SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 6-K

                        REPORT OF FOREIGN PRIVATE ISSUER

                      Pursuant to Rule 13a-16 or 15d-16 of
                      the Securities Exchange Act of 1934

                         For the month of March,2008

                       PRUDENTIAL PUBLIC LIMITED COMPANY

                (Translation of registrant's name into English)

                            LAURENCE POUNTNEY HILL,
                           LONDON, EC4R 0HH, ENGLAND
                    (Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.

                          Form 20-F X     Form 40-F


Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

                                 Yes      No X

If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-



Enclosures: Full Years Results 2007






Embargo: 7.00am Friday 14 March 2008


PRUDENTIAL PLC DELIVERS OUTSTANDING 2007 FULL YEAR RESULTS

EEV operating profit up 25%, doubled over past three years

-        New business APE of GBP2,874 million, up 21%

-        EEV operating profit of GBP2,542 million, up 25%

-        New business profit of GBP1,215 million, up 22%, with Group margin of
         42%(2006: 42%)

-        Asia new business profit up 34% at GBP653m

-        Asia is expected to deliver doubling of 2005 EEV new business profit a
         year early

-        Jackson new business profit up 19% at GBP285m

-        UK retail new business profit up 17%, with total new business profit up
         4% at GBP277m

-        Asset management operating profit GBP334m up 28% on last year

-        IFRS statutory operating profit of GBP1,213 million, up 20%

-        EEV shareholders' funds up 24% to GBP14.8 billion

-        2007 dividend increased by 5% to 18 pence per share

All figures compared to 2006 at constant exchange rates


Commenting, Mark Tucker, Group Chief Executive said:

"These outstanding results, with new business profit up 22 per cent to GBP1,215
million, demonstrate excellent and continued momentum in the successful delivery
of the Group's retirement led strategy. Group EEV operating profit has doubled
over the past three years.

"Each of our businesses is performing strongly representing a powerful
geographic spread to our growth platform. Spectacular growth in Asia has been
accompanied by a very strong performance by the US and clear profit growth in
the UK. Combined with our excellent performance in asset management across the
Group, these results demonstrate the benefits of Prudential's diversified,
international strategy.

"That strategy is focused on continued and profitable growth. Our market
presence and product capability, coupled with strong management teams, puts us
in a great position for continued value creation. Overall, the prospects for the
Group in 2008 remain positive. Over the longer-term the demographic, economic
and social factors driving our business will continue and we are well positioned
to capture a greater share of that growth."


Group Chief Executive's Review

In 2007, the Group's operating performance was outstanding building on the very
strong momentum established in 2005 and 2006.

The combination of our retirement-led strategy, a clear focus on generating
profitable growth and excellence in the delivery of our plans are driving
shorter-term performance and also placing the Group in a strong position from
which to outperform in the longer-term.

The retirement market offers significant long-term sustainable growth
opportunities as the biggest demographic wave in history transitions out of the
work-force and into retirement. The Prudential Group has a strong presence in
this sector based on our financial strength, our investment and risk management
skills, our brands and our product and distribution expertise.

The Group has the flexibility to optimise its capture of the retirement
opportunity as it develops in each of our chosen markets and our business model
creates significant financial and operational synergies. Within each market our
focus is to operate in areas where we see sustainable competitive advantage and
in products and distribution channels that have sound and sustainable economics.

Group performance

Group operating profit before tax from continuing operations, on the European
Embedded Value (EEV) basis increased by 25 per cent in the year to GBP2,542
million and has doubled over a three year period. The Group's return on embedded
value was 15.4 per cent (2006: 14.5 per cent).

On the statutory IFRS basis, operating profit before tax from continuing
operations was up 20 per cent to GBP1,213 million, almost doubling over a three
year period.

Across the Group's insurance operations new business increased by 21 per cent to
GBP2,874  million,  on an APE basis  and  profit on new  business  was  GBP1,215
million,  up 22 per cent.  Average  margin across the Group was maintained at 42
per cent (2006: 42 per cent).

Operating profit in the Group's asset management operations increased by 28 per
cent, to GBP334 million in what was an excellent year for these businesses in
increasingly challenging conditions.

The cash flow position continued to improve and we are progressing well towards
our target of being operating cash flow positive at the Group level in 2008. The
Group's operating cash flow in 2007 was negative GBP82 million. During the year
the Group received GBP527 million from the sale of Egg, the UK internet banking
operation, this resulted in an overall Group cash inflow of GBP445 million.

The Group's balance sheet and regulatory capital position remain robust. In
particular, across the Group we have been cautious on credit for some time and
we have been increasingly moving the portfolio to a more defensive position.
Outside the normal market value movements across the Group related to interest
rates and widening credit spreads net credit losses on debt securities in the US
were GBP78 million.

The Board has recommended a final dividend of 12.3 pence per share, bringing the
full year dividend to 18 pence per share, an increase of 5 per cent. The
dividend was covered 1.9 times by post-tax IFRS operating profit from continuing
operations.

The Board will focus on delivering a growing dividend, which will continue to be
determined after taking into account the Group's financial flexibility and
opportunities to invest in areas of the business offering attractive returns.
The Board believes that in the medium-term a dividend cover of around two-times
is appropriate.

Insurance operations

In Asia we continue to power ahead with the region accounting for 54 per cent of
new business profits. New business on an APE basis,  increased by 44 per cent to
GBP1,306  million  and all  businesses  across the region grew by 15 per cent or
more.

New business profit was GBP653 million, up 34 per cent. Having achieved compound
growth of 26 per cent since 2005 we expect to deliver, one year earlier than
previously stated, on our target of at least doubling 2005 new business profit
by 2009. EEV operating profit in Asia exceeded GBP1 billion for the first time
this year as the business goes from strength to strength.

Growth in our proprietary agency force, greater agency productivity and the
continuing development of non-agency distribution, in particular bancassurance,
remain central to our success.

The agency force across the region increased by 125,000 to 410,000 during the
year and there was significant expansion in India where average agent numbers
more than doubled to 238,000. Throughout the rest of the region the average
number of agents increased by 10 per cent 112,000. Agency productivity has also
moved ahead strongly in a number of markets including Singapore, Hong Kong and
Vietnam. The continuing success of our multi-distribution approach led to sales
through non-agency channels increasing by 44 per cent and we added a number of
important new distribution relationships.

The retirement opportunity in the region is emerging rapidly and we are
developing innovative integrated savings and protection solutions to meet
consumers' increasingly sophisticated needs. Our retirement campaigns under the
banner "What's your number?" have had considerable success in Korea, Taiwan and
Hong Kong and we are now rolling this concept out into other markets.

There is also significant scope to develop our positioning in the health
insurance market across the region and, with the launch of a number of new
products, notably in Singapore and India, sales of health products in the year
have increased by 45 per cent.

The US is the largest  retirement market in the world and our long-term strategy
has been to position  Jackson to meet the pre and  post-retirement  needs of the
baby boomer generation.  In 2007,  variable annuity new business increased by 29
per cent to  GBP455  million,  on an APE  basis.  Jackson  has been the  fastest
growing  variable  annuity  provider in the US over the past six years,  clearly
demonstrating the success of our strategy and our advice based approach.

The variable annuity product in the US is increasingly being used by the
consumer to provide an income in retirement. In 2007, almost two-thirds of
Jackson's customers were over 55 and two-thirds of all variable annuity sales
included a guaranteed minimum withdrawal benefit. Jackson continues to innovate
and develop its market leading Perspective II product, which has been the
top-selling variable annuity contract in the fast growing Independent Broker
channel for each of the last 5 years.

Overall new business in the US increased by 19 per cent to GBP671 million, on an
APE basis, new business profit also increased by 19 per cent with margins
maintained at 42 per cent and an internal rate of return of 19 per cent.

In 2007 we set out our strategy in the UK to focus primarily on the retirement
income market based in particular on our strengths in the annuity market but
also the developing lifetime mortgage and income drawdown markets. In the
retirement savings market we have exited those product areas that are
structurally unprofitable and launched a new range of factory gate priced
savings products.

Retail new business increased by 4 per cent in a market where the competitive
pressures increased still further during the year. In 2007 we also completed the
transfer of Equitable Life's GBP1.7 billion in-force portfolio of with-profits
annuities: however in general pricing across the bulk market was not adequate to
meet our return on capital requirements and we chose not to write business at
uneconomic levels.

The margin at 31 per cent (2006: 30 per cent) remained high in comparison to the
overall UK market as did the internal rate of return which was 18 per cent
including the Equitable Life transaction and 14 per cent excluding it. Our
target internal rate of return in the UK is 14%.

By the end of 2007,  GBP115  million of the cost saving target of GBP195 million
had been  delivered  and  plans are in place to  deliver  the  additional  GBP80
million. A key milestone this year in the UK was the signing of a major contract
to  outsource  a large  proportion  of its  back  book and new  business  policy
administration. The outsource agreement will allow us to remove fixed costs from
our  operations  and to  achieve  significant  operating  efficiencies  with  an
expected positive effect on embedded value estimated at GBP60 million by 2011.

The in-force profit for the UK business includes a charge in respect of a
mortality assumption change on the annuity business of GBP312 million which is
fully offset by a release of excess margins previously held.

In 2007 we announced that the Group would consider a reattribution of the
inherited estate held in the with-profits sub fund of The Prudential Assurance
Company Limited. We are continuing to explore the possibility of a reattribution
and we aim to be in a position in the first half of 2008 to determine whether
this would be in the best interests of policyholders and shareholders.

Asset management

The Group's asset management businesses had another excellent year. Our
international investment management expertise continues to add value to our
insurance operations and also supported the growth in external funds under
management to GBP69 billion at the end of 2007 (2006: GBP57 billion).

M&G's net inflows were the second highest on record at GBP5 billion and profit
increased by 25 per cent to GBP254 million. Our business in Asia continued its
excellent growth record with net inflows of GBP3 billion and operating profit
growing to GBP72 million, up 53 per cent.

Our skills in risk management and our strength across all asset classes in the
UK, the US and in Asia combined with our multi-asset allocation capabilities,
position us well to meet the diverse needs of our customers for savings,
retirement income and protection products.

This is  clearly  evidenced  in the UK where the main  with-profits  fund,  with
assets of over  GBP74  billion,  was  ranked  first in 2006 in the WM  Company's
survey of with-profits funds, based on gross investment performance over 1, 3, 5
and 10 years. In the US, one of the key drivers of our success is our ability to
provide  customised and highly flexible benefit options within our main variable
annuity  product that are  individually  priced for the customer and, in Asia we
continue to see success in our targeted unit-linked and protection products.

Priorities for the Group in 2008

Our overriding objective for 2008 remains that of continuing to create value for
our shareholders by fully exploiting the power of our retirement-led strategy
and continuing to expand the excellent businesses that we have in place today.

Life insurance

In Asia:

-          Expand the agency force and continue to improve productivity
-          Maximise the potential from non-agency distribution and add new
           partners
-          Further develop direct marketing channels and up-sell and cross-sell
-          Increased focus on retirement services and health products

In the US:

-          Continue to innovate around our key variable annuity product
-          Enhance further our already world-class operating platform
-          Expand retail distribution
-          Selectively participate in the institutional market

In the UK:

-          Build on our strengths in the retirement market and risk products
-          Migrate to factory-gate cautiously managed asset accumulation
           products
-          Deliver on the cost reduction program including the outsource program

-          Selectively participate in the wholesale market
-          Determine whether it is in the best interest of policyholders and
           shareholders to pursue a reattribution of the inherited estate

Asset management:

-          Maintain superior investment performance for both internal and
           external funds
-          Extend third party retail and institutional businesses

Outlook

There is significant volatility and nervousness in markets and it seems clear
that there will be a period of less attractive economic growth trends in the US
and in the UK than we have seen in recent years. Notwithstanding this, we
believe that our strategy and our business model are very robust and will
continue to deliver sustainable value.

In Asia, the fundamentals underpinning economic growth remain powerful and our
businesses are very well placed to benefit. We expect to deliver, one year
earlier than previously stated, on our target of at least doubling 2005 new
business profit by 2009.

In the US, our record of out performance is set to continue and our value driven
strategy in the UK is on track. In the UK we have already de-emphasised those
products which might have been more sensitive to market conditions.

Our asset management businesses, although more directly influenced by market
movements, are well placed to capitalise on their strong market positions and
investment performance to deliver net flows and profit growth.

Overall the prospects for the Group in 2008 remain positive. Over the
longer-term the demographic, economic and social factors driving our business
will continue and we are ideally positioned to capture a greater share of that
growth.

ENDS

Enquiries:

Media                                      Investors/Analysts
Jon Bunn                 +44 20 7548 3559  James Matthews       +44 20 7548 3561
William Baldwin-Charles  +44 20 7548 3719  Jessica Stalley      +44 20 7548 3511


Notes to Editors:

1.      In addition to the financial statements provided with this press
release, additional financial schedules, including full details of the Group's
investments, are available on the Group's website at www.prudential.co.uk

2.      The results in this announcement are prepared on two bases:
International Financial Reporting Standards ('IFRS') and European Embedded Value
('EEV'). The IFRS basis results form the basis of the Group's statutory
financial statements. The supplementary EEV basis results have been prepared in
accordance with the principles issued by the CFO Forum of European Insurance
Companies in May 2004 and expanded by the Additional Guidance on EEV disclosures
published in October 2005.  Where appropriate the EEV basis results include the
effects of IFRS.

Period on period percentage increases are stated on a constant exchange rate
basis.

3.      Annual premium equivalent (APE) sales comprise regular premium sales
plus one-tenth of single premium insurance sales.

4.      Present value of new business premiums (PVNBP) are calculated as
equalling single premiums plus the present value of expected new business
premiums of regular premium business, allowing for lapses and other assumptions
made in determining the EEV new business contribution.

5.      An interview with Mark Tucker, Group Chief Executive, (in video/audio/
text) will be available on www.cantos.com and www.prudential.co.uk from 7.00am
today.

6.      There will be a conference call today for wire services at 7.30am (GMT)
hosted by Mark Tucker, Group Chief Executive and Philip Broadley, Group Finance
Director. Dial in telephone number: 020 8609 0793. Passcode: 155439#.

7.      A presentation to analysts will take place at 9.30am (GMT) at Governor's
House, Laurence Pountney Hill, London, EC4R 0HH. An audio cast of the
presentation and the presentation slides will be available on the Group's
website, www.prudential.co.uk

8.      A media conference will take place at 11.30am (GMT) at 12 Arthur Street,
London, EC4R 9AQ. To attend please call Claire Glover on 020 7548 2007.

9.      High resolution photographs are available to the media free of charge at
www.newscast.co.uk on +44 (0) 207 608 1000 or by calling Claire Glover on 020
7548 2007.

10.   Total number of Prudential plc shares in issue as at 31 December 2007 was
2,470,017,240.

11.   Financial Calendar 2008:

First Quarter New Business Results                             17 April 2008
Annual General Meeting                                         15 May 2008
Interim Results                                                31 July 2008
Third Quarter 2008 New Business Results                        21 October 2008

2007 Final Dividend
Ex-dividend date                                               9 April 2008
Record date                                                    11 April 2008
Payment of dividend                                            20 May 2008

2008 Interim Dividend
Ex-dividend date                                               13 August 2008
Record date                                                    15 August 2008
Payment of dividend                                            23 September 2008


About Prudential

Prudential  plc is a  company  incorporated  and  with  its  principal  place of
business in England,  and its affiliated companies constitute one of the world's
leading financial  services groups. It provides insurance and financial services
directly and through its  subsidiaries  and affiliates  throughout the world. It
has been in  existence  since  1848  and has  GBP267  billion  in  assets  under
management  as at 31 December  2007.  Prudential  plc is not  affiliated  in any
manner  with  Prudential  Financial,  Inc, a company  whose  principal  place of
business is in the United States of America.

Forward-Looking Statements

This statement may contain certain "forward-looking statements" with respect to
certain of Prudential's plans and its current goals and expectations relating to
its future financial condition, performance, results, strategy and objectives.
Statements containing the words "believes", "intends", "expects", "plans", "
seeks" and "anticipates", and words of similar meaning, are forward-looking.  By
their nature, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances which are beyond
Prudential's control including among other things, UK domestic and global
economic and business conditions, market related risks such as fluctuations in
interest rates and exchange rates, and the performance of financial markets
generally; the policies and actions of regulatory authorities, the impact of
competition, inflation, and deflation; experience in particular with regard to
mortality and morbidity trends, lapse rates and policy renewal rates; the
timing, impact and other uncertainties of future acquisitions or combinations
within relevant industries; and the impact of changes in capital, solvency or
accounting standards, and tax and other legislation and regulations in the
jurisdictions in which Prudential and its affiliates operate. This may for
example result in changes to assumptions used for determining results of
operations or re-estimations of reserves for future policy benefits.  As a
result, Prudential's actual future financial condition, performance and results
may differ materially from the plans, goals, and expectations set forth in
Prudential's forward-looking statements. Prudential undertakes no obligation to
update the forward-looking statements contained in this statement or any other
forward-looking statements it may make.

PRUDENTIAL PLC 2007 PRELIMINARY ANNOUNCEMENT

RESULTS SUMMARY



European Embedded Value (EEV) Basis Results*                                                          2007       2006



                                                                                                      GBPm       GBPm
                                                                                                            

Asian operations                                                                                     1,103        864
US operations                                                                                          635        718
UK operations:
   UK insurance operations                                                                             859        686
   M&G                                                                                                 254        204

                                                                                                     1,113        890
Other income and expenditure                                                                          (289)      (298)
Restructuring costs                                                                                    (20)       (41)

Operating profit from continuing operations based on longer-term investment returns*                 2,542      2,133
Short-term fluctuations in investment returns                                                          174        738
Mark to market value movements on core borrowings                                                      223         85
Shareholders' share of actuarial gains and losses on defined benefit pension schemes                   116        207
Effect of changes in economic assumptions and time value of cost of options and guarantees             748         59

Profit from continuing operations before tax (including actual investment returns)                   3,803      3,222

Operating earnings per share from continuing operations after related tax and minority interests*     74.9p      62.1p
Basic earnings per share                                                                             125.2p      91.7p
Shareholders' equity, excluding minority interests                                                 GBP14.8bn  GBP11.9bn



International Financial Reporting Standards (IFRS) Basis Results*

Statutory IFRS basis results                                                                          2007       2006

Profit after tax attributable to equity holders of the Company                                    GBP1,022m      GBP874m
Basic earnings per share                                                                              41.8p        36.2p
Shareholders' equity, excluding minority interests                                                 GBP6.2bn     GBP5.5bn


Supplementary IFRS basis information                                                                  2007       2006

Operating profit from continuing operations based on longer-term investment returns*             GBP1,213m    GBP1,050m
Operating earnings per share from continuing operations after related tax and minority interests*    33.8p        30.9p


                                                                                                      2007       2006

Dividends per share declared and paid in reporting period                                            17.42p     16.44p

Dividends per share relating to reporting period                                                     18.00p     17.14p

Funds under management                                                                             GBP267bn   GBP251bn



*Basis of preparation



Results bases

The EEV basis results have been prepared in accordance with the European
Embedded Value Principles issued by the CFO Forum of European Insurance
Companies in May 2004 and expanded by the Additional Guidance on EEV disclosures
published in October 2005. The basis of preparation of statutory IFRS basis
results and supplementary IFRS basis information is consistent with that applied
for the 2006 results and financial statements.

Operating profit based on longer-term investment returns

Consistent with previous reporting practice, the Group analyses its EEV basis
results and provides supplementary analysis of IFRS profit before tax
attributable to shareholders, so as to distinguish operating profit based on
longer-term investment returns from other elements of total profit. On both the
EEV and IFRS bases, operating earnings per share are calculated using operating
profits from continuing operations based on longer-term investment returns,
after related tax and minority interests. These profits exclude short-term
fluctuations in investment returns and the shareholders' share of actuarial
gains and losses on defined benefit pension schemes. Under the EEV basis, where
additional profit and loss effects arise, operating profit based on longer-term
investment returns also excludes the mark to market value movements on core
borrowings and the effect of changes in economic assumptions and changes in the
time value of cost of options and guarantees arising from changes in economic
factors. After adjusting for related tax and minority interests, the amounts for
these items are included in the calculation of basic earnings per share.

Discontinued operations

The results for continuing operations shown above and throughout this
preliminary announcement exclude those in respect of discontinued banking
operations. On 1 May 2007, the Company sold Egg. Accordingly, the presentation
of the comparative results for 2006 has been adjusted from those published in
March 2007.

REVIEW OF OPERATING AND FINANCIAL RESULTS

Results highlights



                                                                       CER             RER (4)(5)
                                                           2007       2006     Change        2006       Change
                                                           GBPm       GBPm          %        GBPm            %
                                                                                            

Annual premium equivalent (APE) sales                     2,874      2,374        21%       2,470          16%
Present value of new business premiums (PVNBP)           21,302     18,192        17%      18,947          12%
Net investment flows                                      7,975      8,511       (6%)       8,633         (8%)
External funds under management                          68,669     57,497        19%      57,199          20%
New business profit (NBP)                                 1,215        992        22%       1,039          17%
NBP Margin (% APE)                                          42%        42%                    42%
NBP Margin (% PVNBP)                                       5.7%       5.5%                   5.5%
EEV basis operating profit from long-term business        2,517      2,103        20%       2,208          14%
from continuing operations (1) (2)
Total EEV basis operating profit from continuing          2,542      2,030        25%       2,133          19%
operations (2)
Total IFRS operating profit from continuing               1,213      1,008        20%       1,050          16%
operations (3)
EEV basis shareholders' funds (GBPbn)                    14,779     11,910        24%      11,883          24%
IFRS shareholders' funds (GBPbn)                          6,201      5,483        13%       5,488          13%
Holding company operating cash flow                        (82)      (104)        21%       (104)          21%
Holding company operating cash flow                         445      (104)       528%       (104)         528%
plus proceeds from the sale of Egg
Return on Embedded Value (6)                              15.4%                             14.5%           6%



(1)Long-term business profits after deducting Asia development expenses and
before restructuring costs.

(2) Based on longer-term investment returns from continuing operations.
Operating profit is stated excluding the effect of short-term fluctuations in
investment returns against the long-term assumptions, the effect of changes in
economic assumptions and changes in the time value of cost of options and
guarantees arising from changes in economic factors, actuarial gains and losses
on defined benefit schemes and the mark to market value movements on borrowings.

(3) Based on longer-term investment returns from continuing operations.
Operating profit is stated excluding the effect of short-term fluctuations in
investment returns against the long-term assumptions, the effect of changes in
economic assumptions, actuarial gains and losses on defined benefit schemes and
the mark to market value movements on borrowings.

(4) Prior year restated excludes Egg, and shows continuing operations only.

(5) Reported exchange rate (RER).

(6) Return on Embedded value is based on EEV operating profit from continuing
operations after tax and minority interests as a percentage of opening embedded
value (shareholder's funds on a EEV basis)

In the Operating and Financial Review (OFR), year-on-year comparisons of
financial performance are on a constant exchange rate (CER) basis, unless
otherwise stated.

These results show the strong performance of the Group in 2007. The KPIs above
show growth in sales and profits and an improvement in cashflow. The surplus
capital position of Prudential plc, measured under the Insurance Group Directive
basis, will be submitted to the FSA by 30 April 2008 but is currently estimated
to be in the region of GBP 1.4 billion. This includes a benefit of around GBP0.3
billion that arose during 2007 from the sale of Egg Banking plc.

At 31 December 2007, total insurance and investment funds under management are
GBP267 billion up from GBP251 billion at the end of 2006, at RER.

Basis of preparation of results

The European Union (EU) requires that all listed European groups prepare their
financial statements in accordance with EU approved IFRS. Since 1 January 2005,
Prudential has been reporting its primary results on an IFRS basis.

As a signatory to the European Chief Financial Officers' (CFO) Forum's EEV
Principles, Prudential also reports supplementary results on an EEV basis for
the Group's long-term business. These results are combined with the IFRS basis
results of the non long-term businesses to provide a supplementary operating
profit under EEV. Reference to operating profit relates to profit based on
long-term investment returns. Under both EEV and IFRS, operating profits from
continuing operations based on longer-term investment returns exclude short-term
fluctuations in investment returns and shareholders' share of actuarial gains
and losses on defined benefit pension schemes. Under EEV, where additional
profit and loss effects arise, operating profits based on longer-term investment
returns also exclude the mark to market value movement on core borrowings and
the effect of changes in economic assumptions and changes in the time value of
the cost of options and guarantees arising from changes in economic factors.

In broad terms, IFRS profits for long-term business contracts reflect the
aggregate of statutory transfers from with-profits funds and profits on a
traditional accounting basis for other long-term business. Although the
statutory transfers from with-profits funds are closely aligned with cash flow
generation, the pattern of IFRS profits over time from shareholder-backed
long-term businesses will generally differ from the cash flow pattern. Over the
life of a contract, however, aggregate IFRS profits will be the same as
aggregate cash flow.

Life insurance products are, by their nature, long term and the profit on this
business is generated over a significant number of years. Accounting under IFRS
does not, in Prudential's opinion, properly reflect the inherent value of these
future profit streams.

Prudential believes that embedded value reporting provides investors with a
better measure of underlying profitability of the Group's long-term businesses
and is a valuable supplement to statutory accounts.

EEV basis operating profit



                                                                                CER           RER(4)(5)
EEV basis operating profit from continuing                           2007      2006    Change      2006     Change
operations                                                           GBPm      GBPm         %      GBPm          %
                                                                                                 

Insurance business:
   Asia                                                             1,046       779       34%       829        26%
   US                                                                 627       652      (4%)       708      (11%)
   UK                                                                 859       686       25%       686        25%
   Development expenses                                              (15)      (14)      (7%)      (15)         0%
Long-term business profit                                           2,517     2,103       20%     2,208        14%
Asset management business:
   M&G                                                                254       204       25%       204        25%
   Asia asset management                                               72        47       53%        50        44%
   Curian                                                             (5)       (7)       29%       (8)        38%
   US broker-dealer and asset management                               13        16     (19%)        18      (28%)
                                                                      334       260       28%       264        27%

Other income and expenditure                                        (289)     (292)        1%     (298)         3%
Total EEV basis operating profit from continuing operations         2,562     2,071       24%     2,174        18%
Restructuring costs                                                  (20)      (41)       51%      (41)        51%
Total EEV basis operating profit from continuing operations         2,542     2,030       25%     2,133        19%
after restructuring costs



Total EEV basis operating profit from continuing operations based on longer-term
investment returns was GBP2,542 million,  up 25 per cent from 2006 at CER and up
19 per cent at RER. This result reflects the significant  growth of new business
profit of GBP1,215  million and in-force profit of GBP1,317 million by insurance
businesses, up 17 per cent over 2006, and strong asset management profit growth.

Record new business profit from insurance  business of GBP1,215 million,  was 22
per cent higher than in 2006,  driven by strong  sales  momentum in Asia and the
US. At RER,  new  business  profit  was up 17 per cent.  The  average  Group new
business  profit margin was 42 per cent (2006:  42 per cent) on an APE basis and
5.7 per cent (2006: 5.5 per cent) on a PVNBP basis. This reflects an increase in
the average UK margin  offset by a fall in the  average  Asia  margin.  In-force
profit  increased  17 per cent on 2006 to  GBP1,317  million.  At RER,  in-force
profit was up 11 per cent.  In  aggregate,  net  assumption  changes  were GBP97
million  positive,  and experience  variances and other items were GBP48 million
positive.

