International Financial Reporting
Standards (IFRS) basis results

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Condensed consolidated income statement

2012 £m 2011 £m
Note Half year Half year* Full year*
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
  • † This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders. This is principally because taxes borne by UK with-profits and unit-linked policies through adjustments to benefits are paid on the policyholders’ behalf by the Company. These amounts are required to be included in the tax charge of the Company under IAS 12. Consequently, the profit before all taxes measure (which is determined after deducting the cost of policyholder benefits and movements in the liability for unallocated surplus of the PAC with-profits fund after adjusting for taxes borne by policyholders) is not representative of pre-tax profits attributable to shareholders.
Earned premiums, net of reinsurance   14,111 12,930 25,277
Investment return I 8,762 7,750 9,360
Other income   1,008 923 1,869
Total revenue, net of reinsurance   23,881 21,603 36,506
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance J (19,850) (17,590) (29,289)
Acquisition costs and other expenditure H (2,592) (2,665) (5,120)
Finance costs: interest on core structural borrowings of shareholder-financed operations  
(140)

(140)

(286)
Total charges, net of reinsurance   (22,582) (20,395) (34,695)
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns)  
1,299

1,208

1,811
(Less) add tax (charge) credit attributable to policyholders’ returns  
(40)

(94)

17
Profit before tax attributable to shareholders C 1,259 1,114 1,828
Total tax charge attributable to policyholders and shareholders K (347) (377) (392)
Adjustment to remove tax charge (credit) attributable to policyholders returns  
40

94

(17)
Tax charge attributable to shareholders’ returns K (307) (283) (409)
Profit for the period   952 831 1,419
Attributable to:        
Equity holders of the Company   952 829 1,415
Non-controlling interests   2 4
Profit for the period   952 831 1,419
         
Earnings per share (in pence)        
Based on profit attributable to the equity holders of the Company: L      
Basic   37.5p 32.7p 55.8p
Diluted   37.5p 32.6p 55.7p

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Dividends per share (in pence)

Note 2012
Half year
2011
Half year
2011
Full year
Dividends relating to reporting period: M      
Interim dividend (2012 and 2011)   8.40p 7.95p 7.95p
Final dividend (2011)   17.24p
Total   8.40p 7.95p 25.19p
Dividends declared and paid in reporting period: M      
Current year interim dividend   7.95p
Final dividend for prior year   17.24p 17.24p 17.24p
Total   17.24p 17.24p 25.19p

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Condensed consolidated statement of comprehensive income

2012 £m 2011 £m
Note Half year Half year* Full year*
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
Profit for the period   952 831 1,419
         
Other comprehensive income:        
Exchange movements on foreign operations and net investment hedges:        
Exchange movements arising during the period   (53) (57) (37)
Related tax   (1) (5) (68)
    (54) (62) (105)
         
Unrealised valuation movements on securities of US insurance operations classified as available-for-sale:        
Unrealised holding gains arising during the period   470 287 912
Add back net losses/deduct net (gains) included in the income statement on disposal and impairment  
12

(50)

(101)
Total U 482 237 811
Related change in amortisation of deferred income and acquisition costs
Q

(181)

(71)

(275)
Related tax   (105) (57) (187)
    196 109 349
         
Other comprehensive income for the period, net of related tax  
142

47

244
         
Total comprehensive income for the period   1,094 878 1,663
         
Attributable to:        
Equity holders of the Company   1,094 876 1,659
Non-controlling interests   2 4
Total comprehensive income for the period   1,094 878 1,663

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Condensed consolidated statement of changes in equity

Period ended 30 June 2012 £m
Note

Share
capital


Share
premium


Retained
earnings

Trans-
lation
reserve
Available
for-sale
securities
reserve

Share-
holders'
equity

Non-
controlling
interests


Total
equity
Reserves                
Total comprehensive income for the period 952 (54) 196 1,094 1,094
Dividends (440) (440) (440)
Reserve movements in respect of share-based payments 52 52 52
Change in non-controlling interests arising principally from purchase and sale of property partnerships of PAC with-profits fund and other consolidated investment funds (9) (9)
                 
Share capital and share premium                
New share capital subscribed 14 14 14
                 
Treasury shares                
Movement in own shares in respect of share-based payment plans 5 5 5
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS 3 3 3
Net increase (decrease) in equity 14 572 (54) 196 728 (9) 719
                 
At beginning of period:                
As previously reported 127 1,873 5,839 354 924 9,117 43 9,160
Effect of change in accounting policy for deferred acquisition costs B (595) (72) 114 (553) (553)
               
After effect of change 127 1,873 5,244 282 1,038 8,564 43 8,607
At end of period 127 1,887 5,816 228 1,234 9,292 34 9,326

