On the achieved profits basis of reporting, Group operating profit before tax was £1,023 million in 1998 of which £955 million was contributed by continuing long-term business operations.

Profit from new business held steady at £413 million despite adverse trading conditions in most of our main markets. Profit from business in force at £542 million was held back by the impact of provisions for pension mis-selling in the UK and strengthened economic assumptions in the Group’s UK and North American operations. Excluding the effects of these changes, profit from business in force increased by some ten per cent.

UK Operations

The long-term business result for the Group’s UK operations fell ten per cent to £514 million, reflecting the reduction from nine per cent to eight per cent in the rate of the expected long-term investment return credited to operating results and a charge of £84 million in respect of the increase in provision for pension mis-selling to £1.1 billion announced at the 1998 interim results.

Weighted insurance premium growth in the UK was 25 per cent. However, the achieved profits contribution from new business was only marginally ahead of 1997 at £220 million due to a combination of altered sales mix, exceptional levels of investment spend, and the reduction in expected future investment returns.

Jackson National Life

At Jackson National Life operating profit fell by six per cent to £368 million following a £53 million one-off charge for strengthened persistency assumptions. This change, together with a reduction in the discount rate from ten per cent to 8.5 per cent, reflects the lower interest rate environment in the United States.

Contributions from new business fell by two per cent to £137 million, broadly in line with sales volumes. Excluding the effects of altered assumptions, underlying profit from business in force was some nine per cent higher than for 1997.

Prudential Asia

Despite considerable economic turmoil in the region, profit from Prudential Asia fell by only £9 million to £73 million. Although weighted premiums fell by some 40 per cent, profit from new business was down just ten per cent on 1997 reflecting primarily a shift in sales towards higher margin linked and non-participating business.

Shareholders’ Funds

Total achieved profits basis shareholders’ funds increased by nine per cent to £7.5 billion. The increase demonstrates the retention of operating profit within the Group’s long-term businesses, investment returns substantially in excess of the expected long-term trend, and the gain on sale following the disposal of the Group’s Australasian operations, partly offset by the impact of changes in economic assumptions.