The in-force profit in 2007 for the UK business included a charge in respect of
a mortality operating assumption change on annuity and deferred annuity pension
business of GBP312 million, which is fully offset by a release of excess margins
previously held.

Asia's development expenses (excluding the regional head office expenses) were
GBP15 million, (2006: GBP14 million).

Operating  profit from the asset  management  business was GBP334 million (2006:
GBP260 million),  up 28 per cent on 2006, driven by growth in M&G and Asia Asset
Management.

Other income and expenditure  totalled a net expense of GBP289 million  compared
with GBP298  million in 2006 at RER.  This result  primarily  includes  interest
expense on central borrowings of GBP168 million (2006:  GBP177 million);  GBP117
million of Group head office costs (2006:  GBP83  million) and GBP38  million of
costs for the Asia head office (2006: GBP36 million). The increase in Group head
office  costs   reflects   costs  in  respect  of  the  process  to  consider  a
reattribution of the inherited estate.

New business capital usage



                                               2007         2007            2007            2007             2007
                                               GBPm         GBPm            GBPm            GBPm             GBPm
                                       Free surplus     Required       Total net        Value of  Total long-term
                                                         capital           worth        in-force         business
                                                                                               

New business  capital usage                                                             business
   Asia                                       (194)           21           (173)             653              480
   US                                         (200)          183            (17)             202              185
   UK                                         (150)          104            (46)             246              200
                                              (544)          308           (236)           1,101              865


The Group  wrote  GBP2,874  million of sales on an APE basis.  To support  these
sales, the Group invested GBP544 million of capital. This amount covers both new
business  acquisition  expenses,  including commission of GBP236 million and the
required  capital of GBP308  million.  The total  investment  of capital for new
business amounts to approximately GBP19 million per GBP100 million of APE sales.
These sales provided a post-tax new business  contribution  to embedded value of
GBP865 million.

In Asia,  capital  was  invested  to support  sales at an average  rate of GBP15
million per GBP100 million of APE sales.

In the US, capital was invested to support sales at an average rate of GBP30
million per GBP100 million of APE sales.

In the UK, capital was invested to support sales at an average rate of GBP17
million per GBP100 million of APE sales.

EEV basis profit after tax and minority interests



                                                                                        RER(4)(5)
                                                                               2007          2006        Change
                                                                               GBPm          GBPm             %
                                                                                                   

Total EEV basis operating profit from continuing operations
after restructuring costs                                                     2,542         2,133           19%

Short term fluctuations in investment returns:                                  174           738
Asia                                                                            226           286
US                                                                              (8)            64
UK                                                                             (42)           378
Other                                                                           (2)            10
Actuarial gains and losses on defined
benefit pension schemes:                                                        116           207
Effect of change in economic
assumptions:                                                                    748           (1)
Asia                                                                            201         (132)
US                                                                               81          (51)
UK                                                                              466           182
Effect of change in time value of cost
of options and guarantees:                                                        0            60
Asia                                                                              9            14
US                                                                                8             6
UK                                                                             (17)            40
Movement in mark to market value
 of core borrowings:                                                            223            85

US                                                                                9             3
Other                                                                           214            82

Profit from continuing operations before tax                                  3,803         3,222           18%

Tax                                                                           (961)         (904)

Profit from continuing operations                                             2,842         2,318           23%
after tax before minority interests

Discontinued operations (net of tax)                                            241         (105)
Minority interests                                                             (21)           (1)

Profit for the period                                                         3,062         2,212           38%


The following year-on-year comparisons are presented on a RER basis.

In the calculation of EEV operating profit longer-term investment return
assumptions are used rather than actual investment returns achieved. Short-term
fluctuations in investment returns are reported separately in the analysis of
profit.

In Asia, long-term business short-term investment fluctuations were GBP226
million, compared to GBP286 million last year. This reflects favourable equity
performance in most territories, principally Hong Kong, Vietnam and Singapore
offset by an unfavourable valuation movement of GBP30 million on a Taiwan CDO.

The US business short-term  fluctuations in investment returns of GBP(8) million
primarily include: a negative GBP44 million in respect of the difference between
actual investment  returns and longer-term  returns included in operating profit
in respect of fixed income securities and related swap transactions;  a negative
GBP16 million in relation to changed  expectations  of future  profitability  on
variable annuity business in force due to the actual variable investment account
("separate  account")  return  being lower than the  long-term  return  reported
within  operating  profit,  offset  by  the  impact  of the  associated  hedging
position;  and a positive  GBP51  million in respect of the  difference  between
actual investment returns and long-term returns included within operating profit
in respect of equity-based investments and other items.

The UK business component of short-term fluctuations in investment returns of
negative GBP42 million primarily reflects reduced asset values in PRIL, the
shareholder-backed annuity business, from widened credit spreads and the
difference between the actual investment return for the with-profits life fund
of 7.2 per cent and the long-term assumed return of 7.85 per cent.

The actuarial gain of GBP116 million (2006:  GBP207  million)  included in total
profit  reflects the  shareholders'  share of actuarial  gains and losses on the
Group's defined benefit pension schemes.  On the EEV basis, this gain includes a
10 per cent share of the actuarial gains and losses on the share attributable to
the PAC  with-profits  sub-fund for the Prudential  Staff and Scottish  Amicable
Pension  Schemes.  The full year 2007 gains mainly  reflect  changes in economic
assumptions,  partly offset by the effect of strengthened mortality assumptions.
The very high level of gains in 2006  reflected the excess  market  returns over
the  long-term   assumption  and  the  increase  in  discount  rate  applied  in
determining the present value of projected pension payments from 4.8 per cent at
31 December 2005 to 5.2 per cent at December 2006.

In Asia  positive  economic  assumption  changes were GBP201  million,  of which
GBP110  million  is due to Taiwan and GBP80  million  is due to Hong  Kong. The
Taiwan credit primarily  reflects a change of projected fund earned rate, offset
by an increase in risk discount  rate,  whereas Hong Kong  primarily  reflects a
decrease in the risk discount rate. Taiwan interest rates performed in line with
the assumed EEV trended basis.

In the US,  economic  assumption  changes of positive  GBP81  million  primarily
reflect a reduction in the risk discount  rates  following a reduction in the US
10-year  Treasury rate,  partially offset by a reduction in the separate account
return assumption.

In the UK, economic assumption changes of positive GBP466 million primarily
reflect the impact of the increase in the investment return assumption and a
decrease in the risk free rate.

The mark to market movement on core borrowings was a positive GBP223 million
reflecting the reduction in fair value of core borrowings as the decrease in
interest rates is more than offset by  the widening of the credit spread,
thereby increasing overall market yields on comparable debt securities.

The effective tax rate at an operating tax level was 27 per cent (2006: 30 per
cent), generally reflecting expected tax rates. The effective tax rate at a
total EEV level was 25 per cent (2006: 28 per cent) on a profit of GBP3,803
million.

On 1 May 2007,  Prudential  completed  the sale of Egg Banking plc to Citi for a
consideration,  net of transaction  expenses, of GBP527 million. The profit from
discontinued operations is GBP241 million being the profit on disposal of GBP290
million,  net of the post-tax  loss of GBP49  million from 1 January 2007 to the
date of sale.

IFRS basis operating profit



                                                                               CER            RER (4)(5)
IFRS basis operating profit from longer term                       2007       2006     Change       2006     Change
investment returns                                                 GBPm       GBPm          %       GBPm          %

                                                                                                 

Insurance business:
   Asia                                                             189        177         7%        189         0%
   US                                                               444        367        21%        398        12%
   UK                                                               528        500         6%        500         6%
   Development expenses                                            (15)       (14)         7%       (15)         0%

Long-term business profit                                         1,146      1,030        11%      1,072         7%

Asset management business:
   M&G                                                              254        204        25%        204        25%
   Asia asset management                                             72         47        53%         50        44%
   Curian                                                           (5)        (7)        29%        (8)        38%
   US broker-dealer and asset management                             13         16      (19%)         18      (28%)
                                                                    334        260        28%        264        27%

Other income and expenditure                                      (248)      (244)       (2%)      (248)         0%

Total IFRS basis operating profit based from longer term          1,232      1,046        18%      1,088        13%
investment returns

Restructuring costs                                                (19)       (38)      (50%)       (38)      (50%)

Total IFRS basis operating profit based from longer term          1,213      1,008        20%      1,050        16%
investment returns after restructuring costs



The increase in Prudential Corporation Asia's operating profit of seven per cent
for  long-term   business  before   development   expenses   reflects   improved
profitability  in mature  markets with  significant  contributions  to operating
profit from Singapore,  Malaysia and Hong Kong,  representing  GBP153 million of
the total operating profit in 2007, up 15 per cent on 2006. There were increased
contributions  from each of  Indonesia,  Taiwan and Vietnam as these  operations
continue to build scale. Five life operations made IFRS losses: GBP43 million in
India which is a relatively new business,  incurring  costs in rapidly  building
scale  through  its  expansion  strategy  and losses of GBP16  million in Japan.
Korea's loss  reflects new business  growth.  China and Thailand are  marginally
loss making.

In the US, IFRS operating profit of GBP444 million was up 21 per cent on 2006 at
CER. The US operations' results are based on US GAAP, adjusted where necessary
to comply with IFRS as the Group's basis of presenting operating profit is based
on longer-term investment returns.  Longer-term returns for the US operations'
fixed income securities incorporate a risk margin reserve (RMR) charge for
longer-term defaults and amortisation of interest-related realised gains and
losses. The growth in the US operations' long-term IFRS operating profit mainly
reflects increased fee income driven by a 34 per cent increase in separate
account assets during the year and higher overall election of optional benefits.
Profits from the annuities spread business were broadly in line with prior year
and continue to represent the key contributor to overall IFRS operating profit.
One-off items affecting the spread-based income were GBP26 million, net of DAC
amortisation

In the UK, IFRS operating  profit for the long-term  business  increased six per
cent to GBP528  million in 2007.  This  reflected  a seven per cent  increase in
profits   attributable   to  the   with-profits   business  to  GBP394  million,
representing  the continued strong  investment  performance of the Life Fund and
its impact on terminal  bonuses.  2007  includes the net impact of the mortality
strengthening  and  a  release  of  excess  margins  previously  held  in  other
assumptions which was a positive GBP34 million.

M&G's operating profit for 2007 was GBP254 million, an increase of 25 per cent
over 2006, due to strong net investment inflows and positive market conditions
for the first three quarters of 2007.

The Asian  asset  management  operations  reported  operating  profits  of GBP72
million, a growth of 53 per cent over 2006, driven by strong  contributions from
Vietnam, India and Taiwan.

The operating profit from the US broker-dealer  and asset management  businesses
was GBP13 million,  a 19 per cent decrease on 2006.  Curian  recorded  losses of
GBP5 million in 2007,  up from losses of GBP7  million in 2006,  as the business
continues to build scale.

IFRS basis profit after tax



                                                                                         RER(4)(5)
                                                                                2007          2006        Change
                                                                                GBPm          GBPm             %
                                                                                                     

Operating profit from continuing operations
based on longer-term investment returns
after restructuring costs                                                      1,213         1,050           16%

Short-term fluctuations in investment returns                                  (137)           155
Shareholders' share of actuarial and                                              90           167
other gains and losses on defined benefit pension schemes

Profit before tax from continuing operations
 attributable to shareholders                                                  1,166         1,372         (15%)

Tax                                                                            (382)         (392)

Profit from continuing operations
for the financial year after tax                                                 784           980         (20%)

Discontinued operations (net of tax)                                             241         (105)
Minority interests                                                               (3)           (1)

Profit for the year attributable to equity holders of the company              1,022           874           17%




The following year-on-year comparisons are presented on a RER basis.

Total IFRS basis profits before tax and minority interests were GBP1,166 million
in 2007,  compared  with  GBP1,372  million for 2006.  The  decrease  reflects a
reduction in short-term fluctuations in investment returns of GBP292 million and
a reduced  positive  movement from the prior year in actuarial  gains and losses
attributable to shareholder-backed  operations in respect of the Group's defined
benefit pension schemes.

In the calculation of IFRS operating profit longer-term investment return
assumptions are used rather than actual investment returns achieved. The actual
movements in asset values beyond the longer-term assumptions appear in the
profit and loss account as short-term fluctuations in investment returns, with
the exception of Jackson where unrealised gains or losses on debt securities
feature directly as movements to shareholder reserves.

The GBP137 million charge for short-term fluctuations in investment returns
comprises GBP71 million, GBP18 million and GBP47 million in respect of Asian
operations, US operations and UK operations respectively.

The fluctuations for the Asian operations primarily reflect reduced values for
debt securities in Taiwan and a GBP30 million reduction in the value of an
investment in a CDO fund, partially offset by strong equity movements in
Vietnam.

In the US there  was a GBP18  million  charge  for  short-term  fluctuations  in
investment  returns.  During 2007 the US life insurance  operations recorded net
credit losses of GBP78 million (2006:  GBP25 million).  This charge is reflected
in two parts of the accounting presentation of the results.  Included within the
IFRS operating profit based on longer-term  investment  returns is a risk margin
reserve (RMR) charge,  representing long-term expected credit defaults, of GBP48
million (2006: GBP54 million).  The difference between the credit related losses
and the RMR charge in the year was, therefore,  a charge of GBP30 million (2006:
GBP29  million  credit)  which is recorded  within  short-term  fluctuations  in
investment  returns,  within  the  overall  GBP18  million  charge  for US  life
insurance operations.

The fluctuations for the UK operations primarily reflect reduced asset values in
PRIL, the shareholder-backed annuity business, from widened credit spreads on
corporate bond securities.

Profit  after tax and minority  interests  was GBP1,022  million  compared  with
GBP874 million in 2006. The effective rate of tax on operating profits, based on
longer-term  investment  returns,  was 32 per  cent  (2006:  29 per  cent).  The
effective rate of tax at the total IFRS profit level for  continuing  operations
was 33 per cent  (2006:  29 per  cent).  The  effective  tax  rates in 2007 were
broadly in line with those expected except for some Asian operations where there
is a restriction  on the ability to recognise  deferred tax assets on regulatory
basis losses.

Earnings per share

Earnings per Share (EPS)



                                                                               2007          2006
                                                                               GBPp           GBPp
                                                                                         

       EPS based on operating profit from continuing    EEV                    74.9          62.1
      operations after tax and minority interest        IFRS                   33.8          30.9

Basic EPS based on total profit after minority interest EEV                   125.2          91.7
                                                        IFRS                   41.8          36.2



Dividend per share

The directors recommend a final dividend for 2007 of 12.30 pence per share
payable on 20 May 2008 to shareholders on the register at the close of business
on 11 April 2008. The interim dividend for 2007 was 5.70 pence per share. The
total dividend for the year, including the interim dividend and the recommended
final dividend, amounts to 18.00 pence per share compared with 17.14 pence per
share for 2006, an increase of five per cent. The total cost of dividends in
respect of 2007 was GBP444 million.

The full year dividend is covered 1.9 times by post-tax IFRS operating profit
from continuing operations.

Dividend cover is calculated as operating profit after tax on an IFRS basis,
divided by the current year interim dividend plus the proposed final dividend.

The Board will focus on delivering a growing dividend, which will continue to be
determined after taking into account the Group's financial flexibility and
opportunities to invest in areas of the business offering attractive returns.
The Board believes that in the medium term a dividend cover of around two times
is appropriate.

Shareholders' funds

On the EEV basis,  which  recognises  the  shareholders'  interest in  long-term
businesses,  shareholders'  funds at 31 December 2007 were GBP14.8  billion,  an
increase of GBP2.9 billion from the 2006 year-end level (2006:  GBP11.9  billion
at RER). This 24 per cent increase primarily reflects: total EEV basis operating
profit of GBP2,542 million; a GBP174 million  favourable  movement in short-term
fluctuations in investment  returns;  a GBP748 million positive  movement due to
changes  in  economic  assumptions  and in time  value  of cost of  options  and
guarantees;  a  positive  movement  on the mark to market of core debt of GBP223
million;  the proceeds  for the share  capital  issue of the parent  company for
GBP182  million;  a positive  movement  in the  actuarial  gains on the  defined
benefit  pension  schemes of GBP116  million  and the  positive  impact of GBP64
million for foreign  exchange  movements.  These were offset by: a tax charge of
GBP961 million and dividend payments of GBP426 million made to shareholders.

The shareholders' funds at 2007 of GBP14.8 billion comprise,  GBP3.7 billion for
the Asian  long-term  business  operations,  GBP3.6 billion for the US long-term
business operations, GBP6.5 billion for the UK long-term business operations and
GBP1 billion for other operations.

At the year end the embedded value for the Asian  long-term  business was GBP3.7
billion. The established markets of Hong Kong, Singapore and Malaysia contribute
GBP2,704  million to the embedded value  generated  across the region with Korea
(GBP304  million)  and  Vietnam  (GBP234  million)  making  further  substantial
contributions.   Prudential's  other  markets,  excluding  Taiwan  in  aggregate
contribute  GBP496  million in embedded  value.  Taiwan has a negative  embedded
value of GBP12  million,  this  positive  movement  against  prior  year  (2006:
negative  GBP216  million) is a reflection  of an increase in new business and a
change in economic assumptions.

The  current  mix  of  new  business  in  Taiwan  is  weighted  heavily  towards
unit-linked and protection products, representing 75 per cent and 15 per cent of
new business APE in 2007, respectively.  As a result, interest rates have little
effect on new  business  profitability  and a one per cent  reduction in assumed
interest  rates  would  reduce new  business  margins in Taiwan by less than one
percentage point. However, the in-force book in Taiwan, predominantly made up of
whole of life policies, has an embedded value that is sensitive to interest rate
changes.  A one per cent decrease in interest  rates,  along with  consequential
changes to assumed  investment  returns for all asset classes,  market values of
fixed interest assets and risk discount  rates,  would result in a GBP91 million
decrease in Taiwan's  embedded  value.  A similar one per cent positive shift in
interest rates would increase embedded value by GBP67 million. On the assumption
that bond yields remained flat during 2008 and then trended towards 5.5 per cent
in December  2014,  this would have  reduced the 2007 Taiwan  embedded  value by
GBP70 million. Sensitivity of the embedded value to interest rate changes varies
considerably  across  the  region.  In  aggregate,  a one per cent  decrease  in
interest rates,  along with all consequential  changes noted above, would result
in a negligible percentage change to Asia's embedded value.

Statutory  IFRS  basis  shareholders'  funds at 31  December  2007  were  GBP6.2
billion.  This  compares  with GBP5.5  billion at 31 December  2006 at RER.  The
increase primarily reflects: profit after tax and minority interests of GBP1,022
million,  the proceeds  from the share  capital  issue of the Company for GBP182
million, offset by the impact of negative unrealised holding losses on available
for sale investments of GBP231 million, and dividend payments to shareholders of
GBP426 million.


Holding company cash flow



                                                                                  2007          2006
                                                                                  GBPm          GBPm
                                                                                           

Cash remitted by business units:
   UK life fund transfer                                                           261           217
   UK other                                                                          3             0
   US                                                                              122           110
   Asia                                                                            186           175
   M&G                                                                             139            94

Total cash remitted to Group                                                       711           596
Net interest paid                                                                 (96)         (128)
Dividends paid                                                                   (426)         (399)
Scrip dividends and share options                                                  183            91

Cash remittances after interest and                                                372           160
dividends
Tax received                                                                        40           122
Corporate activities                                                             (200)          (67)

Cash flow before investment in businesses                                          212           215
Capital invested in business units:
   Asia                                                                          (149)         (147)
UK                                                                               (145)         (172)

Total capital invested in business units                                         (294)         (319)

Increase/(Decrease) in  operating cash                                            (82)         (104)
Egg sale net proceeds                                                              527             0

Total holding company cash flow                                                    445         (104)



The Group holding company received GBP711 million in cash remittances from
business units in 2007 including the shareholders' statutory life fund transfer
of GBP261 million from the UK business.

After dividends and net interest paid, there was a net cash inflow of GBP372
million (2006: GBP160 million). There was a high take up of scrip dividends in
2007.

During  2007,  the Group  holding  company  paid  GBP200  million  in respect of
corporate activities, which included costs in respect of the process to consider
a  reattribution  of the inherited  estate  together with a repayment to HMRC in
respect  of  tax  recoveries  in  previous  years  following  a  change  in  tax
legislation. Tax received of GBP40 million (2006: GBP122 million) was lower than
prior year as a result of foreign  exchange  gains reducing the level of taxable
losses and a payment to HMRC. Asia contributed a net remittance of GBP37 million
to the holding company cash flow.

In aggregate this gave rise to an improvement in operating cash outflow to GBP82
million from GBP104 million in 2006.

The Group  received  GBP527  million from the disposal of Egg (net of expenses),
and the reduction in net interest paid in 2007  includes the  investment  income
earned on these proceeds.

In 2008, the UK shareholders' statutory transfer relating to the bonus
declarations is expected to be GBP279 million.

Depending on the mix of business written and the opportunities available,
Prudential expects that the UK shareholder backed business will become cash
positive in 2010.

Taking into account plans for future growth, our ability to surrender group tax
relief, a normalised level of scrip dividend, the reducing UK capital
requirement and increased remittances from the other life and asset management
operations it is expected that the operating cash flow of the Group holding
company will be positive in 2008.

BUSINESS UNIT REVIEW

Insurance Operations

Asia



Asia                                                                  CER                    RER(5)
                                                         2007        2006       Change         2006        Change
                                                         GBPm        GBPm            %         GBPm             %
                                                                                                

APE sales                                               1,306         909          44%          956           37%
NBP                                                       653         487          34%          514           27%
NBP margin (% APE)                                        50%         54%                       54%
NBP margin (% PVNBP)                                     9.3%       10.0%                     10.0%
Total EEV basis operating profit*                       1,046         779          34%          829           26%
Total IFRS operating profit*                              189         177           7%          189            0%
*Based on longer-term investment returns excluding fund management operations, development and regional head
office expenses.




Prudential's strategy in Asia is to build quality, multi-channel distribution
that delivers customer centric and profitable products in segments with the
potential for sustained growth. By necessity, the approach to each market
varies, but all operations are unified under the Prudence icon and common brand
values and Prudential has the proven ability to leverage learning and expertise
from within the region and the wider Group to accelerate the development of
unique opportunities as they arise in each market.

The ability to execute the strategy is highly dependent on the strength and
depth of the management talent pool in the region and consequently Prudential
invests in continually strengthening and developing its teams. The operating
model empowers local management teams with a regional team overseeing control
functions such as risk management and  providing strategic guidance and
technical support in areas such as distribution optimization and product design.

Prudential has a market leading platform with top five market share positions,
in terms of new business APE, in seven of its twelve markets. Prudential has the
leading private sector life insurance joint ventures in China and India.

Current year initiatives

The core business priorities were outlined as:

  - Building on existing strengths in agency
  - Improving and extending partnership distribution
  - Continuing product innovation
  - Strengthening and deepening customer relationships
  - Developing retirement solutions
  - Starting work on direct distribution
  - Re-examining approach to health products

Agency is the predominant distribution channel in Asia and for Prudential, the
agency force again generated 70 per cent of new business volumes in 2007.
Success in agency distribution requires building and maintaining meaningful
scale in terms of agent numbers whilst also providing the infrastructure to
manage agent training and skills development to drive agency productivity.
Prudential's agency priority depends on the stage of development of each
individual market and Prudential's operation within it. For example in India,
Prudential's joint venture with ICICI has been rapidly expanding, with the
addition of 593 new branches  during the year to give a total 1,065 and
correspondingly average agent numbers in 2007 increased by 123 per cent and at
31 December there were 277,000 agents.

Similarly in China, although the rate of geographic expansion is slower as each
new city requires separate regulatory approvals the emphasis is also on
expanding the agency channel; average numbers were up 38 per cent and at 31
December there were 20,500 agents. In markets where we have sufficient agency
scale, the emphasis is on helping those agents become more productive through
intensified training and sales management support. Agent productivity, in terms
of average APE per agent, increased by 67 per cent in Vietnam and 21 per cent in
Singapore during 2007.

Prudential has a large partnership distribution network in Asia. During 2007,
Prudential extended its agreements with Standard Chartered Bank to include
Taiwan where it will exclusively provide bancassurance products in their newly
acquired HsinChu International Bank with its 83 branches and 2.4 million
customers. In Korea regulation states that a bank can only source a maximum of
25 per cent of its total insurance sales from any one insurer, and with
Prudential's sales existing bank partners regularly reaching their maximum
shares, adding new banks is a priority. In 2007 Prudential secured two major new
banks, Industrial Bank of Korea and Kookmin Bank. Prudential's regional
bancassurance relationship with Citibank also grew strongly with new business
APE generated of GBP23 million being 12 per cent of total bank distribution for
2007.

In 2007 Prudential continued to broaden its range of linked products. These
included the new Global Property Fund in Singapore and a new Takaful range in
Indonesia, launched in September 2007. In Taiwan, a new variable annuity product
and an agency incentive programme contributed to the growth in new business of
71 per cent for the year.

Good results were attained from systematic cross-sell campaigns across the
region, contacting more than 2 million of our existing customers.  These
included the initiation of a regular up-sell in Hong Kong through the indexation
of policy benefits and initiatives to capture maturity proceeds in Singapore and
a targeted offer of guaranteed increases in protection benefits in Malaysia.

Although still small, new business from direct marketing grew by 65 per cent
over 2006 with Thailand performing well and recording growth of 52 per cent. The
regional Direct Marketing team has been strengthened and work is now underway on
exploring further opportunities.

In Asia, there are very material opportunities arising in the provision of
healthcare solutions. Prudential successfully piloted new supplemental health
products in Singapore, India and Hong Kong during the year selling over 125,000
new policies.

Helping people address their financial needs for retirement is also a major
growth opportunity and whilst Prudential already has a number of products
designed to support the accumulation phase of a retirement fund, work is now
underway on drawdown options and supporting related protection and health
products. Prudential has already begun positioning itself as a provider of
retirement solutions through the roll out of the successful 'What's your number?
' campaigns in six countries that encourage people to think about what resources
they are likely to need to finance their retirement aspirations.

Prudential has a unique position in Vietnam with its market leading life
insurance business and  well respected brand. To further leverage this platform,
Prudential launched a consumer finance company in September 2007.

Financial performance

In 2007 Prudential delivered new business APE of GBP1,306 million from Asia
representing very strong growth that averaged 44 per cent over 2006 and with all
operations delivering double digit growth including Taiwan, India and Indonesia,
up 71 per cent, 67 per cent and 75 per cent respectively.

New business profit increased by 34 per cent as the average profit margin
reduced from 54 per cent to 50 per cent mainly due to a change in the country
mix of the sales. China, Hong Kong, Korea and Taiwan all reported increases in
new business profit margins compared to 2006. In India, the branch expansion
programme, has led to an increase in policy acquisition and maintenance costs
and therefore a rebasing of the expense assumptions. The reduction in  average
margin for the other countries was due to a change in country mix.