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Period ended 30 June 2011* £m
Note Share
capital
Share
premium
Retained
earnings
Trans-
lation
reserve
Available for-sale
securities
reserve
Share-
holders'
equity
Non-
controlling
interests
Total
equity
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
Reserves                
Total comprehensive income for the period 829 (62) 109 876 2 878
Dividends (439) (439) (439)
Reserve movements in respect of share-based payments 25 25 25
                 
Share capital and share premium                
New share capital subscribed 15 15 15
                 
Treasury shares              
Movement in own shares in respect of share-based payment plans (10) (10) (10)
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS 2 2 2
Net increase (decrease) in equity 15 407 (62) 109 469 2 471
                 
At beginning of period:                
As previously reported 127 1,856 4,982 454 612 8,031 44 8,075
Effect of change in accounting policy for deferred acquisition costs B (520) (67) 77 (510) (510)
               
After effect of change 127 1,856 4,462 387 689 7,521 44 7,565
At end of period 127 1,871 4,869 325 798 7,990 46 8,036

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Year ended 31 December 2011* £m
Note Share
capital
Share
premium
Retained
earnings
Trans-
lation
reserve
Available for-sale
securities
reserve
Share-
holders'
equity
Non-
controlling
interests
Total
equity
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
Reserves                  
Total comprehensive income for the year   1,415 (105) 349 1,659 4 1,663
Dividends   (642) (642) (642)
Reserve movements in respect of share-based payments   44 44 44
Change in non-controlling interests arising principally from purchase and sale of property partnerships of the PAC with-profits fund and other consolidated investment funds   (5) (5)
                   
Share capital and share premium                  
New share capital subscribed   17 17 17
                   
Treasury shares                  
Movement in own shares in respect of share-based payment plans (30) (30) (30)
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS   (5) (5) (5)
Net increase (decrease) in equity   17 782 (105) 349 1,043 (1) 1,042
                   
At beginning of year:                  
As previously reported   127 1,856 4,982 454 612 8,031 44 8,075
Effect of change in accounting policy for deferred acquisition costs B (520) (67) 77 (510) (510)
               
After effect of change 127 1,856 4,462 387 689 7,521 44 7,565
At end of year 127 1,873 5,244 282 1,038 8,564 43 8,607

Condensed consolidated statement of financial position - Assets

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2012 £m 2011 £m
Note 30 Jun 30 Jun* 31 Dec*
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
  • † Included within financial investments are £5,273 million, £8,744 million and £7,843 million of lent securities as at 30 June 2012, 30 June 2011 and 31 December 2011, respectively.
Intangible assets attributable to shareholders:        
Goodwill P 1,467 1,469 1,465
Deferred acquisition costs and other intangible assets Q 4,333 4,060 4,234
Total   5,800 5,529 5,699
         
Intangible assets attributable to with-profits funds:        
In respect of acquired subsidiaries for venture fund and other investment purposes   178 169 178
Deferred acquisition costs and other intangible assets   84 93 89
Total   262 262 267
Total   6,062 5,791 5,966
         
Other non-investment and non-cash assets:        
Property, plant and equipment   798 705 748
Reinsurers’ share of insurance contract liabilities   1,703 1,334 1,647
Deferred tax assets K 2,179 2,120 2,276
Current tax recoverable   308 384 546
Accrued investment income   2,713 2,460 2,710
Other debtors   1,827 1,638 987
Total   9,528 8,641 8,914
         
Investments of long-term business and other operations:        
Investment properties   10,822 10,965 10,757
Investments accounted for using the equity method   112 71 70
Financial investments:        
Loans S 9,981 9,017 9,714
Equity securities and portfolio holdings in unit trusts   90,542 91,037 87,349
Debt securities T 128,269 117,213 124,498
Other investments   8,143 6,121 7,509
Deposits   12,429 10,858 10,708
Total   260,298 245,282 250,605
         
Properties held for sale   394 3
Cash and cash equivalents   6,737 8,589 7,257
Total assets N 282,625 268,697 272,745

Condensed consolidated statement of financial position - Equity and liabilities

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2012 £m 2011 £m
Note 30 Jun 30 Jun* 31 Dec*
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
Equity        
Shareholders’ equity   9,292 7,990 8,564
Non-controlling interests   34 46 43
Total equity   9,326 8,036 8,607
         
Liabilities        
Policyholder liabilities and unallocated surplus of with-profits funds:        
Contract liabilities (including amounts in respect of contracts classified as investment contracts under IFRS 4) Y 236,419 221,432 227,075
Unallocated surplus of with-profits funds Y 9,802 10,872 9,215
Total   246,221 232,304 236,290
         
