Statutory operating profit (based on longer-term investment returns) before amortisation of goodwill Retail Insurance Operations 479 421 Group Pensions 36 22 Prudential M&G Asset Management 87 28 egg:| and Prudential Banking (150) (77)
Retail IFA Our Retail IFA business produces and sells Scottish Amicable and Prudential branded products, including the market-leading Prudence Bond through Independent Financial Advisers (IFAs).
We are continuing to expand operations at our Craigforth site near Stirling, where the total number of staff employed is now close to 2,300. During 2000, this will be increased further as we transfer the administration of M&G’s life and pensions business from Chelmsford.
We continue to pioneer the introduction of unit linked products around the region and this year became the first company to launch regular premium unit linked products in Malaysia.
Shareholders’ Funds The consolidated balance sheet on page 53 shows statutory basis shareholders’ funds of £3,424 million at the end of 1999, an increase of £175 million from 1998. The increase primarily reflects the profit retained after dividend payments.
Community Investment Investing in community partnerships is a fundamental part of our programme. In 1999 we contributed £1.8 million towards community and sponsorship programmes. For example: • employees from M&G planned, designed and constructed a new technology classroom for a local school in Chelmsford
• Scottish Amicable is working with The Princess Royal Trust for Carers in Scotland and with general practitioners
We have established a Diversity Group to stimulate discussions, develop good practice and monitor progress, chaired by Rodney Baker-Bates, Managing Director, Group Pensions.
(Age 66) A director since 1996. Director of Next plc. Council member of the Institute of Directors. Previously a director of Safeway Group plc and a committee member of the Automobile Association.
(Age 42) A director since September 1999. Chief Executive of Prudential Corporation Asia since 1994. Joined Prudential in 1986.
The Nomination Committee meets as required to consider candidates for appointment to the Board.
Independent Professional Advice The Board has approved a procedure whereby directors have the right in furtherance of their duties to seek professional advice at the company’s expense.
The group has established an ongoing process for identifying, managing and reporting the group’s risks that is regularly reviewed by the Board. The main features of this process are as follows: Investment The respective responsibilities of the Board and business unit management for investment strategy, compliance and performance are clearly defined. There are also detailed rules governing investment dealing and settlement (including the use of derivatives), incorporating details of procedures and authority levels.
In addition, during the year each business area, including group head office, prepared an assessment of its risk exposures and internal control framework. A summary of the findings was considered by the Audit Committee and the findings and conclusions reported to the Board.
Niall FitzGerald (who was Chairman until his retirement on 6 May)
Benefits Executive directors receive certain benefits, the principal ones being the provision of company cars and participation in a medical insurance scheme. These benefits are not pensionable.
Balance on the long-term business technical account 598 530* Tax credit attributable to balance on the long-term business technical account 8 227 240*
Dividend per share 21.0p 19.1p *Restated for altered basis of recognition of investment returns, as explained in note 3 on page 55.
Diluted earnings per share Based on profit for the financial year of £542m (£880m) and 1,959m (1,955m) shares 18 27.7p 45.0p
Technical provisions Provision for unearned premiums 164 158 Long-term business provision 20 84,476 76,760 Claims outstanding 827 704 Equalisation provision 30 22
In addition, the balances on the long-term business and general business technical accounts incorporate longer term investment returns for investments attributable to shareholders.
No distinction has been made between gains attributable to general business and shareholders as the relevant assets are managed on a combined basis.
Tax credit attributable to balance on the long-term business technical account – – 259 232
Wages and salaries 637 576 Social security costs 51 44 Other pension costs (see below) 47 41
Audit related services: Regulatory returns and achieved profits basis audits 0.2 0.1 0.3 0.5 Tax and accounting advice 0.2 0.4 0.6 0.5
A reconciliation of the weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share is set out below: Weighted average number of shares in basic earnings per share calculation 1,947 1,942 Number of shares under option at end of year 26 28 Number of shares held by qualifying employee share ownership trust (1) (4) Number of shares that would have been issued at fair value (13) (11)
General insurance and shareholders’ funds Bank loans and overdrafts repayable on demand 58 59 Borrowings of investment subsidiaries managed by US fund management operation (note (d)): Secured senior and subordinated debt 44 42 Senior secured revolving credit 2004 103 –
Borrowings are repayable as follows: Within one year or on demand 359 506 Between one and two years 186 – Between two and five years 299 181 After five years 1,376 892
Debenture loans Core structural borrowings of shareholder financed operations (as analysed in (i) previous): Holding company and related finance subsidiaries 1,291 781 Jackson National Life 155 150
Operating profit before tax before amortisation of goodwill 776 868 Add back interest charged to operating profit 131 105 Adjustments for non-cash items: Tax on long-term business profits and franked investment income (261) (235) General business and shareholder long-term investment gains (33) (23) Decrease in general business technical provisions (33) (39) Amounts retained and invested in long-term business operations (332) (309) Increase in net banking assets (286) (69) Other (including, in 1999, the effects of re-engineering provisions) 80 (53)
Insurance and Investment Funds under Management (£bn) 170 128 119 91 82
Loss from strengthening of persistency assumption for Jackson National Life – (53)