In-force embedded value profits of GBP393 million are driven principally by the
unwind of discount, with net assumption changes of GBP54 million and net
experience variances of GBP(1) million.  Assumption changes were principally due
to favourable changes in corporation tax and positive mortality assumption
changes. Negative persistency assumption changes are offset by positive expense
assumption changes. Experience variances mainly reflected positive mortality
across all operations partially offset by expense overruns in the newer
operations of China, India and Vietnam.





IFRS Profits                                                                                  CER
                                                                               2007          2006        Change
                                                                               GBPm          GBPm             %
                                                                                                   

Established markets (Hong Kong,Singapore, Malaysia)                             153           134           15%
North Asia (Taiwan, Korea, Japan)                                                16            20         (20%)
Joint Venture markets (China, India)                                           (49)          (20)        (146%)
Other SE Asian markets ( Indonesia, Vietnam, Thailand, Phillipines)              68            43           58%
Total Life IFRS Profits                                                         189           177            7%


The total IFRS Operating profit of GBP189 million was up seven per cent on 2006.
Within  this,  the  Established  markets  (Singapore,  Hong  Kong and  Malaysia)
generated  GBP153  million  up 15 per cent from  2006.  The North  Asia  markets
(Taiwan,  Japan, and Korea)  generated GBP16 million,  down 20 percent from last
year reflecting  increased losses in Japan.  Excluding Japan, profits from North
Asia almost doubled reflecting a strong increase in Taiwan of 47 per cent due to
in-force profits, especially from long term health products and favourable other
experience.  Losses from the joint ventures in India increased to GBP43 million,
reflecting  the fast pace of new business  growth and  investment in growing the
branch networks. Losses from the joint venture in China reduced to GBP6 million.
In the other markets (Vietnam,  Thailand,  Indonesia and  Philippines),  profits
grew by 58 per cent to GBP68 million  reflecting the expected  emergence of IFRS
profits and a one off GBP16 million favourable item in Vietnam.

In 2007 the Asian Life  operations were again net remitters of cash to the Group
of GBP56  million.  Remittances  totalling  GBP148  million were from Hong Kong,
Indonesia,  Malaysia,  Singapore and included the first remittance from Vietnam.
The Life operations received injections of GBP92 million, of which GBP49 million
was injected into India to support branch  expansion with the balance  primarily
injected into China and Korea to support  solvency  requirements  as a result of
new business growth.

IRR for Asia was in excess of 20 per cent for 2007. In Asia, Prudential targets
IRRs on new business to be at least 10 percentage points over the country risk
discount rate, where these vary from five per cent to 17 per cent. During 2007
all markets except India and Japan met this target.

Having achieved compound growth of 26 per cent since 2005, Asia expects to
deliver doubling of 2005 EEV NBP a year early by 2008.

United States



United States                                                 CER                RER(5)
                                                  2007       2006     Change       2006      Change
                                                  GBPm       GBPm          %       GBPm           %
                                                                                 

APE sales                                          671        565        19%        614          9%
NBP                                                285        239        19%        259         10%
NBP margin (% APE)                                 42%        42%                   42%
NBP margin (% PVNBP)                              4.3%       4.2%                  4.2%
Total EEV basis operating profit*                  627        652       (4%)        708       (11%)
Total IFRS operating profit*                       444        367        21%        398         12%
*Based on longer-term investment returns excludes broker dealer, fund management and Curian




The United States is the largest retirement savings market in the world and
continues to grow rapidly.  By mid-2007, total retirement assets in the US
exceeded $17.4 trillion, up from $16.5 trillion at the end of 2006 (Source:
Investment Company Institute).  As 78 million baby boomers (Source: US Census
Bureau) move into retirement age, these assets will shift from asset
accumulation to income distribution. Currently, $1.6 trillion of assets are
generating retirement income. This amount is estimated to grow to $7.3 trillion
by 2017 (Source: Financial Research Corporation).

Despite these favourable demographics, US life insurers face challenges from
both within and outside the industry. The industry remains highly fragmented,
with the top 15 annuity companies sharing only 74 per cent of the total market
share in 2007 (source: LIMRA).  Competition is intensifying through aggressive
price competition. Life insurers also find themselves competing with other
financial services providers, particularly mutual fund companies and banks, for
a share of US retirement savings assets.

During 2007, the S&P index increased 3.5 per cent (2006: 13.6 per cent), and the
US equity markets experienced significant volatility during the second half of
the year. The S&P index increased 6 per cent through June 2007, yet ended the
year 2.5 per cent lower than in June and 5.7 per cent lower than at the end of
October. This volatility and concerns about the US economy are expected to
increase investors' interest in guarantees on products with equity-based
returns.

In addition, for much of 2007, the yield curve was flat and credit spreads were
relatively low, resulting in a difficult environment for the sale of properly
priced fixed annuities.  During the second half of 2007, the yield began to
normalise and credit spreads began to widen, ending closer to normalised
historical levels. The market for fixed annuities was further complicated during
the year by artificially high deposit rates offered by banks to attract assets.

Jackson's primary focus is manufacturing profitable, capital-efficient products,
such as variable annuities, and marketing these products to advice-based
channels through its relationship-based distribution model. In developing new
product offerings, Jackson leverages a low-cost, flexible technology platform to
manufacture innovative, customisable products that can be brought to the market
quickly.

Jackson markets its retail products primarily through advice-based distribution
channels, including independent agents, independent broker-dealer firms,
regional broker-dealers, banks and registered investment advisors. Jackson also
markets life insurance and fixed annuity products through its captive insurance
agency, which is concentrated in the south-eastern United States.

Current year initiatives

During 2007 significant progress was made against the business priorities which
included:

  - continued enhancement and expansion of the existing product offering
  - continue to take profitable share of variable annuities market
  - increased penetration of existing distribution channels
  - increase share of the US retail asset management market.

Jackson continues to base its success in the evolving US market on industry
leading distribution and product innovation coupled with sound evaluation of
product economics. Jackson's long-term goals include the continued expansion of
its share of the US annuities and retail asset management markets, which it
plans to achieve by leveraging its relationship-based distribution advantage in
the advice-based channels.  Growth in Jackson's share of the US annuities market
will be largely contingent upon continued enhancement and expansion of the
existing product offering, increased penetration of existing distribution
channels and entry into new distribution channels, as well as opportunistic
acquisition activity.

Innovation in product design and speed to market continue to be key drivers of
Jackson's competitiveness in the variable annuity market. High quality,
cost-effective technology has allowed Jackson to offer a comprehensive product
portfolio that can be customised to meet the needs of individual customers.
Products are offered on an unbundled basis, allowing customers to select those
benefits that meet their unique financial needs and pay only for those benefits
that they truly need. This advantage, coupled with distribution through
advice-based channels, allows Jackson to effectively meet individuals' long-term
retirement savings and income needs.  Jackson believes that leveraging this
advantage is a more sustainable long-term strategy than price competition and,
as a result, will not sacrifice product economics for a short-term increase in
market share.

Jackson supports its network of independent agents and advisors with
award-winning customer service and marketing support. In 2007, the Service
Quality Measurement Group rewarded Jackson with its third World Class Customer
Satisfaction Award.  Jackson's marketing campaigns continue to win awards for
achievement in graphic design, editorial content and overall communications
excellence.

Through organisational flexibility and excellence in execution, coupled with
product innovation, a successful distribution model and a strong service
offering, Jackson increased its share of the US variable annuity market to 5.1
per cent for full-year 2007 (source: Morningstar Annuity Research Center), up
from 4.6 per cent for the full-year 2006.

Jackson continues to expand its product portfolio, adding a variety of new
features during 2007. The company enhanced its variable annuity portfolio by
adding 20 new underlying investment options, four new guaranteed minimum
withdrawal benefits (GMWBs), one new guaranteed minimum income benefit (GMIB)
and its first guaranteed minimum accumulation benefit (GMAB).

In 2007, Jackson also introduced a line of retail mutual funds and launched two
new fixed index annuity products that offer new index options and multiple
crediting methods. These additions provide even more product choices to advisors
and create more opportunities to capture a larger portion of the US retirement
market.

Jackson continues to seek bolt-on acquisitions that will complement its
long-term organic growth strategy. Transactions will need to meet or exceed
Jackson's targeted rate of return and will likely be in the life insurance
channel, which provides stable future cash flows. Depending on the opportunities
that become available, Jackson may consider utilising securitisation financing
for these bolt-on transactions.

Financial performance

Jackson  achieved record APE sales of GBP671 million in 2007,  representing a 19
per cent  increase  on 2006.  This  growth was led by a  continued  increase  in
variable  annuity  sales.  On a PVNBP  basis,  new  business  sales were  GBP6.7
billion.  Retail  APE sales in 2007 of GBP577  million  were up 19 per cent over
2006.

Jackson  delivered  record variable annuity APE sales of GBP455 million in 2007,
up 29 per cent over 2006.  In 2007,  Jackson  maintained  its ranking of 12th in
gross variable annuity sales (Source: Morningstar Annuity Research Centre).

Fixed annuity APE sales of GBP57 million were 10 per cent down on 2006, while
industry sales of traditional individual deferred fixed annuities were 13 per
cent lower in 2007 compared to 2006 (Source: LIMRA).

Fixed index annuity sales  continued to be affected by the uncertain  regulatory
environment  in the  US and  the  impact  of low  interest  rates  on  caps  and
participation rates that are offered. As a result,  industry sales were nearly 1
per cent lower in 2007 compared to 2006  (Source:  Advantage  Group  Associate).
Jackson's APE sales of GBP45 million were 12 per cent down on 2006. In the third
quarter of 2007, Jackson ranked first in fixed index annuity sales through banks
for the ninth consecutive  quarter (Source:  The Kehrer-LIMRA  Report).  Jackson
continues to pursue profitable growth and hence has been unwilling to compromise
target margins in this market.

Institutional APE sales of GBP94 million were up 15 per cent on 2006. Jackson
continues to participate in this market on an opportunistic basis when margins
are attractive.

EEV basis new  business  profits  of GBP285  million  were 19 per cent above the
prior year,  reflecting a 19 per cent  increase in APE sales with a shift in the
mix of  business  toward  variable  annuities  as well  as  increased  sales  of
institutional  business with longer  duration.  Total new business margin was 42
per cent, in line with 2006.

The variable  annuity new business margin  decreased from 49 per cent in 2006 to
42 per cent in 2007, primarily due to a 70 basis point decrease in the risk-free
rate from 2006 to 2007.  The lower  risk-free rate resulted in a decrease in the
assumed  separate  account return that was partially offset by a decrease in the
risk discount rate. In addition,  Jackson  reviewed its  experience  assumptions
during the year and revised certain partial withdrawal and expense  assumptions,
which also decreased the new business margin.

The fixed index annuity new business margin decreased from 31 per cent in 2006
to 26 per cent in 2007, primarily as a result of a change in expected future
surrender charges.

The fixed annuity new business margin increased significantly from 16 per cent
to 28 per cent, primarily as a result of a decrease in the risk discount rate
for the year.

The new business margin on institutional business improved significantly, from
39 per cent in 2006 to 58 per cent in 2007 due to the much longer average
duration contracts written during 2007 and a lower risk discount rate.

Total EEV basis operating profit for the long-term  business for 2007 was GBP627
million  compared  to GBP652  million  in the prior  year at CER.  In-force  EEV
profits of GBP342  million  were 17 per cent below  prior year  profit of GBP413
million at CER.  Experience  variances  were GBP58  million lower in 2007 due to
lower  spread  income  and the  impact  of  persistency  adjustments.  Operating
assumption  changes were less  favourable  than the prior year by GBP17  million
including the impact of updated persistency and lapse rates during 2007. One-off
items  favourably  affected the spread income  variance by GBP40 million  during
2007.

IFRS operating profit for the long-term  business was GBP444 million,  up 21 per
cent on the  prior  year of  GBP367  million  at CER,  primarily  reflecting  an
increase in fee income and continued low mortality rates during 2007. Higher fee
income was driven  primarily by higher separate  account assets given the growth
in variable annuity sales, and an improvement in the average fees generated from
those assets given the increase in election of guaranteed optional benefits.  In
2007, IFRS spread income  included a number of  non-recurring  items,  totalling
GBP26 million net of DAC amortisation (2006: GBP31 million at CER).

At 31 December 2007,  Jackson had more than GBP41 billion in US GAAP assets.  Of
this total,  GBP15 billion were  separate  account  assets,  an increase of GBP4
billion from year-end 2006, further increasing Jackson's earnings from fee-based
products.

During the second half of 2007,  equity market volatility  increased  materially
primarily  due to liquidity  concerns and  valuation  issues in the US sub-prime
mortgage market.  Much of the market movement was due to concerns  regarding the
risk in this  market  that  resulted  in a  tightening  in the  level of  credit
available.  While the  financial  services  industry  was  hardest  hit by these
events, losses were generally limited to those companies with significant levels
of sub-prime or Alt-A  mortgage  exposure.  Jackson's  exposure to the sub-prime
mortgage  market is limited at only GBP237  million at the end of 2007.  Most of
this exposure is in fixed rate,  residential mortgage backed securities that are
AAA rated and hold first liens on the underlying  collateral.  Exposure to Alt-A
was GBP660 million and direct exposure to monoline insurers was GBP23 million.

The average IRR on new business was up slightly to 19 per cent, primarily due to
a larger proportion of variable annuity sales in 2007.

United Kingdom



United Kingdom                                                        CER                    RER(5)
                                                         2007        2006       Change         2006        Change
                                                         GBPm        GBPm            %         GBPm             %
                                                                                               

APE sales                                                 897         900         (0%)          900          (0%)
NBP                                                       277         266           4%          266            4%
NBP margin (% APE)                                        31%         30%                       30%
NBP margin (% PVNBP)                                     3.6%        3.4%                      3.4%
Total EEV basis operating profit*                         859         686          25%          686           25%
Total IFRS operating profit*                              528         500           6%          500            6%
*Based on longer-term investment returns.




In 2007, Prudential UK continued its strategy of selectively competing in areas
of the retirement savings and income markets where it can generate attractive
returns.

The UK  business  remains  focused  on  maximising  value  from the  opportunity
afforded  by the fast  growing  need for  retirement  solutions.  With an ageing
population and the  concentration of UK wealth in the mass affluent and high net
worth sectors, the retirement and near-retirement  population will represent the
fastest growing segments of the market over the next 10 years. Low savings rates
and high levels of consumer debt,  combined with a shift in  responsibility  for
providing  income  during  retirement  from  Government  and  employers  towards
individuals, have resulted in individuals being inadequately provided for during
increasingly  long periods of retirement.  These  consumers will have a need for
high  quality  financial  advice  and  service  and  are  increasingly   seeking
guarantees and longevity protection from their financial products.

Prudential UK has a unique combination of competitive advantages including its
significant longevity experience, multi-asset management capabilities and its
brand and financial strength. These put it in a strong position to pursue its
value driven strategy in its two principal businesses: Retail and Wholesale.

Prudential  UK's  Retail  business  is  focusing on savings and income for those
customers  nearing or in  retirement.  Its  retirement  income  business aims to
continue to drive profitable growth in its core annuities operation and grow its
presence in the equity  release  market.  The  significant  25-year  pipeline of
internal  vestings  annuity  business  from  maturing  individual  and corporate
pensions  policies is enhanced by  strategic  partnerships  with third  parties,
where Prudential UK is the recommended  annuity  provider for customers  vesting
their  pension at  retirement.  This scale  enables  our  selective  value-based
participation in the external vestings market.  Annuities remain core drivers of
the sales and profit derived by Prudential UK, which now has  approximately  1.5
million annuities in payment.

Prudential UK remains a market leader in the with-profits market. These products
offer a medium to long-term, medium risk investment with exposure to a diverse
range of assets that is particularly important to many customers against the
backdrop of market uncertainty.

In the Retail  accumulation  business,  Prudential  UK  continues to be a market
leader in the  corporate  pensions  market where it is a provider of over 20 per
cent of FTSE 350 companies and the largest provider of pension schemes to the UK
public sector.  Prudential now administers  corporate  pensions for over 600,000
members.

In addition, the Retail business has used its brand and strength with Discovery
to build branded distribution in Health and Protection, further using the joint
venture to access Discovery's Vitality concept and lifestyle protection
capabilities.

Prudential UK's strategy in the Wholesale  market is to participate  selectively
in bulk  annuity and  back-book  buy-outs,  where  Prudential  UK is able to win
business based on its financial strength,  superior track record, market leading
investment  capability  as  well  as  its  extensive  annuitant  mortality  risk
assessment capabilities. The Wholesale business, which has been in operation for
over 10 years and has already written more than 400 bulk buy-outs,  has a strong
track record in the risk management of pension schemes for corporate clients and
insurers   wishing  to  reduce  or  eliminate  their   investment  or  longevity
liabilities.  Prudential  UK  will  maintain  a  strict  focus  on  value,  only
participating in transactions that generate an acceptable rate of return.

Current year initiatives

Prudential UK's key priorities in 2007 were:

  - Maintaining leadership position in individual annuities
  - Building share of the equity release market
  - Growing the volume of products that utilise Prudential's multi-asset
    management expertise
  - Deepening relationships with chosen distributors including the
    introduction of customer-agreed remuneration across some product lines
  - Realigning cost base to the selective business strategy
  - Delivering wholesale transactions with attractive rates of  return

During 2007, Prudential UK maintained its market leadership in individual
annuities, where it has continued to create value by maintaining high retention
rates. This has been augmented by partnership deals with insurers such as
Zurich, Royal London and Save and Prosper. We also announced a new partnership
with Barclays, where Prudential will be the preferred supplier of conventional
annuity products to their retail customers in the UK.

Capitalising on the need for inflation protection in retirement, Prudential
remains the market leader in the growing with-profits annuity market with over
75 per cent market share. Early in 2007 Prudential made a number of product
enhancements including the facility to accept Protected Rights monies, which was
a first in the with-profit annuity market.

In the fourth quarter, Prudential UK launched an income drawdown product. This
product helps customers manage their pension through the various stages of
retirement, and offers flexibility whilst providing potential for growth through
investment. Together with the Flexible Lifetime Annuity this gives Prudential a
full range of retirement income solutions.

Investing in property has been an increasingly important component for many
people saving for their retirement. However this has left many retirees income
poor but asset rich. Prudential UK's lifetime mortgage business grew its share
of the lifetime mortgage market to 14 per cent through its distinctive drawdown
product and strong brand. In the third quarter a number of product enhancements
were introduced, including an inheritance guarantee and a new lump sum product.
Prudential expects both its market share and the overall market size to grow.

In a relatively volatile investment market there has been a marked increase in
demand for cautious managed solutions providing enhanced returns. In February
2007, Prudential UK launched the Cautious Managed Growth Fund and the Managed
Defensive Fund, using Prudential's strengths in investment expertise and in
disciplined approach to asset allocation. These funds have the potential to
offer a better longer-term return than a bank or building society account and
allow the customer to access real returns with lower volatility. These funds are
available across the full tax wrapper suite, including onshore and offshore
bonds, individual pensions and mutual funds.

During 2007, Prudential UK introduced customer-agreed remuneration across some
of its product lines. Under this model, financial advisors agree their
remuneration directly with the customer and not with the product provider and in
doing so make commission structures far more transparent. This is in line with
Prudential UK's focus on building strong long-term relationships with advisors
as well as offering market-leading retirement solutions.

The agreement  announced in 2007 with Capita to outsource a large  proportion of
its  in-force  and new  business  policy  administration  is  another  important
milestone  for the UK business.  This  agreement  will deliver GBP60 million per
annum of savings to Prudential UK, and is an important  element in achieving its
total  cost  savings  target of GBP195  million.  The  contract  will  result in
approximately  3,000  employees  transferring to Capita and helps the UK deliver
its long-term  cost savings  strategy by removing  fixed costs from the business
and achieving  significant operating  efficiencies.  This provides a significant
reduction in long-term  expense risk by providing  certainty on per-policy costs
as the number of policies in the mature life and pensions  book  decreases  over
the coming  years.  Unit costs per policy are  expected to reduce by over 30 per
cent by 2011.

By the end of 2007 GBP115 million of the cost saving target had been  delivered.
The remaining  GBP80  million,  including the GBP60 million  generated  from the
Capita contract, will be delivered by the end of 2010.

In December, Prudential completed the transfer of Equitable Life's portfolio of
in-force with-profits annuities. This book covers approximately 62,000 policies
with assets of approximately GBP1.74 billion. This deal grows Prudential's
with-profits business and creates value for both Equitable policyholders and
Prudential's shareholders and policyholders.

Financial performance

Total APE sales of  GBP897  million  were in line with 2006 and there was a four
percent  increase  in new  business  profit to  GBP277  million,  reflecting  an
improved  new  business  margin  of 31 per cent in an  increasingly  competitive
market.  The 2006  comparator  included  credit life sales of GBP63  million and
associated new business  profit of GBP20 million written under a single contract
that was not renewed in 2007.

A strong Retail  performance  saw a four per cent increase in sales and a 17 per
cent  increase  in new  business  profit to  GBP223  million  demonstrating  the
continuing  benefits  of  selectively  participating  in product  lines that can
deliver   attractive   returns.   Retail  sales  growth  was  driven  by  strong
performances in individual annuities, corporate pensions, with-profits bonds and
lifetime mortgages.

In the  wholesale  bulk  annuity and insurer  back-book  market,  Prudential  UK
achieved  a 26 per cent  year-on-year  increase  with  sales  in 2007 of  GBP180
million.  In the fourth quarter  Prudential  completed the transfer of Equitable
Life's  portfolio  of in-force  with-profit  annuities.  In the  previous  year,
Prudential  UK  completed  two  back-book  insurer  deals with a total volume of
GBP143 million.  New business  profits  relating to the Wholesale  business were
GBP54 million in 2007.

EEV basis  operating  profit based on longer-term  investment  returns of GBP859
million,  before  restructuring  costs of GBP8  million,  were up 25 per cent on
2006.  The  in-force  operating  profit of GBP582  million was up 39 per cent on
2006,  due to the  increase in profits  arising  from the unwind of the in-force
book  (reflecting  an  increased  opening  embedded  value) and a GBP67  million
positive  operating  assumption change in 2007 reflecting the change in the long
term tax rate assumption from 30 per cent to 28 per cent. A charge in respect of
a mortality operating  assumption change on annuity and deferred annuity pension
business  of GBP312  million was fully  offset by the release of excess  margins
previously held.

Other charges of GBP77 million  include GBP36 million of costs  associated  with
product and  distribution  development;  GBP13 million for an annual fee paid by
the   shareholder   business  to  the  Prudential   Assurance   Company's  (PAC)
with-profits  sub-fund  for  the use of the  Prudential  and  Scottish  Amicable
trademarks;  GBP14  million in respect of the tariff  arrangement  with Scottish
Amicable Insurance Finance (SAIF), which terminates at the end of 2007 and GBP14
million in relation to other items.

Prudential continues to manage actively the retention of the in-force book.
During 2007, experience at an aggregate level has been in line with our
long-term assumptions as evidenced by the small positive experience variance.

IFRS  operating   profit  increased  six  per  cent  to  GBP528  million  before
restructuring costs of GBP7 million.  This reflects a seven per cent increase in
profits  attributable to the with-profits  business,  which  contributed  GBP394
million  reflecting  strong  investment  performance  and its impact on terminal
bonuses.  The net impact of the mortality  strengthening  and release of margins
held in other assumptions under the IFRS basis was a positive net GBP34 million.

In  2007,  Prudential  received  a GBP4  million  net  commission  payment  from
Winterthur relating to general insurance sales under the Prudential brand in the
UK. From early 2008, on  settlement of an advance  payment made by Winterthur in
2002,  the business  expects to receive  approximately  GBP30  million a year in
commission  payments,  although this will depend on the new business volumes and
persistency rates.

Prudential UK writes with-profit annuity, with-profits bond and with-profits
corporate pension business in its life fund with other products backed by
shareholder capital. The weighted average post-tax IRR on the shareholder
capital allocated to new business growth in the UK was 14 per cent, excluding
the Equitable Life deal (18 per cent including this business).

Asset Management

Global

The Prudential Group's asset management businesses provide value to the
insurance businesses within the Group by delivering sustained superior
performance. They are also important profit generators in their own right,
having low capital requirements and generating significant cash flow for the
Group.

The asset management businesses are well placed to capitalise on their leading
market positions and strong track records in investment performance to deliver
net flows and profit growth as well as strategically diversifying the Group's
investment propositions in retail financial services (RFS) markets that are
increasingly favouring greater product transparency, greater cross-border
opportunities and more open-architecture investment platforms. Wholesale profit
streams are also growing.

The Group's asset management businesses operate different models and under
different brands tailored to their markets and strengths, however they continue
to work together by managing money for each other with clear regional
specialism, distribute each others' products and share knowledge and expertise,
such as credit research.

Each business and its performance in 2007 is summarised below.

M&G

M&G is comprised of the M&G asset management business and Prudential Capital.



M&G                                                                   CER                    RER(5)
                                                         2007        2006       Change         2006        Change
                                                         GBPm        GBPm            %         GBPm             %
                                                                                               

Net investment flows                                    4,958       6,101        (19%)        6,101         (19%)
Revenue                                                   482         429          12%          429           12%
Other income                                               30          27          11%           27           11%
Staff Costs                                             (224)       (216)         (4%)        (216)          (4%)
Other Costs                                             (113)       (106)         (7%)        (106)          (7%)

Underlying profit before Performance-related Fees         175         134          31%          134           31%
Performance-related fees                                   28          27           4%           27            4%

Operating profit from asset management operations         203         161          26%          161           26%
Operating profit from Prudential Capital                   51          43          19%           43           19%

Total IFRS operating profit                               254         204          25%          204           25%


M&G Asset Management

M&G is an investment-led business with a demonstrable focus on performance
delivery and aims to offer attractive products in a variety of macro-economic
environments. M&G aims to deliver superior investment performance and maximise
risk-adjusted returns for our retail, wholesale and internal clients.  External
funds under management account for nearly a third of M&G's total funds under
management and it is this higher-margin external business that drives
profitability and cash generation for the Group.

M&G's retail strategy is based on obtaining maximum value from a single
manufacturing function through a multi-channel, multi-geography distribution
approach. Over the last five years, M&G's retail business has expanded beyond
the UK into the major European markets, the Middle East, South America and Asia.
By operating through multiple channels, M&G's retail business is well placed to
profit from current trends away from direct selling towards intermediation, and
the growth of on-line fund platforms and third-party product wrappers.

M&G's wholesale strategy centres on leveraging the skills developed primarily
for internal funds to create higher margin products for external clients. In
recent years, this strategy has consolidated M&G's position at the forefront of
the leveraged finance, structured credit and infrastructure investment markets.
The same strategy is now being applied to develop the more traditional pooled
and segregated fixed income areas of M&G's wholesale business.

M&G has significant scale in all major asset classes: it is believed to be one
of the largest active managers in the UK stock market, one of the largest bond
investors in the UK and one of the UK's largest property investors. In addition,
M&G has profitable businesses in a number of specialist areas such as leveraged
loans, structured credit, infrastructure finance and macro investment.

Current year initiatives

Delivering fund performance remains critical and is the key determinant of
success for an asset management business.  M&G has continued to deliver
market-leading investment performance in 2007 with impressive results.  M&G's
retail funds have performed exceptionally well, with 45 per cent delivering
top-quartile performance(1). In addition, 86 per cent of M&G's segregated
institutional funds have met or exceeded their benchmark performance1.