Core structural borrowings of shareholder-financed operations:        
Subordinated debt   2,638 3,044 2,652
Other   958 954 959
Total V 3,596 3,998 3,611
         
Other borrowings:        
Operational borrowings attributable to shareholder-financed operations W 2,804 2,912 3,340
Borrowings attributable to with-profits operations W 955 1,440 972
         
Other non-insurance liabilities:        
Obligations under funding, securities lending and sale and repurchase agreements   2,563 4,537 3,114
Net asset value attributable to unit holders of consolidated unit trusts and similar funds   3,778 3,203 3,840
Deferred tax liabilities K 3,913 3,936 3,929
Current tax liabilities   627 876 930
Accruals and deferred income   641 585 736
Other creditors   2,989 2,599 2,544
Provisions   411 587 529
Derivative liabilities   3,452 2,385 3,054
Other liabilities   1,349 1,299 1,249
Total   19,723 20,007 19,925
Total liabilities   273,299 260,661 264,138
Total equity and liabilities N 282,625 268,697 272,745

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Condensed consolidated statement of cash flows

2012 £m 2011 £m
Note Half year Half year* Full year*
  • * The Group has adopted altered US GAAP requirements for deferred acquisition costs as an improvement to its accounting policy under IFRS 4 for those operations of the Group which measure insurance assets and liabilities substantially by reference to US GAAP principles. Accordingly, the 2011 comparative results and related notes have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied, as described in note B.
Cash flows from operating activities        
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns) note (i)   1,299 1,208 1,811
Non-cash movements in operating assets and liabilities reflected in profit before tax note (ii)   (939) 875 162
Other items note (iii)   (172) 122 (235)
Net cash flows from operating activities   188 2,205 1,738
Cash flows from investing activities        
Net cash flows from purchases and disposals of property, plant and equipment   (108) (42) (114)
Acquisition of subsidiaries, net of cash balance note (iv)   (41) (53)
Change to Group’s holdings, net of cash balance note (iv)   23
Net cash flows from investing activities   (85) (83) (167)
Cash flows from financing activities        
Structural borrowings of the Group:        
Shareholder-financed operations: V      
Issue of subordinated debt, net of costs   340 340
Redemption of subordinated debt   (333)
Interest paid   (139) (137) (286)
With-profits operations: note(vi) W      
Interest paid   (4) (4) (9)
Equity capital:        
Issues of ordinary share capital   14 15 17
Dividends paid   (440) (439) (642)
Net cash flows from financing activities   (569) (225) (913)
Net (decrease) increase in cash and cash equivalents   (466) 1,897 658
Cash and cash equivalents at beginning of period   7,257 6,631 6,631
Effect of exchange rate changes on cash and cash equivalents   (54) 61 (32)
Cash and cash equivalents at end of period   6,737 8,589 7,257

Notes

  1. This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders.
  2. The adjusting items to profit before tax included within non-cash movements in operating assets and liabilities reflected in profit before tax are as follows:
    2012
    Half year
    £m
    2011
    Half year
    £m
    2011
    Full year
    £m
    Other non-investment and non-cash assets (1,261) (869) (999)
    Investments (9,341) (6,984) (8,854)
    Policyholder liabilities (including unallocated surplus) 10,782 8,530 10,874
    Other liabilities (including operational borrowings) (1,119) 198 (859)
    Non-cash movements in operating assets and liabilities reflected in profit before tax (939) 875 162
  3. The adjusting items to profit before tax included within other items are adjustments in respect of non-cash items, together with operational interest receipts and payments, dividend receipts and tax paid.
  4. There were no acquisitions for half year 2012. The acquisition of subsidiaries in half year and full year 2011 related to the outflows from the PAC with-profits fund’s purchases of venture investments. The change to Group’s holding for half year 2012 relates to the dilution of the Group’s holding in PPM South Africa during the period from 75 per cent to 47 per cent. As a result of the dilution, PPM South Africa was deconsolidated as a subsidiary and treated as an associate. See note G for additional details.
  5. Structural borrowings of shareholder-financed operations comprise core debt of the parent company, PruCap bank loan and Jackson surplus notes. Core debt excludes borrowings to support short-term fixed income securities programmes, non-recourse borrowings of investment subsidiaries of shareholder-financed operations and other borrowings of shareholder-financed operations. Cash flows in respect of these borrowings are included within cash flows from operating activities.
  6. Structural borrowings of with-profits operations relate solely to the £100 million 8.5 per cent undated subordinated guaranteed bonds which contribute to the solvency base of the Scottish Amicable Insurance Fund (SAIF), a ring-fenced sub-fund of the PAC with-profits fund. Cash flows in respect of other borrowings of with-profits funds, which principally relate to consolidated investment funds, are included within cash flows from operating activities.
 
 

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