9 Acquisitions and Disposals

On 4 June 1998, regulatory approval was received for the purchase of a controlling interest in the Group’s Malaysian operation, Prudential Assurance Malaysia Berhad. Previously, the Group’s interest in the operation was accounted for as an associated company. The effect of the transaction, which has been accounted for as an acquisition, was:

Click icon to see this table in Excel format		1998 £m
Fair value of consideration (including expenses) for acquisition and funding of ordinary and preference share capital		123
Net assets:
	Book value before acquisition	9
	Fair value adjustment	55
		64
Goodwill recognised as an asset in the balance sheet		59

The fair value adjustment of £55m shown above is for the estimated shareholders’ accrued interest in surpluses expected to emerge on business in force. The goodwill will be amortised from 1 January 1999 over a period of 20 years.

On 17 August 1998 the Group announced the sale of its Australasian businesses (principally Prudential Corporation Australia Limited and The Prudential Assurance Company New Zealand Limited) to The Colonial Mutual Life Assurance Society Limited for total proceeds of A$1.35bn. Completion took place on 30 September and the Group received £468m in cash, net of expenses. The profit on disposal before tax of £249m takes account of £191m in respect of net assets at the date of disposal and, in accordance with UITF3, a further £28m for goodwill written off to reserves on acquisition. An analysis of the long-term business technical account between continuing and discontinued operations is set out below:

Click icon to see this table in Excel format	Continuing operations	Discontinued operations	Total
Long-term business	1998 £m	1998 £m	1998 £m
Gross premiums written	10,640	423	11,063
Outwards reinsurance premiums	(67)	(3)	(70)
Earned premiums, net of reinsurance	10,573	420	10,993
Investment income	8,367	149	8,516
Unrealised gains on investments	3,835	7	3,842
Claims incurred, net of reinsurance	(8,343)	(691)	(9,034)
Change in other technical provisions, net of reinsurance	(10,056)	222	(9,834)
Net operating expenses	(1,218)	(70)	(1,288)
Investment expenses and charges	(277)	(20)	(297)
Tax attributable to the long-term business	(676)	(10)	(686)
Allocated investment return transferred to the non-technical account	(5)	–	(5)
Transfers to the fund for future appropriations	(1,609)	–	(1,609)
Balance on the long-term business technical account	591	7	598