Returns1 on Prudential's Life Fund assets were 66 basis points ahead of
benchmark and 143 basis points better than peer group.

Overall, the demand for asset management products in M&G's distribution markets
continued to grow strongly in 2007 driven, in part, by the same
retirement-related demographic trends that are creating opportunities for the
Group as a whole.

With a diversified business across different asset classes and across retail and
wholesale markets, both in the UK and internationally, M&G remains well
positioned for a variety of macro-economic and market conditions.

The way that clients purchase asset management products continued to evolve
during 2007.  The retail asset management sector benefited from the increasing
shift by retail investors towards more transparent investment products, such as
unit trusts, and M&G's range of market leading funds has positioned it well to
benefit from this trend. M&G extended its range of innovative new funds during
2007 with the launch of the M&G Cautious Multi Asset Fund and M&G Global
Convertibles Fund.

European cross-border distribution of retail funds has accelerated and the trend
in favour of 'Open Architecture' in both the UK and Europe continues to open up
significant bank and life company distribution opportunities. Parallel to this,
distribution of mutual funds has become increasingly intermediated and has been
accompanied by the rise of professional buyers who demand higher levels of
service and investment information, areas in which M&G has considerable
expertise.  M&G has continued to expand its geographic coverage in Europe with
the first full year of operations in Spain and the launch of M&G's funds in
France in October 2007 which has given M&G access to Europe's largest mutual
fund market.

Wholesale markets are demanding increasingly sophisticated and tailored products
and there is a continued  shift from  balanced  to  specialist  mandates.  These
trends,  plus the increased role of fixed income within portfolios,  continue to
play to the  strength  and  scale  of M&G's  wholesale  business.  In 2007,  M&G
launched three new funds aimed at the institutional and pensions markets - the M
&G Alpha  Opportunities  Fund,  M&G  Secured  Property  Income  Fund and the M&G
Secured  Debt  Fund.  All  of  these  funds  offer  innovative  alternatives  to
traditional  fixed income  assets and leverage off M&G's  expertise and scale in
both property and private finance.

M&G's infrastructure investment business has grown from inception in 2005 to
manage GBP471 million (2007 year end fair value) in its principal fund,
Infracapital. The business contributed GBP7.1 million to M&G profits in 2007.

M&G's global macro investment business was established in 2005 and has grown to
GBP1.5 billion in external funds under management as at the end of 2007. It
contributed GBP11.2 million in profits to M&G in 2007, including performance
related fees.

In order to  support  its  retail  and  wholesale  strategy,  M&G  places a high
priority on the recruitment,  development and retention of top-quality staff. In
a highly  competitive  market for the best  talent,  this  entails  providing an
inclusive and supportive  environment as well as offering  appropriate levels of
compensation.  At the same  time,  M&G has a policy  of  prudent  cost  control,
ensuring that top-line growth is translated into enhanced  operational  gearing.
During 2007 turnover of staff remained in line with industry  averages at 10 per
cent  and  the  company  spent  GBP2.1  million  on  training  and   development
programmes.

Financial performance

M&G recorded  another year of record profits in 2007 with an operating result of
GBP203 million (2006:  GBP161 million),  representing profit CAGR of 34 per cent
since 2003.  Underlying  profit  growth,  which  excludes  volatile  performance
related fees (PRFs) and carried  interest earned on private equity  investments,
has  grown at 36 per cent CAGR over the same  period  to GBP175  million  (2006:
GBP134 million).

M&G continues to target increased diversity in profit generating activities.  In
2007, 80 per cent of underlying  profits were  generated as a result of managing
external funds, compared to 23 per cent in 2003. Profit growth is driven by four
key factors:  appreciation of underlying assets,  positive net sales, increasing
mix of higher-margin business and decreasing cost/income ratio.

The underlying growth in M&G's principal investment markets over recent years
has been strongly supportive of its performance. While this growth is beyond the
company's control, M&G has been successful at increasing diversity in terms of
both asset class and distribution channel in order to reduce exposure to
cyclical downturns in individual markets.

M&G has performed strongly against the other three measures.  Net sales for 2007
of GBP5.0 billion (2006:  GBP6.1  billion) were driven by both the retail GBP2.7
billion,  (2006:  GBP3.1 billion) and wholesale  GBP2.3 billion,  (2006:  GBP3.0
billion)  businesses.  Gross  inflows of  GBP14.7  billion  were the  highest on
record,  offset to some extent by higher gross redemptions,  particularly in the
more volatile international retail marketplace.

The continued strong growth in external funds under management, coupled with a
small    decline in the value of funds managed for Prudential, has resulted in
an increasing mix of higher-yielding business for M&G. This has supported an
increase in gross margin (revenue as a proportion of FUM) from 28.0 basis points
in 2003 to 30.8 in 2007.

During 2007, M&G has exercised continued cost discipline to ensure that top-line
growth feeds through to profitability and cash generation. M&G's cost/income
ratio for 2007 was 66 per cent (2006: 71 per cent) having fallen from 83 per
cent in 2003.

M&G continues to provide capital efficient profits and cash generation for the
Prudential group, as well as strong investment returns on its long-term business
funds.  Cash remittances were GBP99 million in 2007.

Prudential Capital

Prudential Capital (re-branded from Prudential Finance in 2007) manages
Prudential's balance sheet for profit through leveraging Prudential's market
position. The business has three strategic objectives: to operate a first class
wholesale and capital markets interface; to realise profitable proprietary
opportunities within a tightly controlled risk framework; and to provide
professional treasury services to Prudential. Prudential Capital generates
revenue by structuring transactions, providing bridging finance, and operating a
securities lending and cash management business for Prudential and its clients.

The business has continued to grow in terms of investment, infrastructure and
personnel in a controlled way while maintaining the dynamism and flexibility
that it requires to identify and  realise opportunities for profit. Prudential
Capital is committed to working closer with other Group business units to
deliver opportunities and to improve value creation for the Group. Prudential
Capital is also taking a more holistic view on hedging strategy, liquidity and
capital management for the Group.

Prudential Capital has a diversified earnings base derived from bridging,
structured finance and wholesale markets. Prudential Capital delivered a good
financial result in 2007, driven by increased investment activity and strong
securities lending performance. As a result of increased revenue and maintaining
a low cost/income ratio, operating profits increased by 19 per cent to GBP51
million, resulting in a cash remittance to the holding company of GBP40 million.

Asia



Asia                                                                 CER                    RER(5)
                                                        2007        2006       Change         2006        Change
                                                        GBPm        GBPm            %         GBPm             %
                                                                                              

Net investment flows                                   2,961       2,410          23%        2,532           17%
Total IFRS operating profit*                              72          47          53%           50           44%
*Based on longer-term investment returns.


Prudential's asset management business in Asia supports the Life Business, and
has established itself as an increasingly material retail business in its own
right. Today it has retail operations in ten markets and, is the only foreign
fund manager with a top five market share position in more than one Asian
country.

The mutual fund industry continues to diversify its investments, expectations
are for a significant increase in net flows over the coming years. Bank
distribution continues to dominate in most markets in Asia, and Prudential has
established strong relationships with both regional and local banks and places
great emphasis on providing good service.

Current Initiatives

Fund innovation is essential in maintaining sales levels and distribution
agreements and during 2007 Prudential's operations launched 71 new funds. The
largest of which include two India funds for Japan; the India Equity Fund and
the India Infrastructure Fund. The China Dragon A Share Equity Fund in Korea
reached its regulatory cap in two weeks and the Asia Pacific REIT in Taiwan also
reached its regulatory cap.

 A key achievement in 2007 was the expansion of regional distribution
relationships with Citi and HSBC.  The Asian asset management business also
signed a global partnership agreement with HSBC Private Banking and is now part
of the Credit Suisse Fundslab platform.

Greater deregulation and higher allocations by sovereign wealth and other
institutional investors in foreign investments is driving the growth of offshore
funds in the market and Prudential is also developing its institutional asset
management business in Asia winning mandates of GBP0.5 billion during 2007.

Prudential launched a retail mutual fund business in Hong Kong in October 2007.
Since launch six distribution relationships have been signed, including banks,
financial advisers and an on-line portal.

The United Arab Emirates operation also made good progress with 13 distribution
agreements signed since launch a year ago and with funds under management of
GBP397 million.

In August 2007, Prudential increased its stake in CITIC Prudential Fund
Management, its joint venture with CITIC Group in China from 33 per cent to 49
per cent, following approval from regulators. This joint venture launched its
first Qualified Foreign Institutional Investor fund in Korea in May 2007 and hit
its GBP100 million quota.

Financial Performance

Prudential's  asset management  business achieved record net inflows for 2007 of
GBP3  billion,  up 23 per cent on 2006.  The  growth in net flows was  primarily
driven by strong performance in India,  Taiwan and Japan. Funds under management
in these three  countries  increased by 65 per cent, 49 per cent and 46 per cent
respectively. In total during 2007, retail funds under management grew by 39 per
cent to GBP17.4 billion.

IFRS profits from asset management operations were GBP72 million, up 53 per cent
on 2006. Operating profits in terms of basis points on funds under management
increased from 18 basis points in 2006 to 21 in 2007. The asset management
business requires very little capital to support its growth and in 2007 it
remitted a net GBP31 million to the Group.

United States

US Asset Management



PPM America                                                          CER                    RER(5)
                                                        2007        2006       Change         2006        Change
                                                        GBPm        GBPm            %         GBPm             %
                                                                                              

Total IFRS operating profit*                               4          10        (60%)           12         (67%)
*Based on longer-term investment returns.




PPM America (PPMA) manages assets for Prudential's US, UK and Asian affiliates.
PPMA also provides investment services to other affiliated and unaffiliated
institutional clients including collateralised debt obligations (CDOs), private
equity funds, institutional accounts and mutual funds. PPMA's strategy is
focused on effectively managing existing assets, maximising synergies with
international asset management affiliates and leveraging investment management
capabilities across the Prudential Group. PPMA also opportunistically pursues
third-party mandates.

Current year initiatives

During 2007, PPMA successfully leveraged its investment management capabilities
as evidenced by:

-      Obtaining over GBP329 million of funds under management in the Jackson
       variable annuity programme.

-      Assuming management of over GBP194 million of funds under management from
       Curian.

-      Assuming additional responsibilities for the UK life fund, growing
       assets by GBP2 billion.

-      Launching three new products offered by Prudential Corporation Asia.

-      Raising over GBP638 million of third-party funds under management.

Financial performance

IFRS operating profit in 2007 was GBP4 million, down from GBP10 million in 2006,
primarily due to lower investment income and performance-related fees, partially
offset by asset-driven fee growth.

Year-end 2007 funds under management of GBP39 billion were as follows:




PPMA funds under management
  (GBP billions)                                  Asia          US               UK           Total
                                                                                    

Insurance                                          0            23               10              33
Unitised                                           3             0                1               4
Institutional                                      0             0                0               0
CDOs                                               0             2                0               2

Total                                              3            25               11              39


US Broker dealer

Broker dealer                                                        CER                    RER(5)
                                                        2007        2006       Change         2006        Change
                                                        GBPm        GBPm            %         GBPm             %
Revenue                                                  300         246          22%          267           12%
Costs                                                  (291)       (240)          21%        (261)           11%
Total IFRS operating profit*                               9           6          50%            6           50%
*Based on longer-term investment returns.




National Planning Holdings (NPH), Jackson's affiliated independent broker-dealer
network, is comprised of four broker-dealer firms, including INVEST Financial
Corporation, Investment Centers of America, National Planning Corporation and
SII Investments.

NPH continues to grow through significant recruiting efforts. By leveraging its
high-quality, state-of-the-art technology, NPH provides its advisors with the
tools they need to operate their practices more efficiently. Through its
relationship with NPH, Jackson continues to benefit from an important retail
distribution outlet, in addition to receiving valuable insight into the needs of
financial advisors and their clients.

Current year initiatives

NPH increased sales of Jackson's enhanced product offering and the overall
distribution of the network during the year. NPH also introduced several
operational enhancements, which increased the efficiency of its production
processes. In addition, NPH executed a focused recruitment initiative to expand
the total assets under management and the representative base of INVEST
Financial Corporation.

Financial performance

NPH had a very  successful  year in 2007,  generating  record revenues of GBP300
million versus GBP246 million in 2006 on gross product sales of GBP7.1  billion.
The network  continues to generate  profitable  growth with 2007 IFRS  operating
profit of GBP9 million, a 50 per cent increase at CER from GBP6 million in 2006.
NPH also increased the number of registered  advisors in its network to 3,000 at
year-end.

Curian



Curian                                                                   CER                    RER(5)
                                                           2007         2006       Change         2006       Change
                                                           GBPm         GBPm            %         GBPm            %
                                                                                                 

Gross investment flows                                      663          422          57%          459          44%
Revenue                                                      20           15          33%           16          25%
Costs                                                      (25)         (22)          14%         (24)           4%
Total IFRS operating profit*                                (5)          (7)        (29%)          (8)        (38%)
*Based on longer-term investment returns.



Curian Capital (Curian), Jackson's registered investment advisor, provides
innovative fee-based separately managed accounts and investment products to
advisors through a sophisticated technology platform.  Curian expands Jackson's
access to advisors and provides a complement to Jackson's core annuity product
lines.

Current year initiatives

During 2007, Curian implemented its Simplified Proposal Process, which allows
financial professionals to generate proposals in a matter of minutes, while
maintaining the flexibility and customisation that make separately managed
accounts an attractive alternative to traditional investment vehicles.  Curian
also expanded its wholesaling force during the year in an effort to accelerate
growth.

Financial performance

As a result of these initiatives,  Curian continued to build its position in the
US retail asset management  market with total assets under management at the end
of  December  2007 of  GBP1.7  billion,  up from  GBP1.2  billion  at the end of
December 2006.  Curian also generated record deposits in 2007 of GBP663 million,
up 57 per cent over 2006.  Curian's IFRS operating loss declined to GBP5 million
in 2007 (2006: GBP7 million at CER).

OTHER CORPORATE INFORMATION

Balance sheet

Explanation of balance sheet structure

The  Group's  capital  on an IFRS  basis  comprises  of  shareholders'  funds of
GBP6,201 million, subordinated long-term and perpetual debt of GBP1,570 million,
other core structural  borrowings of GBP922 million and the unallocated  surplus
of with-profits funds of GBP14.4 billion.

Subordinated or hybrid debt is debt capital which has some equity-like features
and which would rank below other senior debt in the event of a liquidation.
These features allow hybrid debt to be treated as capital for FSA regulatory
purposes.  All of the Group's hybrid debt which qualifies in this way is held at
the Group level and is therefore taken as capital into the parent solvency test
under the IGD.

The FSA has established a structure for determining how much hybrid debt can
count as capital which is similar to that used for banks. It categorises capital
as Tier 1 (equity and preference shares), Upper Tier 2 and Lower Tier 2.  Up to
15 per cent of Tier 1 can be in the form of hybrid debt and called 'Innovative
Tier 1'. At 31 December 2007, the Group held GBP763 million of Innovative Tier 1
capital, in the form of perpetual securities, and GBP932 million of Lower Tier 2
capital. Following the implementation of the IGD, it is advantageous to the
Group from a regulatory capital standpoint to raise its long-term debt in hybrid
form and it is the Group's policy to take advantage of favourable market
conditions as they arise to do so.

The unallocated surplus of the with-profits funds represents assets in the life
fund which have not yet been allocated either to policyholders or shareholders.
They are not generally available to the Group other than as they emerge through
the statutory transfer of the shareholders' share of the surplus as it emerges
from the fund over time.

Shareholders' borrowings and financial flexibility

Core  structural  borrowings of  shareholder-financed  operations at 31 December
2007 totalled  GBP2,492  million,  compared with GBP2,612  million at the end of
2006.  This  decrease  reflected  the  repayment  of  GBP150  million  long-term
borrowings upon maturity,  exchange conversion losses of GBP16 million and other
adjustments of negative GBP14 million.

After adjusting for holding company cash and short-term  investments of GBP1,456
million,  net core  structural  borrowings  at 31  December  2007 were  GBP1,036
million  compared with GBP1,493  million at 31 December 2006.  This reflects the
net cash inflow of GBP445  million  (including  GBP527 million net proceeds from
the  sale of  Egg),  exchange  conversion  gains  of  GBP49  million  and  other
adjustments of negative GBP37 million.

Core  structural  borrowings at 31 December 2007  included  GBP1,473  million at
fixed rates of interest  with maturity  dates  ranging from 2009 to  perpetuity.
GBP888 million of the core borrowings were  denominated in US dollars,  to hedge
partially the currency exposure arising from the Group's investment in Jackson.

Prudential has in place an unlimited global commercial paper programme. At 31
December 2007, commercial paper of GBP320 million, US$3,479 million and EUR483
million has been issued under this programme. Prudential also has in place a
GBP5,000 million medium-term note (MTN) programme. At 31 December 2007,
subordinated debt outstanding under this programme was GBP435 million and EUR520
million, and senior debt outstanding was EUR65 million and US$12 million. In
addition, the holding company has access to GBP1,600 million committed revolving
credit facilities, provided in equal tranches of GBP100 million by 16 major
international banks renewable in December 2009 and an annually renewable GBP500
million committed securities lending liquidity facility. These facilities have
not been drawn on during the year. The commercial paper programme, the MTN
programme, the committed revolving credit facilities and the committed
securities lending liquidity facility are available for general corporate
purposes and to support the liquidity needs of the parent company.

The Group's core debt is managed to be within a target level consistent with its
current debt ratings. At 31 December 2007, the gearing ratio (debt, net of cash
and short-term investments, as a proportion of EEV shareholders' funds plus
debt) was 6.6 per cent compared with 11.2 per cent at 31 December 2006.

Prudential plc enjoys strong debt ratings from Standard & Poor's, Moody's and
Fitch. Prudential long-term senior debt is rated A+ (stable outlook), A2 (stable
outlook) and AA- (stable outlook) from Standard & Poor's, Moody's and Fitch
respectively, while short-term ratings are A-1, P-1 and F1+.

Based on EEV basis operating profit from continuing operations and interest
payable on core structural borrowings, interest cover was 16.1 times in 2007
compared with 13.1 times in 2006.

Treasury policy

The Group operates a central treasury function, which has overall responsibility
for managing its capital funding programme as well as its central cash and
liquidity positions.

The aim of Prudential's capital funding programme, which includes the GBP5,000
million MTN programme together with the unlimited commercial paper programme, is
to maintain a strong and flexible funding capacity.

Prudential UK and Prudential Corporation Asia use derivatives to reduce equity
risk, interest rate and currency exposures, and to facilitate efficient
investment management. In the US, Jackson uses derivatives to reduce interest
rate risk, to facilitate efficient portfolio management and to match liabilities
under fixed index policies.

It is Prudential's policy that all free-standing derivatives are used to hedge
exposures or facilitate efficient portfolio management.

Amounts at risk are covered by cash or by corresponding assets.

Due to the geographical diversity of Prudential's businesses, it is subject to
the risk of exchange rate fluctuations. Prudential's international operations in
the US and Asia generally write policies and invest in assets denominated in
local currency. Although this practice limits the effect of exchange rate
fluctuations on local operating results, it can lead to significant fluctuations
in Prudential's consolidated financial statements upon conversion of results
into pounds sterling. The currency exposure relating to the conversion of
reported earnings is not separately managed, as it is not in the economic
interests of the Group to do so. The impact of gains or losses on currency
conversions is recorded as a component of shareholders' funds within the
statement of recognised income and expense. The impact of exchange rate
fluctuations in 2007 is discussed elsewhere in this financial review.

Unallocated surplus of with-profits

During 2007, the unallocated surplus, which represents the excess of assets over
policyholder liabilities for the Group's with-profits funds on a statutory
basis, grew from GBP13.6 billion at 1 January to GBP14.4 billion at 31 December.
This reflects an increase in the cumulative retained earnings arising on
with-profits business that have yet to be allocated to policyholders or
shareholders.

Regulatory capital requirements

Prudential is subject to the capital adequacy requirements of the Insurance
Groups Directive ("IGD") as implemented by the Financial Services Authority ("
FSA"). The IGD pertains to groups whose activities are primarily concentrated in
the insurance sector, and applies for Prudential from December 2007, following
the sale of Egg Banking during 2007. Prior to this, Prudential was required to
meet the requirements of the Financial Conglomerates Directive ("FCD"), which
applies to groups with significant cross-sector activities in insurance and
banking/investment services.

The FSA implemented the FCD by applying the sectoral rules of the largest sector
of the group.  Prudential was therefore classified as an insurance conglomerate
under the FCD, and was required to focus on the capital adequacy requirements
relevant to that sector. Prudential's move from FCD to IGD during 2007,
therefore, did not have a significant impact on the Group, as the FSA's
implementation of both directives is closely aligned. In particular, from 31
December 2006 the FSA made the continuous parent solvency testing mandatory for
all insurance groups covered by the IGD.  This involves the aggregating of
surplus capital held in the regulated subsidiaries, from which Group borrowings,
except those subordinated debt issues which qualify as capital, are deducted. No
credit for the benefit of diversification is allowed for under this approach.
The test is passed when this aggregate number is positive, and a negative result
at any point in time is a notifiable breach of UK regulatory requirements.

Due to the geographically diverse nature of Prudential's operations, the
application of these requirements to Prudential is complex. In particular, for
many of our Asian operations, the assets, liabilities and capital requirements
have to be recalculated based on FSA regulations as if the companies were
directly subject to FSA regulation.

The IGD surplus as at 31 December  2007 will be submitted to the FSA by 30 April
2008 but is currently  estimated to be around  GBP1.4  billion.  This includes a
gain of around GBP0.3billion that arose during 2007 from the sale of Egg Banking
plc.

The European Union ("EU") is continuing to develop a new prudential framework
for insurance companies, 'the Solvency II project' that will update the existing
life, non-life and insurance groups directives. The main aim of this framework
is to ensure the financial stability of the insurance industry and protect
policyholders through establishing solvency requirements better matched to the
true risks of the business. Like Basel 2, the new approach is expected to be
based on the concept of three pillars - minimum capital requirements,
supervisory review of firms' assessments of risk and enhanced disclosure
requirements. However, the scope is wider than Basel 2 and will cover
valuations, the treatment of insurance groups, the definition of capital and the
overall level of capital requirements.

A key aspect of Solvency II is the focus on risks and, for example, capital
requirements will be calibrated to a one year Value at Risk with a 99.5 per cent
confidence level.  Companies will be encouraged to improve their risk management
processes and will be allowed to make use of internal economic capital models to
enable a better understanding of risks. The emphasis on transparency and
comparability would ensure a level playing field but not delivering this remains
one of the key risks for the project.

The European Commission ("EC") published a draft framework directive on 10 July
2007 containing high-level principles. The directive is now being reviewed by
the European Parliament and the Council of Ministers.  The EC expects the
institutions to agree the Solvency II framework directive in the second half of
2008. The principles in the directive will be supplemented by implementing
measures that will be adopted by the EC and EU member states.  Solvency II is
then intended to be implemented during  2012.  It is important that the EU
policy makers keep up the progress to enable implementation by the suggested
date.

During 2007, the Committee of European Insurance and Occupational Pensions
Supervisors (CEIOPS) invited the EU insurance industry to participate in the
third quantitative impact study, which provided useful input for supervisors and
industry alike.  The EU insurance industry will be participating in a fourth
quantitative impact study during the first half of 2008 with a view to providing
further quantitative input into the calibration of the capital requirements.
This study will include a particular focus on groups.  Participation in these
exercises involves a substantive commitment and is expected to yield benefits by
providing evidence leading to a truly risk-based capital requirement.

Prudential is also actively engaged in policy discussions mainly through its
participation in the Chief Risk Officer (CRO) Forum of major European insurance
firms. We have been emphasising the importance of Solvency II delivering an
economic based approach for groups reflecting diversification benefits across
all the group's insurance activities; an appropriate level playing field, in
particular in connection with the treatment of operations outside the European
Economic Area (EEA); and the provision of instruments of group support that
enhance the efficiency of capital management within the EEA.

Financial strength of insurance operations

Asia

Prudential Corporation Asia maintains solvency margins in each of its operations
so that these are at or above the local regulatory requirements. Across the
region less than 40 per cent of non-linked funds are invested in equities. Both
Singapore and Malaysia have discrete life funds, and have strong free asset
ratios. The Hong Kong life operation is a branch of Prudential Assurance Company
Limited and its solvency is covered by that business. Taiwan has Risk Based
Capital regulatory solvency margins and Prudential ensures sufficient capital is
retained in the business to cover these requirements.

Asia                                          2007          2006           2005
                                          per cent      per cent       per cent
Equities                                        10             3              9
Bonds                                           67            60             59
Other asset classes                             24            37             33

Total                                          100           100            100

United States

The capital adequacy position of Jackson remains strong,  with the capital ratio
improving  from  9.8  per  cent in 2006 to  10.6  per  cent in  2007.  Jackson's
statutory  capital,  surplus and asset  valuation  reserve  position of GBP2,251
million at 31 December  2007  improved  year-on-year  by GBP327  million,  after
deducting  the  GBP122  million  of  capital  remitted  to the  parent  company.
Jackson's financial strength is rated AA by Standard & Poor's and A1 by Moody's.

Jackson's invested asset mix on a US regulatory basis (excludes policy loans and
reverse repo leverage) is as follows:


Jackson                                           2007          2006       2005
                                              per cent      per cent   per cent
Bonds:
Investment Grade Public                             59            60         58
Investment Grade Private                            18            18         19
Non-Investment Grade Public                          3             4          5
Non-Investment Grade Private                         2             1          2
Commercial mortgages                                12            12         11
Private equities and real estate                     3             3          3
Equities, cash and other assets                      3             2          2

Total                                              100           100        100


United Kingdom

The PAC's long-term fund remains very strong.  On a realistic  valuation  basis,
with  liabilities  recorded on a market  consistent  basis,  the free assets are
valued at approximately  GBP8.7 billion at 31 December 2007,  before a deduction
for the risk capital margin.  The financial strength of PAC is rated AA+ (stable
outlook) by Standard & Poor's, Aa1 (negative outlook) by Moody's and AA+ (stable
outlook) by Fitch Ratings.

The with-profits sub-fund delivered a pre-tax return of 7.2 per cent in 2007,
and over the last five years the fund has achieved a total return of 91 per
cent. Much of this excellent investment performance was achieved through the
active asset allocation of the fund. As part of its asset allocation process,
Prudential UK constantly evaluates prospects for different markets and asset
classes. During the year PAC's Long Term Fund reduced its exposure to property
and increased the quality of its corporate bond portfolio. The fund includes the
assets of the Equitable Life with-profit annuity business, transferred during
the year, which were almost entirely fixed interest corporate bonds.


UK fund                                       2007          2006           2005
                                          per cent      per cent       per cent
UK equities                                     35            36             40
International equities                          17            17             19
Property                                        14            15             15
Bonds                                           27            26             21
Cash and other assets classes                    7             6              5

Total                                          100           100            100


Inherited estate of Prudential Assurance

The assets of the main with-profits fund within the long-term  insurance fund of
PAC comprise the amounts that it expects to pay out to meet its  obligations  to
existing  policyholders  and an additional  amount used as working capital.  The
amount payable over time to policyholders from the with-profits fund is equal to
the  policyholders'  accumulated asset shares plus any additional  payments that
may be required by way of  smoothing or to meet  guarantees.  The balance of the
assets  of the  with-profits  fund is  called  the  'inherited  estate'  and has
accumulated over many years from various sources.

The inherited estate represents the major part of the working capital of PAC's
long-term insurance fund. This enables PAC to support with-profits business by
providing the benefits associated with smoothing and guarantees, by providing
investment flexibility for the fund's assets, by meeting the regulatory capital
requirements that demonstrate solvency and by absorbing the costs of significant
events or fundamental changes in its long-term business without affecting the
bonus and investment policies. The size of the inherited estate fluctuates from
year to year depending on the investment return and the extent to which it has
been required to meet smoothing costs, guarantees and other events.

PAC believes that it would be beneficial if there were greater clarity as to the
status of the Inherited Estate. As a result PAC has announced that it has begun
a process to determine whether it can achieve that clarity through a
reattribution of the inherited estate.  As part of this process a Policyholder
Advocate has been nominated to represent policyholders' interests.  This
nomination does not mean that a reattribution will occur.

Given the size of the Group's with-profits business any proposal is likely to be
time consuming and complex to implement and is likely to involve a payment to
policyholders from shareholders funds.  If a reattribution is completed the
inherited estate will continue to provide working capital for the long-term
insurance fund.

Prudential aims to be in a position to determine whether reattribution is in the
best interests of policyholders and shareholders in the first half of 2008.

Defined benefit pension schemes

The Group operates four defined benefit schemes, three in the UK, of which the
principal scheme is the Prudential Staff Pension Scheme (PSPS), and a small
scheme in Taiwan. The level of surplus or deficit of assets over liabilities for
defined benefit schemes is currently measured in three ways: the actuarial
valuation, FRS 17 (for subsidiary accounting in the UK), and IAS 19 for the
Group financial statements. FRS 17 and IAS 19 are very similar. As at 31
December 2007 the shareholders' share of the GBP447 million surplus for PSPS and
the deficits of the other schemes amounted to an GBP76 million surplus net of
related tax relief.

Defined benefit schemes in the UK are generally required to be subject to full
actuarial valuation every three years to assess the appropriate level of funding
for schemes having regard to their commitments. These valuations include
assessments of the likely rate of return on the assets held within the separate
trustee administered funds. PSPS was last actuarially valued as at 5 April 2005
and this valuation demonstrated the Scheme to be 94  per cent funded, with a
shortfall of  actuarially determined assets to liabilities of 6 per cent,
representing a deficit  of GBP243 million.

The  finalisation of the valuation as at 5 April 2005 was accompanied by changes
to the basis of  funding  for the scheme  with  effect  from that date.  Deficit
funding  amounts  designed to  eliminate  the  actuarial  deficit over a 10-year
period have been and are being made based on that valuation. Total contributions
to the Scheme for  deficit  funding  and  employer's  contributions  for ongoing
service  for  current  employees  are  expected  to be of the order of  GBP70-75
million per annum over a 10-year period.  In 2007, total  contributions  for the
calendar year including expenses and augmentations were GBP82 million.

Under IAS 19 the basis of valuation  differs  markedly  from the full  triennial
valuation basis. In particular, it requires assets of the Scheme to be valued at
their market value at the year-end, while pension liabilities are required to be
discounted  at a rate  consistent  with the  current  rate of  return  on a high
quality corporate bond. As a result,  the difference between IAS 19 basis assets
and  liabilities can be volatile.  For those schemes such as PSPS,  which hold a
significant proportion of their assets in equity investments, the volatility can
be  particularly  significant.  For 2007, a GBP23  million  pre-tax  shareholder
charge to operating  results based on longer-term  returns arises.  In addition,
outside  the  operating  result,  but  included  in total  profits  is a pre-tax
shareholder  credit  of GBP90  million  for net  actuarial  gains.  These  gains
primarily  represent  the effect of changes in economic  assumptions  which more
than offsets the losses from the effect of  strengthened  mortality  assumptions
for the UK pension schemes.

Surpluses and deficits on the Group's defined benefit schemes are apportioned to
the PAC life fund and shareholders' funds based on estimates of employees'
service between them. At 31 December 2005, the deficit of PSPS was apportioned
in the ratio 70/30 between the life-fund and shareholders' backed operations
following detailed consideration of the sourcing of previous contributions. This
ratio was applied to the base deficit position at 1 January 2006 and for the
purpose of determining the allocation of the movements in that position up to 31
December 2007. The IAS 19 service charge and ongoing employer contributions are
allocated by reference to the cost allocation for current activity. The deficit
of the Scottish Amicable Pension Scheme has been allocated 50 per cent to the
PAC with profits fund and 50 per cent to the PAC shareholder fund.

Reflecting these two elements, at 31 December 2007, the total share of the
surplus on PSPS and the deficit on the smaller Scottish Amicable scheme
attributable to the PAC with-profits fund amounted to a net surplus of GBP304
million net of related tax relief.

RISK MANAGEMENT

Philosophy, principles and objectives

Philosophy

As a provider of financial services, including insurance, the Group's business
is the managed acceptance of risk. Prudential believes that effective risk
management capabilities are a key competitive advantage. A strategic risk,
capital and value management framework and risk management culture has been
developed to enhance the Group's embedded and franchise value.

Principles

Risk is defined as the uncertainty that Prudential faces in successfully
implementing its strategies and objectives. This includes all internal or
external events, acts or omissions that have the potential to threaten the
success and survival of Prudential.

The control procedures and systems established within the Group are designed to
manage, rather than eliminate, the risk of failure to meet business objectives.
They can only provide reasonable and not absolute assurance against material
misstatement or loss, and focus on aligning the levels of risk-taking with the
achievement of business objectives.

The Group's policy is to proactively identify, assess, control, and monitor
risk. This forms an essential element of delivering the Group's performance
ambition. In so doing, material risks will only be retained where this is
consistent with Prudential's risk appetite framework, ie:

-      The retention of the risk contributes to value creation.

-      The Group is able to withstand the impact of an adverse outcome.

-      The Group has the necessary capabilities, expertise, processes and
       controls to manage the risk.

Objectives

The Group has five objectives for risk and capital management:

a)     Framework: Design, implement and maintain a consistent risk management
framework and policies spanning: economic, regulatory and rating agency capital
management; risk appetite; and risk-adjusted profitability (RAP).

b)     Monitoring: Establish a 'no surprises' risk management culture by
identifying the risk landscape, assessing and monitoring risk exposures and
understanding change drivers.

c)     Control: Implement risk mitigation strategies and remedial actions where
exposures are deemed inappropriate' and manage the response to extreme events.

d)     Communication: Communicate the Group risk, capital and profitability
position to internal and external stakeholders and rating agencies.

e)     Culture: Foster a risk management culture, providing quality assurance
and facilitating the sharing of best practice risk measurement and management
across the Group and industry.


Categorisation model

A common risk language is used across the Group, which allows meaningful
comparisons to be made between different business units. Risks are broadly
categorised as shown below.



Category                Risk type                         Definition
                                                       

 Financial risks        Market risk                       The risk that arises from adverse changes in the value of, or
                                                          income from, assets and changes in interest rates or exchange
                                                          rates.

                        Credit risk                       The risk of loss if another party fails to perform its
                                                          obligations, or fails to perform them in a timely fashion.

                        Insurance risk                    The inherent uncertainty as to the occurrence, amount and
                                                          timing of insurance liabilities. This includes adverse
                                                          mortality, morbidity and persistency experience.

                        Liquidity risk                    The risk that a business, though solvent on a balance sheet
                                                          basis, either does not have the financial resources to meet
                                                          its obligations as they fall due or can secure them only at
                                                          excessive cost.

Non-financial risks     Operational risk                  The risk of direct or indirect loss resulting from inadequate
                                                          or failed internal processes, people or systems, or from
                                                          external events.  This includes legal and regulatory
                                                          compliance risk.

                        Business environment risk         Exposure to forces in the external environment that could
                                                          significantly change the fundamentals that drive the
                                                          business's overall objectives and strategy.

                        Strategic risk                    Ineffective, inefficient or inadequate senior management
                                                          processes for the development and implementation of business
                                                          strategy in relation to the business environment and the
                                                          Group's capabilities.




Governance

The Group's internal control processes are detailed in the Group Governance
Manual. This is supported by the Group Risk Framework, which provides an
overview of the Group-wide philosophy and approach to risk management.

For joint ventures where the Group does not control management, the business
unit party to the arrangement must: satisfy itself that suitable governance and
risk management arrangements are in place to protect the Group's interests; and
comply with the Group's requirements in respect of any operations it performs in
support of the joint venture's activities.

Prudential's risk governance framework requires that all of the Group's
businesses and functions establish processes for identifying, evaluating and
managing the key risks faced by the Group. The risk governance framework is
based on the concept of 'three lines of defence': risk management, risk
oversight and independent assurance (see diagram opposite).

Risk management

Primary responsibility for strategy, performance management and risk control
lies with the Prudential plc Board of directors (the Board), the Group Chief
Executive and the chief executives of each business unit.  Additionally, the
Board has delegated responsibility to the Approvals Committee to approve actions
which could significantly change the risk profile of any business, capital
commitments and divestments within defined materiality thresholds, and certain
legal matters involving trademarks, contracts, material guarantees and specific
interactions with third parties.

Where appropriate, more detailed policies and procedures have been developed at
Group and/or business unit levels. These include Group-wide mandatory policies
on certain operational risks, including: health, safety, fraud, money
laundering, bribery, business continuity, information security and operational
security. Additional guidelines are provided for some aspects of actuarial and
finance activity.

Board: The Board has overall responsibility for the system of internal control
and risk management. It approves the overall framework for managing the risks
faced by the Group and provides strategic direction on the amount and type of
risk that the Group is prepared to accept.

Group executive management: The Group Chief Executive has overall responsibility
for the risks facing the Group. The Group Chief Executive recommends to the
Board the amount and type of risk that the Group is prepared to accept, and
recommends risk management strategies as well as an overall framework for
managing the risks faced by the Group with support from the Group Executive
Committee, Group Finance Director and Group level risk committees. The Group
Chief Executive provides regular updates to the Board on the risk position and
risk policy.

Business unit management: Business unit chief executives are accountable for the
implementation and operation of appropriate business unit risk frameworks and
for ensuring compliance with the policy and minimum standards set by the Group.
Business units must establish suitable governance structures that are based on
the concept of 'three lines of defence', tailored as appropriate to the scale
and complexity of the business unit. As the first line of defence, business unit
management is responsible for identifying and managing business unit risks and
providing regular risk reporting to the Group.

Risk oversight

Risk oversight: Risk management oversight is provided by Group-level risk
committees, the Group Finance Director and the Group Risk function, working with
counterparts in the business units in addition to other Group Head Office (GHO)
oversight functions.

Group-level risk committees

Group Asset Liability Committee (Group ALCo): The Group ALCo is responsible for
oversight of financial risks (market, credit, liquidity and insurance risks)
across the Group. It is chaired by the Group Finance Director and its membership
includes senior business unit and Group executives (chief actuaries, principal
asset liability management officers and chief investment officers) who are
involved in the management of the aforementioned risks. Group ALCo meetings are
held on a monthly basis.

Balance Sheet and Capital Management Committee (BSCMC): The BSCMC is responsible
for managing the balance sheets of Prudential plc and oversight of the
Prudential Capital business unit.  It is chaired by the Group Finance Director
and its membership includes senior representatives from GHO, M&G and Prudential
Capital.  BSCMC meetings are held on a monthly basis.

Group Operational Risk Committee (GORC): The GORC is responsible for the
oversight of non-financial risks (operational, business environment and
strategic risks) across the Group. Responsibilities include monitoring
operational risk and related policies and processes as they are applied
throughout the Group. It is chaired by the Group Finance Director and its
membership includes senior representatives of the Group and business unit risk
functions. GORC meetings are held on a quarterly basis.

Group Risk

Group Risk's mandate is to establish and embed a strategic risk, capital and
value management framework and risk management culture, consistent with
Prudential's risk appetite, that protects and enhances the Group's embedded and
franchise value.

Group Risk is responsible for the continued enhancement and evolution of the
Group Risk Framework; provides functional leadership to the business units for
the oversight of risk management across the Group; and acts as secretariat to
the Group ALCo and GORC.

Group Risk also has certain finance and actuarial responsibilities related to
Group regulatory and rating agency capital requirements, development of
actuarial and financial reporting requirements and the RAP value management
framework.

Independent assurance

Group Audit Committee: The Group Audit Committee provides independent assurance
to the Board on the effectiveness of the Group's system of internal controls and
risk management. The Group Audit Committee reviews the Group's risk management
framework, and regular risk reports. The Group Audit Committee is supported by
Group-wide Internal Audit.

Group-wide Internal Audit (GwIA): The GwIA function independently assures the
effective operation of the Group's risk management framework. This involves the
validation of methodology application, policy compliance and control adequacy.
The GwIA Director reports all audit related matters to the Group Audit Committee
(and business unit audit committees where appropriate) and reports for
management purposes (but not audit-related matters) to the Group Chief
Executive.

Risk appetite

The Group risk appetite framework sets out the Group's overall tolerance to risk
exposures, approach to risk and return optimisation and management of risk. The
Board and Group Executive Committee have set up Group-level risk appetite
statements concerning the key risk exposures faced by the Group. The Group risk
appetite statements set out the Group's risk tolerance, or risk appetite, to '
shocks' to the key financial risk exposures (market, credit and insurance risk).

Limits

Aggregate risk limits are defined in terms of earnings volatility and capital
requirements:

(a)   Earnings volatility: The objectives of the limits are to ensure that (a)
the volatility of earnings is consistent with stakeholder expectations: (b) the
Group has adequate earnings (and cash flows) to service debt and expected
dividends: and (c) that earnings (and cash flows) are managed properly across
geographies and are consistent with the Group's funding strategies. The two
measures used are European Embedded Value (EEV) operating profit and
International Financial Reporting Standards (IFRS) operating profit.

(b)   Capital requirements: The objectives of the limits are to ensure that (a)
the Group is economically solvent: (b) the Group achieves its desired target
rating to meet its business objectives: (c) supervisory intervention is avoided:
(d) any potential capital strains are identified: and (e) accessible capital is
available to meet business objectives. The two measures used are EU Insurance
Groups Directive (IGD) capital requirements and economic capital requirements.

Business units must establish suitable market, credit, underwriting and
liquidity limits that maintain financial risk exposures within the defined risk
appetite.

In addition to business unit operational limits on credit risk, counterparty
risk limits are also set at the Group level. Limits on total Group-wide
exposures to a single counterparty are specified for different credit rating '
buckets'. Actual exposures are monitored against these limits on a quarterly
basis.

Usage by business units

Risk appetite is part of the annual business planning cycle. The risk profile of
the Group is monitored against the agreed limits throughout the year by Group
Risk. Using submissions from business units, Group Risk calculates the Group's
position (allowing for diversification effects between business units) relative
to the limits implied by the risk appetite statements.

In order to determine its risk position, each business unit calculates the
impacts (on earnings and capital measures) of a shock to market, credit,
insurance and operational risk exposures.

A two-tier approach is used to apply the limits at business unit level. Firstly,
indicative business unit risk limits are calculated; these ensure that, if each
business unit keeps within its limits, the Group risk position would be within
the Group limits. Secondly, the impact on the risk position is considered as
part of Group Risk's scrutiny of large transactions or departures from plan
proposed by individual business units.

Any potential breaches of the risk limits implied by a business unit plan will
necessitate a dialogue process between GHO and the business units. Group limits
may not be breached if, for example, limits in other business units are not
fully utilised, or the diversification effect at Group level of a particular
risk with other business units means that the Group limit is not breached.
Ultimately, authorisation to breach Group limits would require Group Executive
Committee approval.

Risk management process

Risk mitigation

The Group expects active management of its actual risk profile against its
tolerance of risk.  Primary responsibility for identifying and implementing
controls and mitigation strategies rests with the business units. Group Risk
provides oversight and advice.

Risk registers are maintained that include details of the controls and
mitigating actions being employed for identified risks. The effectiveness of
controls and progress with actions are routinely assessed. Any mitigation
strategies involving large transactions (eg. a material derivative transaction)
would be subject to scrutiny at Group level before implementation.

Prudential employs a range of risk mitigation strategies aimed at reducing the
impact of a variety of risks. Key mitigation strategies include: adjustment of
asset portfolios to reduce investment risks (such as duration mismatches or
overweight counterparty exposures); use of derivatives to hedge market risks;
reinsurance programmes to limit insurance risk; and corporate insurance
programmes to limit impact of operational risks. Revisions to business plans
(such as reassessment of bonus rates on participating business and scaling back
of target new business volumes) may be also be used as a mitigating strategy.

Contingency plans are in place for a range of operational risk scenarios,
including incident management and business continuity plans. As a contingency
plan for liquidity risk, the Group has arranged access to committed revolving
credit facilities and committed securities lending facilities.

Asset liability management

Prudential manages its assets and liabilities locally, in accordance with local
regulatory requirements and reflecting the different types of liabilities of
each business unit. Stochastic asset-liability modelling is carried out locally
by the business units to perform dynamic solvency testing and assess economic
capital requirements. Reserve adequacy testing under a range of scenarios is
also carried out, including scenarios prescribed by local regulatory bodies.

The investment strategy for assets held to back liabilities is set locally by
business units, taking into account the nature, term and currency of the
liabilities, and any local regulatory requirements. The main principles are as
follows:

-      For liabilities that are sensitive to interest rate movements (in
particular, UK non-profit annuities and Jackson fixed annuities), cash flow
analysis is used to construct a portfolio of fixed income securities whose value
changes in line with the value of liabilities when interest rates change;

-      For participating business (in particular, the UK with-profits fund),
stochastic asset-liability modelling is used to derive a strategic asset
allocation and policyholder bonus strategy that (based on the model assumptions)
will optimise policyholder and shareholder returns, while maintaining financial
strength. The bonus strategy on participating business is an integral part of
the asset-liability management approach for participating business; and

-      For unit-linked business, the assets held to cover policyholder unit
accounts are invested as per the stated investment strategy or benchmark index
given in the product marketing literature. Assets in respect of non-unit
reserves (e.g. sterling reserves) are invested in fixed income securities (using
a cash flow matching analysis).

Derivative hedging strategies are also used on a controlled basis across the
Group to manage exposure to market risks. Surplus assets held centrally are
predominantly invested in short-term fixed income securities. The Group's
central treasury function actively manages the surplus assets to maximise
returns, subject to maintaining an acceptable degree of liquidity.

Risk reporting

Group Risk and other GHO oversight functions have individually defined and
publicised frameworks, escalation criteria and processes for the timely
reporting of risks and incidents by business units.  As appropriate, these risks
and incidents are escalated to the various Group-level oversight and risk
committees and the Board.

Internal business unit routine reporting requirements vary according to the
nature of the business.  Each business unit is responsible for ensuring that its
risk reporting framework meets both the needs of the business unit (for example
reporting to the business unit risk and audit committees) and the minimum
standards set by the Group (for example, to meet Group-level reporting
requirements).

Business units review their risks as part of the annual preparation of their
business plans, and review opportunities and risks to business objectives
regularly with Group executive management. Group Risk reviews, and reports to
Group executive management, on the impact of large transactions or divergences
from business plan.

The Group Executive Committee and Board are provided with regular updates on the
Group's economic capital position, overall position against risk limits and RAP.
They also receive the annual financial condition reports prepared by the Group's
insurance operations.

EUROPEAN EMBEDDED VALUE (EEV) BASIS RESULTS

SUMMARY CONSOLIDATED INCOME STATEMENT



                                                                                                    2007        2006
                                                                                                    GBPm        GBPm
                                                                                                           

Asian operations                                                                                   1,103         864
US operations                                                                                        635         718
UK operations:
   UK insurance operations                                                                           859         686
   M&G                                                                                               254         204

                                                                                                   1,113         890
Other income and expenditure                                                                        (289)       (298)
Restructuring costs                                                                                  (20)        (41)

Operating profit from continuing operations based on longer-term investment returns                2,542       2,133
Short-term fluctuations in investment returns                                                        174         738
Mark to market value movements on core borrowings                                                    223          85
Shareholders' share of actuarial gains and losses on defined benefit pension schemes                 116         207
Effect of changes in economic assumptions and time value of cost of options and guarantees           748          59

Profit from continuing operations before tax (including actual investment returns)                 3,803       3,222
Tax attributable to shareholders' profit                                                            (961)       (904)

Profit from continuing operations for the financial year after tax before minority interests       2,842       2,318
Discontinued operations (net of tax)                                                                 241        (105)

Profit for the year                                                                                3,083       2,213
Attributable to:
Equity holders of the Company                                                                      3,062       2,212
Minority interests                                                                                    21           1

Profit for the year                                                                                3,083       2,213

Earnings per share (in pence)                                                                       2007        2006
Continuing operations
From operating profit, based on longer-term investment returns, after related tax and minority
interests                                                                                           74.9p      62.1p
Adjustment from post-tax longer-term investment returns to post-tax actual investment returns
(after minority interests)                                                                           6.1p      21.8p
Adjustment for effect of mark to market value movements on core borrowings                           9.1p       3.5p
Adjustment for post-tax effect of shareholders' share of actuarial gains and losses on defined
benefit pension schemes                                                                              3.4p       6.0p
Adjustment for post-tax effect of changes in economic assumptions and time value of cost of
options and guarantees (after minority interests)                                                   21.8p       2.6p

Based on profit from continuing operations after tax and minority interests                        115.3p      96.0p

Discontinued operations
Based on profit (loss) from discontinued operations after tax and minority interests                 9.9p      (4.3)p

Based on profit for the year after minority interests                                              125.2p       91.7p

Average number of shares (millions)                                                                2,445       2,413


Dividends per share (in pence)                                                                      2007        2006
Dividends relating to reporting period:
Interim dividend (2007 and 2006)                                                                    5.70p       5.42p
Final dividend  (2007 and 2006)                                                                    12.30p      11.72p

Total                                                                                              18.00p      17.14p

Dividends declared and paid in reporting period:
Current year interim dividend                                                                       5.70p       5.42p
Final dividend for prior year                                                                      11.72p      11.02p

Total                                                                                              17.42p      16.44p


EUROPEAN EMBEDDED VALUE (EEV) BASIS RESULTS

OPERATING PROFIT FROM CONTINUING OPERATIONS BASED ON LONGER-TERM INVESTMENT
RETURNS*



Results Analysis by Business Area                                                                  2007           2006

                                                                                                   GBPm           GBPm
Asian operations
New business                                                                                        653            514
Business in force                                                                                   393            315

Long-term business                                                                                1,046            829
Asset management                                                                                     72             50
Development expenses                                                                                (15)           (15)

Total                                                                                             1,103            864

US operations
New business                                                                                        285            259
Business in force                                                                                   342            449

Long-term business                                                                                  627            708
Broker-dealer and asset management                                                                   13             18
Curian                                                                                               (5)            (8)

Total                                                                                               635            718

UK operations
New business                                                                                        277            266
Business in force                                                                                   582            420

Long-term business                                                                                  859            686
M&G                                                                                                 254            204

Total                                                                                             1,113            890

Other income and expenditure
Investment return and other income                                                                   45              8
Interest payable on core structural borrowings                                                     (168)          (177)
Corporate expenditure:
Group Head Office                                                                                  (117)           (83)
Asia Regional Head Office                                                                           (38)           (36)
Charge for share-based payments for Prudential schemes                                              (11)           (10)

Total                                                                                              (289)          (298)

Restructuring costs                                                                                 (20)           (41)

Operating profit from continuing operations based on longer-term investment returns               2,542          2,133

Analysed as profits (losses) from:
New business                                                                                      1,215          1,039
Business in force                                                                                 1,317          1,184

Long-term business                                                                                2,532          2,223
Asset management                                                                                    334            264
Other results                                                                                      (324)          (354)

Total                                                                                             2,542          2,133



* EEV basis operating profit from continuing operations based on longer-term
investment returns excludes short-term fluctuations in investment returns, the
mark to market value movements on core borrowings, the shareholders' share of
actuarial gains and losses on defined benefit pension schemes, the effect of
changes in economic assumptions and changes in the time value of cost of options
and guarantees arising from changes in economic factors. The amounts for these
items are included in total EEV profit. The directors believe that operating
profit, as adjusted for these items, better reflects underlying performance.
Profit before tax and basic earnings per share include these items together with
actual investment returns. This basis of presentation has been adopted
consistently throughout this preliminary announcement.

For 2007, the EEV basis  operating  profit from continuing  operations  based on
longer-term  investment  returns  before tax of  GBP2,542m  includes a credit of
GBP99m that arises from including the benefits,  grossed up for notional tax, of
altered corporate tax rates for China,  Malaysia,  Singapore and the UK. Further
details are explained in note 5.

The results for continuing operations shown above exclude those in respect of
discontinued banking operations. On 1 May 2007, the Company sold Egg.
Accordingly, the presentation of the comparative results for 2006 has been
adjusted from those published in March 2007.


EUROPEAN EMBEDDED VALUE (EEV) BASIS RESULTS

MOVEMENT IN SHAREHOLDERS' EQUITY (excluding minority interests)



                                                                                                   2007           2006
                                                                                                   GBPm           GBPm
                                                                                                             

Profit for the year attributable to equity shareholders                                           3,062          2,212
Items taken directly to equity:
      Exchange movements                                                                             64           (359)
      Unrealised valuation movements on Egg securities classified as available-for-sale              (2)            (2)
      Movement on cash flow hedges                                                                   (3)             7
      Related tax                                                                                     3            (74)
      Dividends                                                                                    (426)          (399)
      Acquisition of Egg minority interests                                                           -           (167)
      New share capital subscribed                                                                  182            336
      Reserve movements in respect of share-based payments                                           18             15
      Treasury shares:
        Movement in own shares in respect of share-based payment plans                                7              6
        Movement on Prudential plc shares purchased by unit trusts consolidated under IFRS            4              0
      Mark to market value movements on Jackson assets backing surplus and required capital*        (13)             7

Net increase in shareholders' equity                                                              2,896          1,582
Shareholders' equity at beginning of year (excluding minority interests)                         11,883         10,301

Shareholders' equity at end of year (excluding minority interests)                               14,779         11,883

Comprising:
Asian operations:
Net assets                                                                                        3,837          2,637
Acquired goodwill                                                                                   172            172

                                                                                                  4,009          2,809

US operations                                                                                     3,686          3,360

UK operations:
Long-term business                                                                                6,497          5,813
M&G:
Net assets                                                                                          271            230
Acquired goodwill                                                                                 1,153          1,153
Egg                                                                                                   -            292

                                                                                                  7,921          7,488
Other operations:
Holding company net borrowings at market value (note 7)                                            (873)        (1,542)
Other net assets (liabilities)                                                                       36           (232)

Shareholders' equity at end of year (excluding minority interests)                               14,779         11,883

*The mark to market value movements on Jackson assets backing surplus and
required capital for 2006 represents the cumulative adjustment as at 31 December
2006.

EUROPEAN EMBEDDED VALUE (EEV) BASIS RESULTS

SUMMARISED CONSOLIDATED BALANCE SHEET

                                                                                                   2007           2006
                                                                                                   GBPm             GBPm

Total assets less liabilities, excluding insurance funds                                        195,987        183,130
Less insurance funds*:
Policyholder liabilities (net of reinsurers' share) and unallocated surplus of with-profits
funds                                                                                          (189,786)      (177,642)
Less shareholders' accrued interest in the long-term business                                     8,578          6,395

                                                                                               (181,208)      (171,247)

Total net assets                                                                                 14,779         11,883

Share capital                                                                                       123            122
Share premium                                                                                     1,828          1,822
IFRS basis shareholders' reserves                                                                 4,250          3,544

Total IFRS basis shareholders' equity                                                             6,201          5,488
Additional EEV basis retained profit                                                              8,578          6,395

Shareholders' equity (excluding minority interests)                                              14,779         11,883

* Including liabilities in respect of insurance products classified as
investment contracts under IFRS 4.

NET ASSET VALUE PER SHARE (in pence)

                                                                                                   2007           2006

Based on EEV basis shareholders' equity of GBP14,779m (2006: GBP11,883m)                            598p           486p
Number of issued shares at year end (millions)                                                     2,470         2,444



EUROPEAN EMBEDDED VALUE (EEV) BASIS RESULTS

NOTES ON THE EEV BASIS RESULTS

(1)   Basis of preparation of results

The EEV basis results have been prepared in accordance with the EEV Principles
issued by the CFO Forum of European Insurance Companies in May 2004 and expanded
by the Additional Guidance on EEV Disclosures published in October 2005. Where
appropriate the EEV basis results include the effects of adoption of
International Financial Reporting Standards (IFRS).

The EEV results for the Group are prepared for 'covered business', as defined by
the EEV Principles. Covered business represents the Group's long-term insurance
business for which the value of new and in-force contracts is attributable to
shareholders. The EEV basis results for the Group's covered business are then
combined with the IFRS basis results of the Group's other operations.
These other operations include the results of discontinued banking operations,
following the sale of Egg on 1 May 2007.

The definition of long-term business operations is consistent with previous
practice and comprises those contracts falling under the definition of long-term
insurance business for regulatory purposes together with, for US operations,
contracts that are in substance the same as guaranteed investment contracts
(GICs) but do not fall within the technical definition. Under the EEV
Principles, the results for covered business incorporate the projected margins
of attaching internal asset management.

With two principal exceptions, covered business comprises the Group's long-term
business operations. The principal exceptions are for the closed Scottish
Amicable Insurance Fund (SAIF) and for the presentational treatment of the
financial position of two of the Group's defined benefit pension schemes. A very
small amount of UK group pensions business is also not modelled for EEV
reporting purposes.

SAIF is a ring-fenced sub-fund of the Prudential Assurance Company (PAC)
long-term fund, established by a Court approved Scheme of Arrangement in October
1997. SAIF is closed to new business and the assets and liabilities of the fund
are wholly attributable to the policyholders of the fund. In 2006, a bulk
annuity arrangement between SAIF and Prudential Retirement Income Limited
(PRIL), a shareholder-owned subsidiary, took place as explained in the notes to
the schedule of new business within this announcement. Reflecting the altered
economic interest for SAIF policyholders and Prudential shareholders, this
arrangement represents a transfer from long-term business of the Group that is
not 'covered' to business that is 'covered' with consequential effect on the EEV
basis results.

As regards the Group's defined benefit pension schemes, the surplus or deficit
attaching to the Prudential Staff Pension Scheme (PSPS) and Scottish Amicable
Pension scheme are excluded from the EEV value of UK operations and included in
the total for Other operations. The surplus and deficit amounts are partially
attributable to the PAC with-profits fund and shareholder-backed long-term
business and partially to other parts of the Group. In addition to the IFRS
basis surplus or deficit, the shareholders' 10 per cent share of the PAC
with-profits fund's interest in the movement on the financial position of the
schemes is recognised for EEV reporting purposes.

The directors are responsible for the preparation of the supplementary
information in accordance with the EEV Principles.

The EEV basis results for 2007 and 2006 have been derived from the EEV basis
results supplement to the Company's statutory accounts for 2007. The supplement
included an unqualified audit report from the auditors.

(2)   Economic assumptions

(a)   Deterministic assumptions

In most countries, the long-term expected rates of return on investments and
risk discount rates are set by reference to period end rates of return on cash
or fixed interest securities. This 'active' basis of assumption setting has been
applied in preparing the results of all the Group's US and UK long-term business
operations. For the Group's Asian operations, the active basis is appropriate
for business written in Japan, Korea and US dollar denominated business written
in Hong Kong.

An exception to this general rule is that for countries where long-term fixed
interest markets are less established, investment return assumptions and risk
discount rates are based on an assessment of longer-term economic conditions.
Except for the countries listed above, this basis is appropriate for the Group's
Asian operations.

Expected returns on equity and property asset classes in respect of each
territory are derived by adding a risk premium, also based on the long-term view
of Prudential's economists, to the risk-free rate. In Asia, equity risk premiums
range from 3.0 per cent to 6.0 per cent (2006: 3.0 per cent to 5.8 per cent).
In the US and the UK, the equity risk premium is 4.0 per cent above risk-free
rates for both 2007 and 2006. Best estimate assumptions for other asset classes,
such as corporate bond spreads, are set consistently.

Assumed investment returns reflect the expected future returns on the assets
held and allocated to the covered business at the valuation date.

The tables below summarise the principal financial assumptions:

Asian operations



            China   Hong Kong India Indonesia   Japan Korea Malaysia Philippines Singapore   Taiwan Thailand Vietnam
                  (notes iii,                                 (notes                (notes   (notes
                       iv, v)                                 iv, v)                 iv,v)   ii, v)
               31          31    31        31      31    31       31          31        31       31       31      31
              Dec         Dec   Dec       Dec     Dec   Dec      Dec         Dec       Dec      Dec      Dec     Dec
             2007        2007  2007      2007    2007  2007     2007        2007      2007     2007     2007    2007
                %           %     %         %       %     %        %           %         %        %        %       %
                                                                               

Risk discount
rate:
New
business    11.75         5.7 15.75     16.75     5.1   9.7      9.3       15.75       6.4      9.1     13.0   16.75
In force    11.75         6.0 15.75     16.75     5.1   9.7      9.1       15.75       6.8      9.8     13.0   16.75
Expected
long-term
rate of
inflation     4.0        2.25   5.0       6.0     0.0  2.75     2.75         5.0      1.75     2.25      3.0     6.0
Government
bond
yield        8.25         4.1  9.25     10.25     2.0   5.8      6.5        9.25      4.25      5.5     6.75   10.25

            China   Hong Kong India Indonesia   Japan Korea Malaysia Philippines Singapore   Taiwan Thailand Vietnam
                  (notes iii,                                 (notes                (notes   (notes
                       iv, v)                                 iv, v)                iv, v)   ii, v)
               31          31    31        31      31    31       31          31        31       31       31      31
              Dec         Dec   Dec       Dec     Dec   Dec      Dec         Dec       Dec      Dec      Dec     Dec
             2006        2006  2006      2006    2006  2006     2006        2006      2006     2006     2006    2006
                %           %     %         %       %     %        %           %         %        %        %       %
Risk discount
rate:
New
business     12.0         6.6  16.5      17.5     5.3   9.5      9.5        16.5       6.9      8.8    13.75    16.5
In force     12.0         6.8  16.5      17.5     5.3   9.5      9.2        16.5       6.9      9.3    13.75    16.5
Expected
long-term
rate of
inflation     4.0        2.25   5.5       6.5     0.0  2.75      3.0         5.5      1.75     2.25     3.75     5.5
Government
bond
yield         9.0         4.7  10.5      11.5     2.1   5.0      7.0        10.5       4.5      5.5     7.75    10.5

                                                                                          Asia total       Asia total
                                                                                         31 Dec 2007      31 Dec 2006
                                                                                                   %                %
Weighted risk discount rate (note (i)):
New business                                                                                     9.5              9.8
In force                                                                                         8.7              8.8




Notes

(i)         The weighted risk discount rates for Asian operations shown above
have been determined by weighting each country's risk discount rates by
reference to the EEV basis operating result for new business and the closing
value of in-force business.

(ii)        For traditional business in Taiwan, the economic scenarios used to
calculate the 2007 and 2006 EEV basis results reflect the assumption of a phased
progression of the bond yields from the current rates applying to the assets
held to the long-term expected rates.

The projections assume that in the average scenario, the current bond yields at
31 December 2007 of around 2.5 per cent (2006: around 2 per cent) trend towards
5.5 per cent at 31 December 2013.


In projecting forward the Fund Earned Rate, allowance is made for the
mix of assets in the fund, future investment strategy, and further market value
depreciation of bonds held as a result of assumed future yield increases. These
factors, together with the assumption of the phased progression in bond yields,
give rise to an average assumed Fund Earned Rate that trends from 0.5 per cent
for 2007 to 6.4 per cent for 2014. The assumed Fund Earned Rate increases to 2.5
per cent in 2008 and then increases to 3.3 per cent by 2013. Thereafter, the
assumed Fund Earned Rate fluctuates around a target of 6.4 per cent. This
projection compares with that applied for the 2006 results of a grading from an
assumed rate of 2.1 per cent for 2006 to 5.7 per cent for 2014.

Consistent with EEV methodology, a constant discount rate has been applied to
the projected cash flows.

(iii)       The assumptions shown are for US dollar denominated business which
comprises the largest proportion of the in-force Hong Kong business.

(iv)      The mean equity return assumptions for the most significant equity
holdings in the Asian operations were:




                                                                                              31 Dec 2007 31 Dec 2006
                                                                                                        %           %
                                                                                                            

Hong Kong                                                                                             8.1         8.7
Malaysia                                                                                             12.5        12.8
Singapore                                                                                             9.3         9.3



To obtain the mean, an average over all simulations of the accumulated return at
the end of the projection period is calculated. The annual average return is
then calculated by taking the root of the average accumulated return minus 1.

(v)       For 2007, cash rates rather than government bond yields were used in
setting risk discount rates for Malaysia, Singapore, Taiwan and for Hong Kong
dollar denominated business. For 2006, cash rates were used for these operations
and for all Hong Kong business (i.e. including US dollar denominated business).


                                                                                             31 Dec 2007     31 Dec 2006
US operations (Jackson)                                                                                %               %

Risk discount rate*:
New business                                                                                         7.0             7.6
In force                                                                                             6.0             6.7
Expected long-term spread between earned rate and rate credited to policyholders for                1.75            1.75
single premium deferred annuity business
US 10-year treasury bond rate at end of period                                                       4.1             4.8
Pre-tax expected long-term nominal rate of return for US equities                                    8.1             8.8
Expected long-term rate of inflation                                                                 2.4             2.5

*The risk discount rates at 31 December 2007 for new business and business
in-force for US operations reflect weighted rates based on underlying rates of
8.1% for variable annuity business and 4.8% for other business. The decrease in
the weighted discount rates reflects the decrease in the US 10-year treasury
bond rate.


                                                                                             31 Dec 2007     31 Dec 2006
UK insurance operations                                                                                %               %

Risk discount rate (note (i)):
New business                                                                                         7.3             7.8
In force                                                                                            7.85             8.0
Pre-tax expected long-term nominal rates of investment return:
UK equities                                                                                         8.55             8.6
Overseas equities                                                                            8.1 to 10.2      8.6 to 9.3
Property                                                                                             6.8             7.1
Gilts                                                                                               4.55             4.6
Corporate bonds - with-profits funds (note (ii))                                                     6.0             5.3
                            - other business                                                        6.25             5.3
Expected long-term rate of inflation                                                                 3.2             3.1
Post-tax expected long-term nominal rate of return for the PAC with-profits fund:
Pension business (where no tax applies)                                                             7.85             7.5
Life business                                                                                        6.9             6.6
Pre-tax expected long-term nominal rate of return for annuity business (note (iii)):
Fixed annuities                                                                               5.4 to 5.6      5.0 to 5.1
Linked annuities                                                                              5.0 to 5.2      4.8 to 5.0



Notes

(i)         The risk discount rates for new business and business in force for
UK insurance operations reflect weighted rates based on the type of business.

(ii)        The assumed long-term rate for corporate bonds for 2007 for
with-profits business reflects the purchase of credit default swaps.

(iii)       The pre-tax rates of return for annuity business are based on the
gross redemption yield on the backing assets net of a best estimate allowance
for future defaults.



(b)   Stochastic assumptions

The economic assumptions used for the stochastic calculations are consistent
with those used for the deterministic calculations described above. Assumptions
specific to the stochastic calculations, such as the volatilities of asset
returns, reflect local market conditions and are based on a combination of
actual market data, historic market data and an assessment of longer-term
economic conditions. Common principles have been adopted across the Group for
the stochastic asset models, for example, separate modelling of individual asset
classes but with allowance for correlation between the various asset classes.

Details are given below of the key characteristics and calibrations of each
model.

Asian operations

The same asset return models as used in the UK, appropriately calibrated, have
been used for the Asian operations as described for UK insurance operations
below. The principal asset classes are government and corporate bonds.  Equity
holdings are much lower than in the UK whilst property holdings do not represent
a significant investment asset.

The stochastic cost of guarantees is primarily only of significance for the Hong
Kong, Malaysia, Singapore and Taiwan operations.

The mean stochastic returns are consistent with the mean deterministic returns
for each country. The expected volatility of equity returns for both 2007 and
2006 ranges from 18 per cent to 25 per cent, and the volatility of government
bond yields ranges from 1.3 per cent to 2.5. per cent (2006: 1.4 per cent to 2.5
per cent).

US operations (Jackson)

-    Interest rates are projected using a log-normal generator calibrated
to actual market data;

-    Corporate bond returns are based on Treasury securities plus a spread
that has been calibrated to current market conditions and varies by credit
quality; and

-    Variable annuity equity and bond returns have been stochastically
generated using a regime-switching log-normal model with parameters determined
by reference to historical data. The volatility of equity fund returns for both
2007 and 2006 ranges from 18.6 per cent to 28.1 per cent, depending on risk
class, and the standard deviation of bond returns ranges from 1.4 per cent to
1.7 per cent (2006: 1.4 per cent to 2.0 per cent).

UK insurance operations

-    Interest rates are projected using a two-factor model calibrated to
actual market data;

-    The risk premium on equity assets is assumed to follow a log-normal
distribution;

-    The corporate bond return is calculated as the return on a
zero-coupon bond plus a spread. The spread process is a mean reverting
stochastic process; and

-    Property returns are modelled in a similar fashion to corporate
bonds, namely as the return on a riskless bond, plus a risk premium, plus a
process representative of the change in residual values and the change in value
of the call option on rents.

Mean returns have been derived as the annualised arithmetic average return
across all simulations and durations.

For each projection year, standard deviations have been calculated by taking the
square root of the annualised variance of the returns over all the simulations.
These have been averaged over all durations in the projection. For equity and
property, the standard deviations relate to the total return on these assets.
The standard deviations applied to both years are as follows:


                                                              %
Equities:
UK                                                           18.0
Overseas                                                     16.0
Property                                                     15.0


(3)   Level of encumbered capital

In adopting the EEV Principles, Prudential has based encumbered capital on its
internal targets for economic capital subject to it being at least the local
statutory minimum requirements. Economic capital is assessed using internal
models but, when applying the EEV principles, Prudential does not take credit
for the significant diversification benefits that exist within the Group. For
with-profits business written in a segregated life fund, as is the case in Asia
and the UK, the capital available in the fund is sufficient to meet the
encumbered capital requirements.

-  Asian operations: the economic capital requirement is substantially higher
than local statutory requirements in total. Economic capital requirements vary
by territory, but in aggregate, the encumbered capital is equivalent to the
amount required under the Insurance Groups Directive (IGD).

-  US operations: the level of encumbered capital has been set to an amount at
least equal to 235 per cent of the risk-based capital required by the National
Association of Insurance Commissioners (NAIC) at the Company Action Level (CAL),
which is sufficient to meet the economic capital requirement.

-  UK insurance operations: the economic capital requirements for annuity
business are fully met by Pillar I requirements being four per cent of
mathematical reserves, which are also sufficient to meet Pillar II requirements.

(4)   Margins on new business premiums




                                            New Business           Annual     Present
                                          Premiums            Premium and    Value of
                                                             Contribution         New
                                                              Equivalents    Business   Pre-Tax New       New Business
                                                                             Premiums      Business    Margin
                                           Single  Regular          (APE)     (PVNBP)  Contribution     (APE)    (PVNBP)
2007                                        GBPm       GBPm          GBPm        GBPm          GBPm         %          %
                                                                                                

Asian operations                             1,820    1,124         1,306       7,007           653        50        9.3
US operations                                6,515       19           671       6,666           285        42        4.3
UK insurance operations                      6,632      234           897       7,629           277        31        3.6
Total                                       14,967    1,377         2,874      21,302         1,215        42        5.7


                                            New Business           Annual     Present
                                          Premiums            Premium and    Value of
                                                             Contribution         New
                                                              Equivalents    Business   Pre-Tax New      New Business
                                                                             Premiums      Business   Margin
                                           Single  Regular          (APE)     (PVNBP)  Contribution     (APE)     PVNBP)
2006                                        GBPm      GBPm           GBPm        GBPm          GBPm         %          %

Asian operations                             1,072      849           956       5,132           514        54       10.0
US operations                                5,964       17           614       6,103           259        42        4.2
UK insurance operations                      6,991      201           900       7,712           266        30        3.4
Total                                       14,027    1,067         2,470      18,947         1,039        42        5.5



New business margins are shown on two bases, namely the margins by reference to
Annual Premium and Contribution Equivalents (APE) and the Present Value of New
Business Premiums (PVNBP). APEs are calculated as the aggregate of regular new
business amounts and one-tenth of single new business amounts. PVNBPs are
calculated as equalling single premiums plus the present value of expected
premiums of new regular premium business, allowing for lapses and other
assumptions made in determining the EEV new business contribution.

In determining the EEV basis value of new business written in the year the
policies incept, premiums are included in projected cash flows on the same basis
of distinguishing annual and single premium business as set out for statutory
basis reporting.

New business contributions represent profits determined by applying the economic
and non-economic assumptions as at the end of the year.

(5)   Effect of changes in corporate tax rates and other operating assumptions

Effect of changes in corporate tax rates

At 31 December  2007, a change to reduce the UK  corporate  tax rate from 30 per
cent  to 28 per  cent in 2008  had  been  enacted  in the  legislative  process.
Accordingly,  the  2007  results  incorporate  the  effects  of this  change  in
projecting  the tax  cash  flows  attaching  to  in-force  business.  Under  the
convention applied for EEV basis reporting,  profits are generally determined on
a post-tax  basis and then grossed up at the  prevailing  corporate tax rates to
derive pre-tax results. The effect of the change in the UK corporate tax rate is
to give rise to a benefit to the value of business in force at 1 January 2007 of
GBP48m.  After grossing up this amount for notional tax of GBP19m, the effect on
the pre-tax  operating  results based on longer-term  investment  returns for UK
insurance operations for 2007 is a credit of GBP67m.

Similar  considerations  apply to corporate tax rate changes in China,  Malaysia
and  Singapore  giving rise to a benefit to the value of in-force  business at 1
January 2007 of GBP25m. After grossing up this amount for notional tax of GBP7m,
the effect on the  pre-tax  operating  result  based on  longer-term  investment
returns for Asian operations for 2007 is a credit of GBP32m.

Effect of changes in other operating assumptions

For UK insurance operations there is a net nil charge or credit for both the
2007 and 2006 results. However, the 2007 results for annuity business have been
determined after a strengthening of explicit mortality assumptions, and the
release of excess margins in the aggregate liabilities that had previously been
set aside as an indirect extra allowance for longevity related risks.

The overall impact of the assumption changes and release of margins for 2007 is
as follows;


                                                                GBPm
Strengthening of mortality assumptions (a)                     (312)
Release of margins:
Projected benefit related (b)                                   144
Investment related (c)                                           82
Expense related (d)                                              29
Other (e)                                                        57
                                                                312

                                                                  0

(a)  The mortality assumptions have been strengthened such that the previous
future improvement assumptions of medium cohort for males and 75% of medium
cohort for females are now subject to a minimum level of improvement in future
years.

(b)  The release of projected benefit related margins relates to modelling
improvements that have been made during 2007 and the effect of hedging
inflationary increases on certain deferred annuity business.

(c)  The release of investment related margins predominantly relates to GBP38m
in respect of default margins and GBP43m for adjustments to the assumed
liquidity premium. The resulting assumptions for expected defaults and liquidity
premium, after allowing for the release of margins, remain appropriate given
economic conditions at 31 December 2007.

(d)      A release of expense reserves has been made following recent expense
reductions, on which the related cost of capital on the EEV basis is GBP29m.

(e)      This amount reflects the release of other additional margins in the
liabilities that are no longer appropriate in light of the explicit
strengthening of the mortality assumption.

(6)   Effect of changes in economic assumptions and time value of cost of
options and guarantees

The profits (losses) on changes in economic assumptions and time value of cost
of options and guarantees resulting from changes in economic factors for
in-force business included within the profit from continuing operations before
tax (including actual investment returns) arise as follows:





                                                              2007                                   2006
                                                             Change in                             Change in
                                                             time value                           time value
                                                Change in    of cost of             Change in     of cost of
                                                 economic   options and              economic    options and
                                              assumptions    guarantees    Total  assumptions     guarantees    Total
                                                     GBPm          GBPm     GBPm         GBPm           GBPm     GBPm
                                                                                                

Asian operations (note (i))                           201             9      210          (132)           14     (118)
US operations (note (ii))                              81             8       89           (51)            6      (45)
UK insurance operations (note (iii))                  466           (17)     449           182            40      222

Total                                                 748             0      748            (1)           60       59




Notes

(i) The principal components of the effect of changes in economic assumptions in
2007 of GBP201m for Asian operations are credits of GBP110m in Taiwan and GBP80m
in Hong Kong. The increase for Taiwan reflects the combined effect of changes to
the projected fund earned rate (as explained in note 2), and to economic capital
(versus  projected),  offset by the effect of an increase  in the risk  discount
rate.  The increase for Hong Kong reflects a reduction in the risk discount rate
for all  product  lines and an increase  in the  projected  fund earned rate for
participating and linked business. The charge of GBP132m for 2006 mainly relates
to Taiwan  where  there was a charge of  GBP101m  arising  from the delay in the
assumed  long-term yield  projection and the associated  effect of this delay on
the economic capital requirement.

(ii)        The credit of GBP81m for US operations in 2007 arises from the
decrease in risk discount rate, partially offset by the negative effect of a
reduction in the assumed future rate of return for separate account variable
annuity business. Both changes reflect the 0.7 per cent decrease in the 10-year
treasury bond rate (as shown in note 2).

(iii)       The effect of changes in economic assumptions in 2007 of GBP466m for
UK insurance operations reflects a 0.35 per cent increase in the fund earned
rate arising from the increase in assumed returns on non-UK equities and
corporate bond rates which more than offsets the slight reduction in gilt rates
(as shown in note 2), a partial offset from the cost of credit default swaps of
GBP41m and the effect of the risk discount rate for business in force reducing
slightly by 0.15 per cent, in a similar way to the fall in gilt rates as also
shown in note 2.

(7)   Holding company net borrowings at market value

Holding company net borrowings at market value comprise:



                                                                                             31 Dec 2007    31 Dec 2006
                                                                                                    GBPm           GBPm
                                                                                                              

Holding company borrowings:
  IFRS basis                                                                                      (2,367)        (2,485)
  Mark to market value adjustment                                                                     38           (176)

  EEV basis                                                                                       (2,329)        (2,661)
Holding company* cash and short-term investments                                                   1,456          1,119

Holding company net borrowings                                                                      (873)        (1,542)


*Including central finance subsidiaries.


(8)   Taiwan - effect of altered economic assumptions and sensitivity of results
to future market conditions

For the 2007 results, as explained in note 2(a)(ii), the expected long-term bond
yield has been maintained at 5.5 per cent to be achieved by 31 December 2013.

The sensitivity of the embedded value at 31 December 2007 of the Taiwan
operation to altered economic assumptions and future market conditions to:

(a)      a one per cent increase or decrease in the projected long-term bond
yield, (including all consequential changes to investment returns for all
classes, market values of fixed interest assets and risk discount rates), is an
increase (decrease) of GBP67m and GBP(91)m respectively (2006: GBP107m and
GBP(165)m);and

(b)      a one per cent increase or decrease in the starting bond rate for the
progression to the assumed long-term rate is an increase (decrease) of GBP73m
and GBP(57)m respectively (2006: GBP116m and GBP(125m)).

If it had been assumed in preparing the 2007 results that interest rates
remained at the current level of around 2.5% until 31 December 2008 and the
progression period in bond yields was delayed by a year so as to end on 31
December 2014, there would have been a reduction in the Taiwan embedded value of
GBP70m.


TOTAL INSURANCE AND INVESTMENT PRODUCTS NEW BUSINESS

INSURANCE PRODUCTS AND INVESTMENT PRODUCTS




                                                                       Insurance        Investment           Total
                                                                       products          products
                                                                       2007     2006     2007     2006     2007     2006
                                                                       GBPm     GBPm     GBPm     GBPm     GBPm     GBPm
                                                                                                   

Asian operations                                                      2,944    1,921   38,954   20,408   41,898   22,329
US operations                                                         6,534    5,981       60        -    6,594    5,981
UK operations                                                         6,866    7,192   14,745   13,486   21,611   20,678

Group Total                                                          16,344   15,094   53,759   33,894   70,103   48,988



INSURANCE PRODUCTS - NEW BUSINESS PREMIUMS AND CONTRIBUTIONS (note (i))




                                                      Single            Regular        Annual Premium  Present Value of
                                                                                     and Contribution    New Business
                                                                                     Equivalents (APE) Premiums (PVNBP)
                                                     2007     2006     2007     2006     2007     2006     2007     2006

                                                     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm
                                                                                             

Asian operations
China (note (v))                                       72       27       40       36       47       39      268      198
Hong Kong                                             501      355      117      103      167      139    1,196      933
India (Group's 26% interest)                           26       20      177      105      180      107      728      411
Indonesia                                             118       31      109       71      121       74      494      269
Japan                                                 122       68       22        7       34       14      214       97
Korea                                                 179      103      241      208      259      218    1,267    1,130
Malaysia                                               41        4       78       72       82       72      472      418
Singapore                                             593      357       67       72      126      108    1,047      803
Taiwan                                                132       92      218      139      231      148    1,121      743
Other                                                  36       15       55       36       59       37      200      130
Total Asian operations                              1,820    1,072    1,124      849    1,306      956    7,007    5,132
US operations
Fixed annuities                                       573      688        -        -       57       69      573      688
Fixed index annuities                                 446      554        -        -       45       55      446      554
Variable annuities                                  4,554    3,819        -        -      455      382    4,554    3,819
Life                                                    7        8       19       17       20       18      158      147
Guaranteed Investment Contracts                       408      458        -        -       41       46      408      458
GIC-Medium Term Notes                                 527      437        -        -       53       44      527      437
Total US operations                                 6,515    5,964       19       17      671      614    6,666    6,103
UK operations
Product summary
Internal vesting annuities                          1,399    1,341        -        -      140      134    1,399    1,341
Direct and partnership annuities                      842      780        -        -       84       78      842      780
Intermediated annuities                               589      592        -        -       59       59      589      592
Total individual annuities                          2,830    2,713        -        -      283      271    2,830    2,713
Equity release                                        156       89        -        -       16        9      156       89
Individual pensions                                    38       21        1        -        5        2       42       21
Corporate pensions                                    283      318       84       66      112       98      737      490
Unit-linked bonds                                     243      388        -        -       24       39      243      388
With-profit bonds                                     297      139        -        -       30       14      297      139
Protection                                              -       11        5        9        5       10       26       63
Offshore products                                     434      540        4        -       47       54      455      540
Total retail retirement                             4,281    4,219       94       75      522      497    4,786    4,443
Corporate pensions                                    198      261      115      100      135      126      604      643
Other products                                        190      232       25       26       44       49      276      347
DWP rebates                                           143      161        -        -       14       16      143      161
Total mature life and pensions                        531      654      140      126      193      191    1,023    1,151
Total retail                                        4,812    4,873      234      201      715      688    5,809    5,594
Wholesale annuities (notes (iii) and (iv))          1,799    1,431        -        -      180      143    1,799    1,431
Credit life                                            21      687        -        -        2       69       21      687
Total UK operations                                 6,632    6,991      234      201      897      900    7,629    7,712
Channel Summary
Direct and partnership                              2,385    2,543      209      174      448      428    3,288    3,133
Intermediated                                       2,284    2,169       25       27      253      244    2,378    2,300
Wholesale (notes (iii) and (iv))                    1,820    2,118        -        -      182      212    1,820    2,118
Sub-total                                           6,489    6,830      234      201      883      884    7,486    7,551
DWP rebates                                           143      161        -        -       14       16      143      161
Total UK operations                                 6,632    6,991      234      201      897      900    7,629    7,712
Group Total                                        14,967   14,027    1,377    1,067    2,874    2,470   21,302   18,947


INVESTMENT PRODUCTS - FUNDS UNDER MANAGEMENT (note (ii))

                                                     1 Jan 2007      Market   Redemptions  Market and        31 Dec 2007
                                                                      gross                     other
                                                                    inflows                 movements
                                                          GBPm         GBPm         GBPm        GBPm                 GBPm

Asian operations                                         12,253      38,954      (35,993)       2,179             17,393
US operations                                                 -          60           (4)          (1)                55
UK operations                                            44,946      14,745       (9,787)       1,317             51,221

Group Total                                              57,199      53,759      (45,784)       3,495             68,669



Notes

(i)      The tables shown above are provided as an indicative volume measure of
transactions undertaken in the reporting period that have the potential to
generate profits for shareholders. The amounts shown are not, and not intended
to be, reflective of premium income recorded in the IFRS income statement.

Annual premium and contribution equivalents are calculated as the aggregate of
regular new business amounts and one tenth of single new business amounts. New
business premiums for regular premium products are shown on an annualised basis.
Department of Work and Pensions rebate business is classified as single
recurrent business. Internal vesting business is classified as new business
where the contracts include an open market option.

The format of the tables shown above is consistent with the distinction between
insurance and investment products as applied for previous financial reporting
periods. With the exception of some US institutional business, products
categorised as "insurance" refer to those classified as contracts of long-term
insurance business for regulatory reporting purposes, i.e. falling within one of
the classes of insurance specified in part II of Schedule 1 to the Regulated
Activities Order under FSA regulations.

The details shown above for insurance products include contributions for
contracts that are classified under IFRS 4 "Insurance Contracts" as not
containing significant insurance risk. These products are described as
investment contracts or other financial instruments under IFRS. Contracts
included in this category are primarily certain unit-linked and similar
contracts written in UK insurance operations and Guaranteed Investment Contracts
and similar funding agreements written in US operations.

(ii)       Investment products referred to in the table for funds under
management above are unit trust, mutual funds and similar types of retail asset
management arrangements. These are unrelated to insurance products that are
classified as "investment contracts" under IFRS 4, as described in the preceding
paragraph, although similar IFRS recognition and measurement principles apply to
the acquisition costs and fees attaching to this type of business. US investment
products are no longer included in the table above as they are assets under
administration rather than assets under management.

(iii)      The table above includes the transfer of 62,000 with-profits annuity
policies from Equitable Life on 31 December 2007 with assets of approximately
GBP1.7bn. The transfer represented an APE of GBP174m.

(iv)      The tables for 2006 above include a bulk annuity transaction with the
Scottish Amicable Insurance Fund (SAIF) with a premium of GBP560m. The
transaction reflects the arrangement entered into in June 2006 for the
reinsurance of non-profit immediate pension annuity liabilities of SAIF to
Prudential Retirement Income Limited (PRIL), a shareholder owned subsidiary of
the Group. SAIF is a closed ring-fenced sub-fund of the PAC long-term fund
established by a Court approved Scheme of Arrangement in October 1997, which is
solely for the benefit of SAIF policyholders. Shareholders have no interest in
the profits of this fund, although they are entitled to investment management
fees on this business. The inclusion of the transaction between SAIF and PRIL as
new business in the tables reflects the transfer from SAIF to Prudential
shareholders' funds of longevity risk, the requirement to set aside supporting
capital  and  entitlement  to  surpluses  on the  block  of  business  from  the
reinsurance arrangements.  For Group reporting purposes, the amounts recorded by
SAIF and PRIL for the premium are eliminated on consolidation.

(v)       Subsequent to 29 September, following expiry of the previous
management agreement, CITIC-Prudential Life Insurance Company Ltd
(CITIC-Prudential), the Group's life operation in China, has been accounted for
as a joint venture. Prior to this date, CITIC-Prudential was consolidated as a
subsidiary undertaking. The amounts in the table above include 100% of the total
premiums for this operation up to 29 September 2007 and 50% thereafter, being
the Group's share after this date.

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS

CONSOLIDATED INCOME STATEMENT



                                                                                                         2007      2006
                                                                                                         GBPm      GBPm
                                                                                                              

Gross premiums earned                                                                                  18,359    16,157
Outward reinsurance premiums                                                                            (171)     (171)
Earned premiums, net of reinsurance                                                                    18,188    15,986
Investment income                                                                                      12,221    17,128
Other income                                                                                            2,457     1,917

Total revenue, net of reinsurance (note B)                                                             32,866    35,031

Benefits and claims                                                                                  (26,210)  (25,981)
Outward reinsurers' share of benefits and claims                                                         (20)     (144)
Movement in unallocated surplus of with-profits funds                                                   (760)   (2,296)

Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance    (26,990)  (28,421)
Acquisition costs and other operating expenditure                                                     (4,523)   (4,212)
Finance costs: interest on core structural borrowings of shareholder-financed operations                (168)     (177)

Total charges, net of reinsurance (note B)                                                           (31,681)  (32,810)

Profit before tax* (note B)                                                                             1,185     2,221
Tax attributable to policyholders' returns                                                               (19)     (849)

Profit before tax attributable to shareholders (note C)                                                 1,166     1,372

Tax expense (note G)                                                                                    (401)   (1,241)
Less: tax attributable to policyholders' returns                                                           19       849
Tax attributable to shareholders' profit (note G)                                                       (382)     (392)

Profit from continuing operations after tax (note B)                                                      784       980
Discontinued operations (net of tax) (note H)                                                             241     (105)

Profit for the year                                                                                     1,025       875

Attributable to:
Equity holders of the Company                                                                           1,022       874
Minority interests                                                                                          3         1

Profit for the year                                                                                     1,025       875


Earnings per share (in pence)                                                                            2007      2006

Basic (based on 2,445m and 2,413m shares respectively):
Based on profit from continuing operations attributable to the equity holders of the Company
(note I)                                                                                                 31.9p     40.5p
Based on profit (loss) from discontinued operations attributable to the equity holders of the
Company                                                                                                  9.9p     (4.3)p
                                                                                                        41.8p    36.2p

Diluted (based on 2,448m and 2,416m shares respectively):
Based on profit from continuing operations attributable to the equity holders of the Company            31.9p    40.5p
Based on profit (loss) from discontinued operations attributable to the equity holders of the
Company                                                                                                  9.8p    (4.3)p
                                                                                                        41.7p    36.2p

Dividends per share (in pence)                                                                           2007      2006
Dividends relating to reporting period:
Interim dividend (2007 and 2006)                                                                        5.70p     5.42p
Final dividend (2007 and 2006) (note J)                                                                12.30p    11.72p

Total                                                                                                  18.00p    17.14p
Dividends declared and paid in reporting period:
Current year interim dividend                                                                           5.70p     5.42p
Final dividend for prior year                                                                          11.72p    11.02p

Total                                                                                                  17.42p    16.44p



* Profit before tax represents income net of post-tax transfers to unallocated
surplus of with-profits funds, before tax attributable to policyholders and
unallocated surplus of with-profits funds, unit-linked policies and
shareholders' profits.




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                               2007
                          Share   Share Retained Translation Available-for-sale Hedging Shareholders'  Minority   Total
                        capital premium earnings     reserve securities reserve reserve        equity interests  equity
                          GBPm     GBPm     GBPm        GBPm               GBPm    GBPm          GBPm      GBPm    GBPm
                                                                                          

Reserves
Profit for the year                        1,022                                                1,022         3   1,025

Items recognised
directly in equity:
Exchange movements                                         11                                      11                11
Movement on cash flow
hedges                                                                               (3)           (3)               (3)
Unrealised valuation
movements on Egg
securities classified
as available-for-sale                                                        (2)                   (2)               (2)
Unrealised valuation
movements on securities
of US insurance
operations classified as
available-for-sale
Unrealised holding losses
arising during the year                                                    (231)                 (231)            (231)
Less gains included in
the income statement                                                        (13)                  (13)             (13)

Total (note N)                                                             (244)                 (244)            (244)
Related change in
amortisation of
deferred income and
acquisition costs                                                            88                    88               88
Related tax                                                 2                53        1           56               56

Total items recognised
directly in equity                                         13              (105)      (2)         (94)             (94)

Total income and expense
for the year                               1,022           13              (105)      (2)         928         3    931
Dividends                                   (426)                                                (426)       (5)  (431)
Reserve movements in
respect of
share-based payments                          18                                                   18               18
 Change in minority
interests arising
principally from
purchase and sale of
venture investment
companies and property
partnerships of the PAC
with-profits fund and
other consolidated
investment funds                                                                                            (28)   (28)

Share capital and
share premium
New share capital
subscribed
(note O)                      1     181                                                           182              182
Transfer to retained
earnings in respect of
shares issued in lieu
of cash dividends
(note O)                           (175)     175

Treasury shares
Movement in own shares
in respect of
share-based payment
plans                                          7                                                    7                7
Movement in Prudential
plc shares purchased
by unit trusts
consolidated under IFRS                        4                                                    4                4

Net increase (decrease)
in equity                     1       6      800           13              (105)      (2)         713       (30)   683
At beginning of year        122   1,822    3,640         (125)               27        2        5,488       132  5,620

At end of year              123   1,828    4,440         (112)              (78)       0        6,201       102  6,303


                                                                               2006
                          Share   Share Retained Translation Available-for-sale Hedging Shareholders'  Minority  Total
                        capital premium earnings     reserve securities reserve reserve        equity interests equity
                           GBPm    GBPm     GBPm        GBPm               GBPm    GBPm          GBPm      GBPm   GBPm
Reserves
Profit for the year                          874                                                  874         1    875
Items recognised
directly in
equity:
Exchange movements                                      (224)                                    (224)            (224)
Movement on cash
flow hedges                                                                           7             7                7
Unrealised valuation
movements on
Egg securities
classified as
available-for-sale                                                           (2)                   (2)              (2)
Unrealised valuation
movements on
securities of US
insurance operations
classified as
available-for-sale:
Unrealised holding
losses arising                                                             (208)                 (208)            (208)
during the year
Less losses included
in the income
statement                                                                     7                     7                7

                                                                           (201)                 (201)            (201)
Related change in
amortisation of
deferred income and
acquisition costs                                                            75                    75               75
Related tax                                              (74)                50      (2)          (26)             (26)
Total items of income
and expense
recognised directly
in equity                                               (298)               (78)      5          (371)            (371)

Total income and expense
for the year                                 874        (298)               (78)      5           503         1    504
Dividends                                   (399)                                                (399)            (399)
Reserve movements in
respect of
share-based payments                          15                                                   15               15
Change in minority
interests
arising principally from
purchase and sale of
venture investment
companies and property
partnerships of the PAC
with-profits fund and
other consolidated
investment funds                                                                                             43     43
Acquisition of minority
interests of now
discontinued Egg banking
operations (note H)                         (167)                                                (167)      (84)  (251)

Share capital and share
premium
New share capital
subscribed                    3     333                                                           336              336
Transfer to retained
earnings in respect
of shares issued in lieu
of cash dividends                   (75)      75

Treasury shares
Movement in own shares
in respect of
share-based payment plans                      6                                                    6                6
Movement in Prudential
plc shares purchased
by unit trusts
consolidated under IFRS                        0                                                    0                0
Net increase (decrease)
in equity                     3     258      404        (298)               (78)      5           294       (40)   254
At beginning of year        119   1,564    3,236         173                105      (3)        5,194       172  5,366

At end of year              122   1,822    3,640        (125)                27       2         5,488       132  5,620


INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS

CONSOLIDATED BALANCE SHEET
                                                                                                         2007     2006
                                                                                                         GBPm     GBPm
Assets

Intangible assets attributable to shareholders:
Goodwill                                                                                                 1,341     1,341
Deferred acquisition costs and other intangible assets                                                   2,836     2,497
                                                                                                         4,177     3,838

Intangible assets attributable to the PAC with-profits fund:
In respect of acquired subsidiaries for venture fund and other investment purposes (note K)                192       830
Deferred acquisition costs                                                                                  19        31
                                                                                                           211       861
Total                                                                                                    4,388     4,699

Other non-investment and non-cash assets:
Property, plant and equipment                                                                            1,012     1,133
Reinsurers' share of insurance contract liabilities                                                        783       945
Deferred tax assets                                                                                        925     1,012
Current tax recoverable                                                                                    285       404
Accrued investment income                                                                                2,023     1,900
Other debtors                                                                                            1,297     1,052
Total                                                                                                    6,325     6,446

Investments:
Investment properties                                                                                   13,688    14,491
Investments accounted for using the equity method                                                           12         6
Financial investments:
    Loans (note L)                                                                                       7,924    13,754
    Equity securities and portfolio holdings in unit trusts                                             86,157    78,892
    Debt securities (note M)                                                                            83,984    81,719
    Other investments                                                                                    4,396     3,220
    Deposits                                                                                             7,889     7,759
Total                                                                                                  204,050   199,841

Held for sale assets                                                                                        30       463
Cash and cash equivalents                                                                                4,951     5,071
Total assets                                                                                           219,744   216,520

Equity and liabilities

Equity
Shareholders' equity (note O)                                                                            6,201     5,488
Minority interests                                                                                         102       132
Total equity                                                                                             6,303     5,620

Liabilities
Banking customer accounts (note H)                                                                           -     5,554
Policyholder liabilities and unallocated surplus of with-profits funds:
Insurance contract liabilities                                                                         132,636   123,213
Investment contract liabilities with discretionary participation features                               29,550    28,733
Investment contract liabilities without discretionary participation features                            14,032    13,042
Unallocated surplus of with-profits funds                                                               14,351    13,599
Total insurance liabilities                                                                            190,569   178,587

Core structural borrowings of shareholder-financed operations (note P):
Subordinated debt (other than discontinued Egg banking operations)                                       1,570     1,538
Other                                                                                                      922     1,074
                                                                                                         2,492     2,612
Subordinated debt of discontinued Egg banking operations  (note H)                                           -       451
Total                                                                                                    2,492     3,063

Other borrowings:
Operational borrowings attributable to shareholder-financed operations (note Q)                          3,081     5,609
Borrowings attributable to with-profits funds (note Q)                                                     987     1,776

Other non-insurance liabilities:
Obligations under funding, securities lending and sale and repurchase agreements                         4,081     4,232
Net asset value attributable to unit holders of consolidated unit trusts and similar funds               3,556     2,476
Current tax liabilities                                                                                  1,237     1,303
Deferred tax liabilities                                                                                 3,475     3,882
Accruals and deferred income                                                                               599       517
Other creditors                                                                                          1,020     1,398
Provisions                                                                                                 473       464
Other liabilities                                                                                        1,871     1,652
Held for sale liabilities                                                                                    -       387
Total                                                                                                   16,312    16,311
Total liabilities                                                                                      213,441   210,900
Total equity and liabilities                                                                           219,744   216,520


CONSOLIDATED CASH FLOW STATEMENT

                                                                                                         2007       2006
                                                                                                         GBPm       GBPm
Cash flows from operating activities
Profit before tax from continuing operations (note (i) and B)                                           1,185      2,221
Profit (loss) before tax from discontinued operations (note H)                                            222      (150)

Profit before tax                                                                                       1,407      2,071
Changes in operating assets and liabilities:
Investments                                                                                          (11,730)   (13,748)
Banking customer accounts                                                                                 (9)      (276)
Other non-investment and non-cash assets                                                                (817)      (232)
Policyholder liabilities (including unallocated surplus)                                               12,017     13,540
Other liabilities (including operational borrowings)                                                      962      1,136
Interest income and expense and dividend income included in profit before tax                         (8,201)   (10,056)
Other non-cash items                                                                                    (140)        198
Operating cash items:
Interest receipts                                                                                       5,541      6,466
Dividend receipts                                                                                       3,633      2,732
Tax paid                                                                                                (624)      (523)

Net cash flows from operating activities                                                                1,138      2,209
Cash flows from investing activities
Purchases of property, plant and equipment                                                              (231)      (174)
Proceeds from disposal of property, plant and equipment                                                    61         34
Costs incurred on purchase of Egg minority interests                                                        -        (6)
Acquisition of subsidiaries, net of cash balances (note (ii))                                            (77)       (70)
Disposal of Egg, net of cash balances (note (iii) and H)                                                (538)          -
Disposal of other subsidiaries, net of cash balances (note (ii))                                          157        114
Deconsolidation of investment subsidiaries (note (iv))                                                   (91)          -

Net cash flows from investing activities                                                                (719)      (102)

Cash flows from financing activities
Structural borrowings of the Group:
Shareholder-financed operations (note (v) and P):
Redemption                                                                                              (150)        (1)
Interest paid                                                                                           (171)      (204)
With-profits operations (note (vi) and Q):
Interest paid                                                                                             (9)        (9)
Equity capital (note (vii)):
Issues of ordinary share capital                                                                            6         15
Dividends paid to shareholders                                                                          (255)      (323)

Net cash flows from financing activities                                                                (579)      (522)

Net (decrease) increase in cash and cash equivalents                                                    (160)      1,585
Cash and cash equivalents at beginning of year                                                          5,071      3,586
Effect of exchange rate changes on cash and cash equivalents                                               40      (100)

Cash and cash equivalents at end of year (note (viii))                                                  4,951      5,071



Notes

(i)  Profit before tax represents income, net of post-tax transfers to
unallocated surplus of with-profits funds, before tax attributable to
policyholders and unallocated surplus of with-profits funds, unit-linked
policies and shareholders' profits. It does not represent profit before tax
attributable to shareholders.

(ii) Acquisitions and disposals of subsidiaries shown above include
venture investments and other investment subsidiaries of the PAC with-profits
fund.

(iii)The amount of GBP(538)m in respect of the disposal of Egg, net of cash
balances shown above, represents the net sale proceeds of GBP527m less cash and
cash equivalents of GBP1,065m held by Egg and transferred on disposal.

(iv) In November 2007, the Company sold its venture fund management
subsidiary, PPM Capital, as described in note K. As a result of the arrangements
attaching to the sale, it is no longer appropriate to consolidate the holdings
managed by that company.

(v)  Structural borrowings of shareholder-financed operations comprise core
debt of the holding company and central finance subsidiaries, Jackson surplus
notes and, in 2006, Egg debenture loans. Following the sale of Egg in May 2007,
these loans no longer form part of the Group's borrowings. Core debt excludes
borrowings to support short-term fixed income securities programmes and
non-recourse borrowings of investment subsidiaries of shareholder-financed
operations. Cash flows in respect of these borrowings are included within cash
flows from operating activities. In June 2007, borrowings of GBP150m were repaid
on maturity.

(vi)  Structural  borrowings  of  with-profits  operations  relate solely to the
GBP100m 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
and, prior to deconsolidation, venture fund investment subsidiaries are included
within cash flows from operating activities.

(vii) Cash movements in respect of equity capital exclude scrip dividends
and share capital issued in respect of the acquisition of Egg minority interests
in 2006.

(viii)   Of the cash and cash equivalents amounts reported above, GBP339m (2006:
GBP437m) represents cash and cash equivalents of central companies.


INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS

NOTES ON THE STATUTORY IFRS BASIS RESULTS

A         Basis of preparation and audit status

The statutory basis results included in this announcement have been extracted
from the audited financial statements of the Group for the year ended 31
December 2007. These statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) as required by EU law (IAS Regulation EC1606/2002).

The auditors have reported on the 2007 statutory accounts. The financial
information set out above does not constitute the Company's statutory accounts
for the years ended 31 December 2007 or 2006 but is derived from those accounts.
The auditors' report was (i) unqualified, (ii) did not include reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.

In 2007 the Group adopted the following accounting pronouncements

-        IFRS 7, 'Financial instruments: Disclosures'
-        Revised IFRS 4 'Implementation Guidance'
-        Amendment to IAS 1,'Capital Disclosures'
-        IFRIC 9, 'Reassessment of Embedded Derivatives'.

The changes in respect of IFRS 7, IFRS 4 and IAS 1 affect only disclosures in
the Group Financial Statements.

IFRIC 9, which potentially effects measurements, relates to assessment of
whether derivatives are required to be separated from host contracts by the
reporting entity and accounted for as derivatives when the Group first becomes a
party to the contracts. IFRIC 9 became effective for annual periods beginning on
or after 1 June 2006, but had no material effect on the Group's 2007 results.

B         Segment disclosure



                                                                                                  2007            2006
                                                                                                  GBPm            GBPm
                                                                                                             

Revenue
Long-term business                                                                              31,555          34,197
Broker-dealer and asset management                                                               1,397           1,080
Unallocated corporate                                                                              182              38
Intra-group revenue eliminated on consolidation                                                  (268)           (284)

Total revenue, net of reinsurance, per income statement                                         32,866          35,031

Charges (before income tax attributable to policyholders and unallocated surplus of
long-term insurance funds)
Long-term business, including post-tax transfers to unallocated surplus of with-profits
funds                                                                                         (30,533)         (32,162)
Broker-dealer and asset management                                                             (1,053)            (797)
Unallocated corporate                                                                            (363)            (135)
Intra-group charges eliminated on consolidation                                                    268              284

Total charges, net of reinsurance, per income statement                                       (31,681)         (32,810)

Segment results - revenue less charges (continuing operations)
Long-term business                                                                               1,022            2,035
Broker-dealer and asset management                                                                 344              283
Unallocated corporate                                                                            (181)             (97)

Profit before tax*                                                                               1,185            2,221
Tax attributable to policyholders' returns                                                        (19)            (849)

Profit before tax attributable to shareholders                                                   1,166            1,372
Tax attributable to shareholders' profit                                                         (382)            (392)

Profit from continuing operations after tax                                                        784              980

Segment results - discontinued operations (net of tax)
Banking (note H)                                                                                   241            (105)

Profit for the year                                                                              1,025              875




* Profit before tax represents income net of post-tax transfers to unallocated
surplus of with-profits funds, before tax attributable to policyholders and
unallocated surplus of with-profits funds, unit-linked policies and
shareholders' profits.


C     Supplementary analysis of profit from continuing operations before tax
attributable to shareholders
                                                                                                       2007        2006
Results analysis by business area                                                                      GBPm        GBPm
Asian operations
Long-term business (note D)                                                                             189         189
Asset management                                                                                         72          50
Development expenses                                                                                   (15)        (15)

Total                                                                                                   246         224

US operations
Jackson (note D)                                                                                        444         398
Broker-dealer and asset management                                                                       13          18
Curian                                                                                                  (5)         (8)

Total                                                                                                   452         408

UK operations
UK insurance operations (note D)                                                                        528         500
M&G                                                                                                     254         204

Total                                                                                                   782         704

Other income and expenditure
Investment return and other income                                                                       86          58
Interest payable on core structural borrowings                                                        (168)       (177)
Corporate expenditure:
Group Head Office                                                                                     (117)        (83)
Asia Regional Head Office                                                                              (38)        (36)
Charge for share-based payments for Prudential schemes (note (i))                                      (11)        (10)

Total                                                                                                 (248)       (248)

Restructuring costs                                                                                    (19)        (38)

Operating profit from continuing operations based on longer-term investment returns (note (ii))       1,213       1,050
Short-term fluctuations in investment returns on shareholder-backed business (note E)                 (137)         155
Shareholders' share of actuarial gains and losses on defined benefit pension schemes (note F)            90         167

Profit from continuing operations before tax attributable to shareholders (note (ii))                 1,166       1,372



Notes

(i)          The charge for share-based payments for Prudential schemes is for
the SAYE and Group performance-related schemes.

(ii)         The results for continuing operations shown above exclude those in
respect of discontinued banking operations. On 1 May 2007, the Company sold Egg.
Accordingly, the presentation of the comparative results for 2006 has been
adjusted from those previously published. Note H shows the composition of the
contribution from discontinued operations.


D         Effect of changes in assumptions, estimates and bases used to measure
insurance assets and liabilities

There were no changes of assumptions that had a material impact on the 2007 and
2006 results for Asian operations.

The 2007 results for US operations have been determined after taking account of
certain changes of assumptions during the year. Generally, assumptions were
modified in 2007 to conform to more recent experience with a net effect of a
credit of GBP8m (2006: charge of GBP7m).

For  UK  insurance  operations,   the  operating  profit  based  on  longer-term
investment  returns  of  GBP528m  for 2007  includes  a credit of GBP34m for the
effect on shareholders' results for changes in assumptions.

The 2007 results for shareholder-backed annuity business have been determined
after making changes to mortality assumptions and releasing excess margins in
the aggregate liabilities that had previously been set aside as an indirect
extra allowance for longevity related risks.
                                                                      GBPm
Effect of strengthening of mortality assumptions (a)                 (276)
Release of margins:
Projected benefit related (b)                                         104
Investment related (c)                                                 48
Expense related (d)                                                    68
Other (e)                                                              90
                                                                      310
Net credit to shareholder result                                       34


(a)      The mortality assumptions have been strengthened by increasing the
minimum level of future improvement rate.

(b)      The release of projected benefit related margins primarily relates to
modelling improvements that have been made during 2007.

(c)      The release of investment related margins of GBP48m relates to default
margins. The resulting assumptions for expected defaults, after allowing for the
release of margins, remain appropriate given economic conditions at 31 December
2007.

(d)      A release of expense reserves has been made following recent expense
reductions.

(e)    This amount reflects the release of other additional margins in the
liabilities that are no longer appropriate in light of the explicit
strengthening of the mortality assumptions.

The 2006 comparative operating profit based on longer-term investment returns of
GBP500m  included a net credit of GBP42m for changes in assumptions,  mainly due
to a GBP46m  reduction in liabilities due to the  implementation  of PS 06/14 by
the FSA.

E        Short-term fluctuations in investment returns on shareholder-backed
business
                                                       2007            2006
                                                       GBPm              GBPm
Long-term business operations:
   Asian insurance operations (note (ii))               (71)             134
   US insurance operations (note (iii))                 (18)              53
   UK insurance operations (note (iv))                  (47)            (43)
Other                                                    (1)             11

Total (note (i))                                       (137)             155


Notes

(i) General

The short-term fluctuations in investment returns for 2007 reflect primarily
temporary market value movements on the portfolio of investments held by the
Group's shareholder-backed operations. There were no default losses on debt
securities in 2007.

(ii) Asian insurance operations

The fluctuations for Asian operations reflect the impact of interest rate
increases in Taiwan on the value of debt securities and a GBP30m value reduction
in a CDO fund investment, partially offset by the effect of favourable equity
market movements in Vietnam.

(iii) US insurance operations

The short-term fluctuations in investment returns included in the supplementary
analysis of profit for US insurance operations comprise the following items:




                                                                                                   2007            2006
                                                                                                   GBPm            GBPm

                                                                                                             

Debt securities
   Credit related losses
      Losses in the year
         Bond write downs                                                                          (35)            (32)
         Losses on sales of impaired and deteriorating bonds                                       (51)             (3)
         Recoveries/ reversals                                                                        8              10
                                                                                                   (78)            (25)
      Less: Risk margin charge included in operating profit based on longer-term
                      investment returns                                                             48              54
     Short-term fluctuation                                                                        (30)              29
   Interest related realised gains and losses
      Gains (losses) in year                                                                         31            (15)
      Less: Amortisation of gains and losses in current and prior years included in                (37)            (45)
      operating profit based on longer-term investment returns
      Short-term fluctuation                                                                        (6)            (60)
Related change to amortisation of deferred acquisition costs                                          9               6
Total short-term fluctuation related to realised gains and losses on debt securities               (27)            (25)
Derivatives (other than equity related): market value movement                                     (19)              34
Equity type movements: actual less longer-term return
                                                                                                     42              21
Other items                                                                                        (14)              23
Total                                                                                              (18)              53

In addition, for US insurance operations, included within the statement of
changes in equity, is a net reduction in the value of debt securities classified
as available-for-sale of GBP244m. This reduction reflects the effect of widened
credit spreads and global credit concerns partially offset by the effect of
reductions in US interest rates and a steepening yield curve. These temporary
market value movements do not reflect defaults or permanent impairments.
Additional details on the movement in the value of the Jackson portfolio are
included in note N.

(iv) UK insurance operations

The fluctuations for UK insurance operations arise mostly in Prudential
Retirement Income Limited, which writes the most significant element of the
shareholder-backed annuity business in the UK. The fluctuations principally
reflect the impact of widened credit spreads on the corporate bond securities
backing the shareholders' equity of the business.

F         Shareholders' share of actuarial gains and losses on defined benefit
pension schemes
                                                                                                    2007            2006
                                                                                                    GBPm            GBPm

Actual less expected return on scheme assets (note (i))                                              (8)             156
Experience (losses) gains on scheme liabilities                                                     (14)              18
Gains on changes of assumptions for scheme liabilities (note (ii))                                   317             311

                                                                                                     295             485
Less: amount attributable to the PAC with-profits fund                                             (205)           (318)
Total attributable to shareholders                                                                    90             167



Notes

(i) The expected rate of return for full year 2007 applied to the schemes'
assets was a weighted rate of 5.9%.

(ii) The gains of GBP317m on changes of assumptions comprise gains due to
 changes in economic  assumptions  of GBP509m which are  partially  offset by
a charge of GBP192m from the effect of strengthened mortality assumptions for
UK schemes.

The discount rates applied for the Group's UK defined benefit schemes, and the
change therein reflected in the gains and losses shown above, are as follows:

31 December 2007       5.9%
31 December 2006       5.2%

G        Tax expense

The total tax charge of GBP401m for 2007 (2006: GBP1,241m) comprises a charge of
GBP80m (2006:  GBP698m) for UK tax and a charge of GBP321m  (2006:  GBP543m) for
overseas tax. This tax charge comprises tax  attributable to  policyholders  and
unallocated   surplus  of   with-profits   funds,   unit-linked   policies   and
shareholders.  The tax charge  attributable  to shareholders of GBP382m for 2007
(2006:  GBP392m) comprises a charge of GBP176m (2006:  GBP142m) for UK tax and a
charge of GBP206m (2006: GBP250m) for overseas tax.

The tax credit related to discontinued operations, which is all attributable to
shareholders, amounted to GBP19m for 2007 (2006: GBP45m).

Amounts for deferred tax are determined using the current rate of tax or, where
substantively enacted through the legislative process, the prospective rate.
Accordingly, the deferred tax amounts for full year 2007 reflect the prospective
change for the main UK corporation tax rate from 30 per cent to 28 per cent
which will be effective from 1 April 2008.

H        Discontinued operations

In the first half of 2006, the Company acquired the outstanding 21.7 per cent
minority interest in Egg, its UK banking business. The Company accounted for the
purchase using the economic entity method. Accordingly, GBP167m was charged to
retained earnings in 2006 representing the difference between the consideration
paid and net assets acquired.

In January 2007, the Company announced that it had entered into a binding
agreement to sell Egg. Under the terms of the agreement, the consideration
payable to the Company was GBP575m cash, subject to adjustments to reflect any
change in net asset value between 31 December 2006 and completion.

On 1 May 2007, the Company completed the sale. The consideration, net of
expenses, was GBP527m. The reduction from the GBP575m noted above primarily
reflected Egg's post tax operating loss of GBP49m for the period from 1 January
2007 to the date of sale as shown below.

The profit (loss) from discontinued operations comprises:


                                                                                                    2007            2006
                                                                                                    GBPm            GBPm
                                                                                                              

Pre-tax loss from discontinued operations
    Egg results:
        Operating loss based on longer-term investment returns for the period of ownership          (68)           (157)
        Short-term fluctuations in investment returns                                                  -               7
    Profit on sale of Egg                                                                            290               -
    Total                                                                                            222           (150)
Tax
   On Egg results:
         Operating loss based on longer-term investment returns for the period of
ownership                                                                                             19              47
         Short-term fluctuations in investment returns                                                 -             (2)
   On profit on sale of Egg                                                                            0               -

   Total                                                                                              19              45
Profit (loss) from discontinued operations, net of tax                                               241           (105)

Cash and cash equivalents transferred on disposal were GBP1,065m. Accordingly, the
cash outflow arising from the disposal of Egg, as shown in the consolidated cash
flow statement, was GBP538m.

I           Supplementary analysis of earnings per share from continuing
operations


Earnings per share (in pence)                                                                        2007          2006

From operating profit based on longer-term investment returns after related tax and                 33.8p        30.9p
minority interests
Adjustment from post-tax longer-term investment returns to post-tax actual investment              (4.5)p         4.8p
returns (after related minority interests)
Adjustment for post-tax shareholders' share of actuarial gains and losses on defined                 2.6p         4.8p
benefit pension schemes
Based on profit from continuing operations after tax and minority interests                         31.9p        40.5p



J          Dividend

A final dividend for 2007 of 12.30p per share was proposed by the directors on
13 March 2008. This dividend will absorb an estimated GBP304m of shareholders'
funds. Subject to shareholder approval, the dividend will be paid on 20 May 2008
to shareholders on the register at the close of business on 11 April 2008. A
scrip dividend alternative will be offered to shareholders.

K         Intangible assets attributable to the PAC with-profits fund in respect
of venture fund and other investments

During 2006 and 2007, the PAC with-profits fund held a number of venture capital
holdings which were managed by its venture capital management subsidiary, PPM
Capital. On 9 November 2007, PPM Capital was sold by the Group. Prior to the
sale of PPM Capital, the Group was deemed to have a controlling interest in
these investments and where appropriate these investments were accounted for as
subsidiaries with line-by-line consolidation of assets, including acquired
goodwill and other intangible assets and liabilities.  At 31 December 2006,
GBP830m of goodwill and other intangible assets were recognised for the
consolidated venture fund investments. As a result of the control arrangements
put in place at the time of the sale of PPM Capital, the Group no longer
controls these venture fund investments and consequently ceased to consolidate
these investments and instead fair values them in the balance sheet.

The intangible assets of GBP192m at 31 December 2007 attributable to the PAC
with-profits fund relate to the goodwill recognised from the fund's acquisition
of 78 per cent voting equity interests in Red Funnel, a ferry company in June
2007, and which is managed by M&G.

L         Loans portfolio

Loans are accounted for at amortised cost unless impaired.  The amounts included
in the balance sheet are analysed as follows:



                                                                                                    2007            2006
                                                                                                    GBPm              GBPm
                                                                                                                

Insurance operations
UK (note(i))                                                                                       1,245           1,128
US (note (ii))                                                                                     3,258           3,254
Asia (note (iii))                                                                                  1,087             904
Asset management operations
M&G (note (iv))                                                                                    2,334           2,181
Unallocated to a segment                                                                               0              94
Discontinued banking operations                                                                        -           6,193
Total                                                                                              7,924          13,754



Notes

(i)        UK insurance operations

The loans of the Group's UK  insurance  operations  of  GBP1,245m at 31 December
2007 comprise mortgage loans of GBP449m,  policy loans of GBP35m and other loans
of GBP761m. The mortgage loans are collateralised by properties. Other loans are
all  commercial  loans and  comprise  mainly  syndicated  loans  held by the PAC
with-profits fund.

(ii)       US insurance operations

The loans of the Group's US  insurance  operations  of  GBP3,258m at 31 December
2007 comprise  mortgage  loans of GBP2,841m and policy loans of GBP417m.  All of
the mortgage loans are commercial  mortgage  loans which are  collateralised  by
properties. The property types are mainly industrial,  multi-family residential,
suburban office, retail and hotel.

The US insurance operations' mortgage loan portfolio does not include any
single-family residential mortgage loans and is therefore not exposed to the
risk of defaults associated with residential sub-prime mortgage loans.

The policy loans are fully secured by individual life insurance policies or
annuity policies.

(iii)      Asian insurance operations

The loans of the Group's Asian insurance  operations of GBP1,087m at 31 December
2007 comprise mortgage loans of GBP132m, policy loans of GBP430m and other loans
of GBP525m.  The mortgage and policy  loans are secured by  properties  and life
insurance policies respectively.

The majority of the other loans are commercial loans held by the Malaysian
operation and which are all investment graded by two local rating agencies.

(iv)     M&G

The M&G loans of GBP2,334m  comprise  GBP1,383m of bridging loan finance  assets
and GBP951m in respect of a  structured  finance  arrangement,  both  managed by
Prudential Capital.  The bridging loan finance assets generally have no external
credit ratings  available,  with internal  ratings prepared by the Group's asset
management operations as part of the risk management process rating GBP738m BBB+
to BBB- and GBP645m BB+ to BB-.

Of the loans receivable under the structured finance arrangement, GBP826m of the
receivable was with  counterparties  rated AA by Standard and Poor's and GBP125m
AA-. In addition an AAA rated credit  default swap was held covering  GBP400m of
the AA element of the loans.

M        Debt securities portfolio

Debt securities are accounted for at fair value. The amounts included in the
balance sheet are analysed as follows, with further information relating to the
credit quality of the Group's debt securities at 31 December 2007 provided in
the notes below.



                                                                                                   2007            2006
                                                                                                   GBPm              GBPm
                                                                                                               

Insurance operations
UK (note(ii))                                                                                     57,180          53,461
US (note (iii))                                                                                   19,002          20,146
Asia (note (iii))                                                                                  6,920           5,391
Asset management operations (note (iv))                                                              882             678
Unallocated to a segment                                                                               -              67
Discontinued banking operations                                                                        -           1,976
Total                                                                                             83,984          81,719


Notes

In the tables below, Standard and Poor's (S&P) ratings have been used where
available. For securities where S&P ratings are not available, those produced by
Moody's and then Fitch have been used as an alternative.




(i) UK insurance operations
                                            PAC-with profits sub-fund             Other funds and subsidiaries

                              Scottish    Excluding  Prudential    Total      Prudential Unit-linked     Other
                              Amicable   Prudential   Annuities               Retirement    business  business
                             Insurance    Annuities     Limited                   Income                          Total
                                  Fund      Limited                              Limited
                                  GBPm         GBPm        GBPm     GBPm            GBPm        GBPm      GBPm     GBPm
                                                                                            

S&P - AAA                        1,453        6,434       4,356   10,790           5,658       3,534       121   21,556
S&P - AA+ to AA-                   436        1,978       1,518    3,496           1,541         680        20    6,173
S&P - A+ to A-                   1,030        4,356       2,693    7,049           3,354       1,093        31   12,557
S&P - BBB+ to BBB-                 652        2,780         920    3,700             781         267         9    5,409
S&P - Other                        167          757          11      768               1           6         -      942
                                 3,738       16,305       9,498   25,803          11,335       5,580       181   46,637
Moody's - Aaa                      138          550         177      727             125          22         9    1,021
Moody's - Aa1 to Aa3                23          198         273      471              82           9         2      587
Moody's - A1 to A3                  74          321         284      605             243          19         3      944
Moody's - Baa1 to Baa3              41          180         150      330             103          14         2      490
Moody's - Other                     10          400           -      400               -           -         -      410
                                   286        1,649         884    2,533             553          64        16    3,452
Fitch                               43          196         265      461             160          17         1      682
Other                              528        2,233       2,428    4,661           1,125          90         5    6,409
Total debt securities            4,595       20,383      13,075   33,458          13,173       5,751       203   57,180

Where no external ratings are available, internal ratings produced by the
Group's asset management operation, which are prepared on the Company's
assessment of a comparable basis to external ratings, are used where possible.
Of the GBP6,409m total debt securities held at 31 December 2007 which are not
externally rated, GBP2,972m were internally rated AAA to A-, GBP2,844m were
internally rated BBB to B- and GBP593m were unrated. The majority of unrated debt
security investments were held in SAIF and the PAC with-profits fund and relate
to convertible debt and other investments which are not covered by ratings
analysts nor have an internal rating attributed to them.

(ii) US insurance operations
                                                                                                                  GBPm
S&P - AAA                                                                                                        3,896
S&P - AA+ to AA-                                                                                                 1,187
S&P - A+ to A-                                                                                                   3,657
S&P - BBB+ to BBB-                                                                                               5,415
S&P - Other                                                                                                      1,113
                                                                                                                15,268
Moody's - Aaa                                                                                                      549
Moody's - Aa1 to Aa3                                                                                               118
Moody's - A1 to A3                                                                                                  47
Moody's - Baa1 to Baa3                                                                                              79
Moody's - Other                                                                                                     78
                                                                                                                   871
Fitch                                                                                                              380
Other*                                                                                                           2,483
Total debt securities                                                                                           19,002


* The amounts within Other which are not rated by S&P, Moody or Fitch have the
following National Association of Insurance Commissioners (NAIC)
classifications:
                                                                                                                    2007
                                                                                                                    GBPm
       NAIC 1                                                                                                      1,079
       NAIC 2                                                                                                      1,311
       NAIC 3-6                                                                                                       93
                                                                                                                   2,483

(iii) Asian insurance operations
                                                              With-profits        Unit-linked  Other business     Total
                                                                  business           business
                                                                      GBPm               GBPm            GBPm      GBPm
S&P - AAA                                                            1,367                660             257     2,284
S&P - AA+ to AA-                                                       242                153           1,599     1,994
S&P - A+ to A-                                                         299                271             105       675
S&P - BBB+ to BBB-                                                     142                 34              17       193
S&P - Other                                                              8                 47              94       149
                                                                     2,058              1,165           2,072     5,295
Moody's - Aaa                                                           16                185               -       201
Moody's - Aa1 to Aa3                                                     7                 19              19        45
Moody's - A1 to A3                                                      11                 16               1        28
Moody's - Baa1 to Baa3                                                  12                  7               -        19
Moody's - Other                                                         58                  -               -        58
                                                                       104                227              20       351
Other                                                                  167                509             598     1,274
Total debt securities                                                2,329              1,901           2,690     6,920


(iv) Asset management operations

The total for asset management operations was GBP882m, of which GBP841m related to M
&G's Prudential Capital operations and which was all AAA to A- where S&P rated
or Aaa by Moody's.

(v) Group exposure to holdings in sub-prime and Alt-A assets, monoline insurers
and CDO funds

Included in the amounts shown above for debt securities are the following
holdings with S&P ratings.

(a)      Sub-prime and Alt-A securities

Shareholder-backed business
                                                                                                                   GBPm
US insurance operations - Sub-prime (AAA)                                                                           237
                        - Alt-A (77% AAA, 17% AA)                                                                   660
Asian insurance operations                                                                                           15
                                                                                                                    912


With-profits operations

                                                                                                                   GBPm
UK insurance operations - Sub-prime (AAA)                                                                           129
                        - Alt-A (96% AAA)                                                                           100
Asian insurance operations                                                                                            7
                                                                                                                    236
Total                                                                                                             1,148

Further details on the US insurance operations' sub-prime and Alt-A securities
are given in note N.

(b)      Monoline insurers

The Group held direct holdings in monoline insurers with a value at 31 December
2007 of GBP33m (shareholder-backed operations GBP27m, with-profits operations GBP6m).
The Group also held debt securities with a value of GBP1,754m (shareholder-backed
operations GBP577m, with-profits operations GBP1,177m) which had a monoline wrap
guarantee.

(c)      CDO funds (all without sub-prime exposure)

Shareholder-backed business                                                                                        GBPm
US insurance operations (65% AAA, 8% AA) *                                                                          260
Asian insurance operations (72% AAA, 28% AA-)                                                                        62
UK insurance operations - PRIL (AAA)                                                                                 36
Other operations (AAA)                                                                                               19
                                                                                                                    377
* including Group's economic interest in Piedmont and other consolidated CDO
funds.

With-profits operations                                                                                            GBPm
UK insurance operations (79% AAA, 8% AA)                                                                            240
Asian insurance operations  (AAA)                                                                                    59
                                                                                                                    299

Total                                                                                                               676



N         Debt securities of US insurance operations: Accounting presentation of
movements in unrealised gains and losses and securities in an unrealised loss
position

(i)       Accounting presentation of unrealised value movements

With the exception of debt securities of US insurance operations classified as '
available-for-sale' under IAS 39, unrealised value movements on the Group's
investments are booked within the income statement. For with-profits operations,
such value movements are reflected in changes to asset share liabilities to
policyholders or the liability for unallocated surplus. For shareholder-backed
operations, the unrealised value movements form part of the total return for the
year booked in the profit before tax attributable to shareholders. Separately,
as noted elsewhere and in note C in this announcement, and as applied
previously, the Group provides a supplementary analysis of this profit
distinguishing operating profit based on longer-term investment return and
short-term fluctuations in investment returns.

However, for debt securities classified as 'available-for-sale', unless
impaired, fair value movements are recorded as a movement in shareholder
reserves direct to equity. Impairments are recorded in the income statement as
shown in note E of this announcement. This classification is applied for most of
the debt securities of the Group's US insurance operations.

(ii)     2007 movements in unrealised gains and losses

In general,  the debt  securities  of the Group's US  insurance  operations  are
purchased  with the intention and the ability to hold them for the  longer-term.
In 2007  there  was a  movement  in the  balance  sheet  value  for  these  debt
securities  classified  as  available-for-sale  from a net  unrealised  gain  of
GBP110m to a net unrealised loss of GBP136m. During 2007, US interest rates fell
and the yield curve steepened. Offsetting the positive effect on bond values for
these changes were adverse market price effects resulting from increasing credit
spreads and global  credit  concerns.  As a result of these  factors,  the gross
unrealised  gain in the balance sheet decreased from GBP366m at 31 December 2006
to GBP303m at 31 December 2007,  while the gross  unrealised loss increased from
GBP256m to GBP439m at 31 December 2007.

These features are included in the table shown below of the movements in the
values of available-for-sale securities.



                                                                           31 Dec 2007          Changes in 31 Dec 2006
                                                                                                unrealised
                                                                                              appreciation
                                                                                  GBPm                 GBPm        GBPm
                                                                                                           

Assets fair valued at below book value
Book value                                                                     10,730                          11,258
Unrealised loss                                                                  (439)               (183)       (256)
Fair value (as included in balance sheet)                                      10,291                          11,002

Assets fair valued at or above book value
Book value                                                                      8,041                            8,208
Unrealised gain                                                                   303                 (63)         366

Fair value (as included in balance sheet)                                       8,344                            8,574
Total
Book value                                                                     18,771                           19,466
Net unrealised (loss) gains                                                      (136)               (246)         110
Fair value (as included in balance sheet)*                                     18,635                           19,576
Reflected as part of movement in shareholders' equity
Movement in unrealised appreciation                                                                  (244)
Exchange movements                                                                                     (2)
                                                                                                     (246)


*Debt securities for US operations included in the balance sheet of GBP19,002m,
and as referred to in note M, comprise GBP18,635m for securities classified as
available-for-sale, as shown above, and GBP367m for securities of consolidated
investment funds classified as fair value through profit and loss.

Included within the unrealised valuation losses movement for the debt securities
of Jackson of  GBP244m,  as shown in the  consolidated  statement  of changes in
equity,  was an amount of GBP55m relating to the sub-prime and Alt-A  securities
for which the carrying values at 31 December 2007 are shown in note M.

(iii)    Securities in unrealised loss position

The following tables show some key attributes of those securities that are in an
unrealised loss position at 31 December 2007.

(a)     Fair value of securities as a percentage of book value



                                                                                         Fair value    Unrealised loss
                                                                                               GBPm               GBPm
                                                                                                             

Between 90% and 100%                                                                          9,370              (274)
Between 80% and 90%                                                                             784              (122)
Below 80%                                                                                       137               (43)
                                                                                             10,291              (439)

Included within the table above, showing the fair value of securities in an
unrealised loss position at 31 December 2007 as a percentage of book value, are
amounts relating to sub-prime and Alt-A securities of:
Fair value of securities as a percentage of book value                                                 Unrealised loss
                                                                                           Fair value             GBPm
                                                                                                GBPm
Between 90% and 100%                                                                              572             (24)
Between 80% and 90%                                                                               132             (22)
Below 80%                                                                                          28             (10)
                                                                                                  732             (56)


(b)     Aged analysis of unrealised losses for the time periods indicated



                                                                     Not rated  Non investment     Investment     Total
                                                                                         grade          grade
                                                                          GBPm            GBPm           GBPm       GBPm
                                                                                                        

Less than 6 months                                                         (7)             (8)           (52)      (67)
6 months to 1 year                                                        (10)            (21)          (105)     (136)
1 year to 2 years                                                          (5)             (2)           (16)      (23)
2 years to 3 years                                                        (24)            (10)          (140)     (174)
More than 3 years                                                          (7)             (3)           (29)      (39)
                                                                          (53)            (44)          (342)     (439)

At 31 December 2007, the gross unrealised losses in the balance sheet for the
sub-prime and Alt-A securities in an unrealised loss position were GBP56m, as
shown above in note (a). GBP37m of these losses relate to securities that have
been in an unrealised loss position for less than one year and GBP19m to
securities that have been in an unrealised loss position for more than one year.

(c)     By maturity of security
                                                                                                                   GBPm
Less than 1 year                                                                                                    (1)
1 year to 5 years                                                                                                  (54)
5 years to 10 years                                                                                               (164)
More than 10 years                                                                                                 (60)
Mortgage-backed and other debt securities                                                                         (160)
Total                                                                                                             (439)


O        Shareholders' equity

                                                                                                        2007      2006
                                                                                                        GBPm      GBPm
Share capital                                                                                            123       122
Share premium                                                                                          1,828     1,822
Reserves                                                                                               4,250     3,544
Total                                                                                                  6,201     5,488


P         Net core structural borrowings of shareholder-financed operations
                                                                                                        2007     2006*
                                                                                                        GBPm      GBPm
Core structural borrowings of shareholder-financed operations:
    Central funds                                                                                      2,367     2,485
    Jackson                                                                                              125       127
Total (per consolidated balance sheet)                                                                 2,492     2,612
Less: Holding company** cash and short-term investments (recorded within the consolidated            (1,456)   (1,119)
    balance sheet)
Net core structural borrowings of shareholders-financed operations                                    1,036     1,493

*Excluding borrowings of discontinued banking operations

**Including central finance subsidiaries

Q       Other borrowings
                                                                                                        2007      2006
                                                                                                        GBPm      GBPm
Operational borrowings attributable to shareholder-financed operations
Borrowings in respect of short-term fixed income securities programmes                                 2,477     2,032
Non-recourse borrowings of US operations                                                                 591       743
Other borrowings                                                                                          13        15
Total continuing operations                                                                            3,081     2,790
Discontinued banking operations (note H)                                                                   -     2,819

Total                                                                                                  3,081     5,609
Borrowings attributable to with-profits funds
Non-recourse borrowings of venture fund investment subsidiaries (note K)                                   -       926
Non-recourse borrowings of consolidated investment funds                                                 789       681
Subordinated debt of the Scottish Amicable Insurance Fund                                                100       100
Other borrowings (predominantly obligations under finance leases)                                         98        69
Total                                                                                                    987     1,776




R       Inherited estate of the PAC long-term fund

The assets of the main with-profits fund within the long-term fund of PAC
comprise the amounts that it expects to pay out to meet its obligations to
existing policyholders and an additional amount used as working capital. The
amount payable over time to policyholders from the with-profits fund is equal to
the policyholders' accumulated asset shares plus any additional payments that
may be required by way of smoothing or to meet guarantees. The balance of the
assets of the with-profits fund is called the 'inherited estate' and has
accumulated over many years from various sources.

The inherited estate represents the major part of the working capital of PAC's
long-term insurance fund. This enables the Company to support with-profits
business by providing the benefits associated with smoothing and guarantees, by
providing investment flexibility for the fund's assets, by meeting the
regulatory capital requirements that demonstrate solvency and by absorbing the
costs of significant events or fundamental changes in its long-term business
without affecting the bonus and investment policies. The size of the inherited
estate fluctuates from year to year depending on the investment return and the
extent to which it has been required to meet smoothing costs, guarantees and
other events.

PAC believes that it would be beneficial if there were greater clarity as to the
status of the inherited estate. As a result, it has announced that it has begun
a process to determine whether it can achieve that clarity through a
reattribution of the inherited estate. As part of this process a Policyholder
Advocate has been nominated to represent policyholders' interests. This
nomination does not mean that a reattribution will occur.

Given the size of the PAC's with-profits business, any proposal is likely to be
time consuming and complex to implement and is likely to involve a payment to
policyholders from shareholders' funds. If a reattribution is completed, the
inherited estate will continue to provide working capital for the long-term
insurance fund.

S       Group Investments - IFRS disclosures from the 2007 Annual Report

The Company has published a document alongside the Company's preliminary
announcement for the year ended 31 December 2007, entitled 'Group Investments -
IFRS disclosures from the 2007 Annual Report'. This document includes detailed
analysis and explanation of the information contained in the Group's financial
statements for the year ended 31 December 2007 on the Group's investments. The
document has been posted to the Company's website address at
www.prudential.co.uk



--------------------------


1. Over three years


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date 14 March, 2008

                                      PRUDENTIAL PUBLIC LIMITED COMPANY

                                        By: /s/  JON BUNN

                                                   Jon Bunn
                                                   Director of Public Relations