As filed with the Securities and Exchange Commission on May 18, 2004

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-FAnnual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal

year ended December 31, 2003

Commission File Number: 1-15040

PRUDENTIAL PUBLIC LIMITED COMPANY(Exact Name of Registrant as Specified in its Charter)

England and Wales(Jurisdiction of Incorporation)

Laurence Pountney Hill,London EC4R 0HH, England

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered

American Depositary Shares, each New York Stock Exchangerepresenting 2 Ordinary Shares, 5 pencepar value each

Ordinary Shares, 5 pence par value each New York Stock Exchange*

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

The number of outstanding shares of each of the issuer’s classes of capital or common stock as ofDecember 31, 2003 was:

2,009,176,830 Ordinary Shares, 5 pence par value each

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports) and (2) has been subject tosuch filing requirements for the past 90 days.

Yes X No

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 Item 18 X

* Not for trading, but only in connection with the registration of American Depositary Shares.

TABLE OF CONTENTS

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Item 1. Not ApplicableItem 2. Not ApplicableItem 3. Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Selected Historical Financial Information of Prudential . . . . . . . . . . . . . . . . . 1Dividend Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Exchange Rate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Item 4. Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Business of Prudential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Significant Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16UK and Europe Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17US Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Asian Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Supervision and Regulation of Prudential . . . . . . . . . . . . . . . . . . . . . . . . . 72UK Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72US Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Asian Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Item 5. Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . 95Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Factors Affecting Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 96Overview of Consolidated Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Analysis by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Geographic Analysis by Nature of Income and Expense . . . . . . . . . . . . . . . . 119US GAAP Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143Introduction of the Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

Item 6. Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . 155Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Item 7. Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . 175Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

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TABLE OF CONTENTS (Continued)

Page

Item 8. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177Item 9. The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

Comparative Market Price Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178Market Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

Item 10. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179Memorandum and Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . 179Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185Documents on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

Item 11. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 189Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189Major Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190Asset/Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192Use of Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193World-Wide Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193Currency of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194Currency of Core Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Item 12. Not ApplicableItem 13. Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . 202Item 14. Material Modifications to the Rights of Security Holders . . . . . . . . . . . . . . . . . 203Item 15. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204Item 16A. Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204Item 16B. Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204Item 16C. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204Item 17. Not ApplicableItem 18. Financial Statements

Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1Condensed Financial Information of Registrant . . . . . . . . . . . . . . . . . . . . . . S-1

Item 19. Exhibits

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Item 3. Key Information

SELECTED HISTORICAL FINANCIAL INFORMATION OF PRUDENTIAL

The following table sets forth Prudential’s selected consolidated financial data for the periodsindicated. Certain data is derived from Prudential’s audited consolidated financial statements prepared inaccordance with UK GAAP under which insurance business is accounted for on the modified statutorybasis (‘‘MSB’’). These accounting principles differ in certain significant respects from US GAAP. Note 36of the notes to the Prudential audited consolidated financial statements included elsewhere in thisdocument includes a description of the differences between UK GAAP and US GAAP that are significantto the financial statements and provides a reconciliation from UK GAAP consolidated profit and loss andconsolidated shareholders’ funds to US GAAP consolidated net income (loss) and consolidatedshareholders’ equity, respectively. Item 5, ‘‘Operating and Financial Review and Prospects—US GAAPAnalysis’’ provides a discussion of the significant differences between UK GAAP and US GAAP. Thistable is only a summary and should be read in conjunction with Prudential’s consolidated financialstatements and the related notes included elsewhere in this document, together with Item 5, ‘‘Operatingand Financial Review and Prospects’’.

The following table presents the profit and loss account and balance sheet data for and as at theyears ended December 31, 1999 to 2003 and has been derived from Prudential’s audited consolidatedfinancial statements audited by KPMG Audit Plc:

Year Ended December 31,

2003(1) 2003 2002 2001 2000 1999

(In $ Millions) (In £ Millions)Profit and loss account data—UK GAAP basisGross premiums from continuing operations including acquisitions:

—Long-term business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,739 13,781 16,669 15,196 14,173 14,826Gross premiums from discontinued general business operations(2): . . . . . — — 329 390 333 318Reinsurance and change in unearned premiums . . . . . . . . . . . . . . . (479) (290) (545) (380) (130) (91)

Total earned premiums, net of reinsurance . . . . . . . . . . . . . . . . . . 22,260 13,491 16,453 15,206 14,376 15,053

Investment returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,826 15,652 (3,636) (1,210) 5,046 17,232

Operating profit before amortization of goodwill, exceptional items andtax(3)*Continuing operations:

UK and Europe operations* . . . . . . . . . . . . . . . . . . . . . . . . 503 305 423 361 360 339US operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267 162 153 298 466 451Asian operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 71 62 25 36 27Group activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (298) (181) (189) (130) (123) (90)

Total continuing operations* . . . . . . . . . . . . . . . . . . . . . . . . . 589 357 449 554 739 727Discontinued operations(2) . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 72 33 49

Operating profit before amortization of goodwill, exceptional items andtax(4)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 357 449 626 772 776

Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (98) (98) (95) (84) (54)Short-term fluctuations in investment returns(5) . . . . . . . . . . . . . . . . 150 91 (205) (480) (48) 28Profit on business disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 355 — 120 —Merger break fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 338 — —Profit on Egg flotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 119 —

Total profit on ordinary activities before tax* . . . . . . . . . . . . . . . . . 577 350 501 389 879 750

Profit after tax and minority interests:Operating profit (including post-tax long term investment returns)* . . 424 257 333 466 511 507

Profit for the period (including post-tax actual investment returns)* . . . . 343 208 468 395 577 472

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Year Ended December 31,

2003(1) 2003 2002 2001 2000 1999

(In $ Millions) (In £ Millions)Statement of income and comprehensive income data—US GAAP

basisInsurance policy revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,470 4,527 5,201 3,954 3,614 4,597Investment results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,374 11,742 (1,764) 252 4,669 12,793Non-operating income

Merger break fee, net of related expenses . . . . . . . . . . . . . . . . . — — — 338 — —Profit on Egg flotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 119 —

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,124 681 693 619 620 600

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,968 16,950 4,130 5,163 9,022 17,990

Net income (loss) from continuing operations (after minority interests) . . 1,020 618 (675) (300) 498 869Income from discontinued operations including profit on disposals (net of

applicable tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 47 318 31 4 19Cumulative effect of changes in accounting principles . . . . . . . . . . . . — — — (139) — —

Total net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,097 665 (357) (408) 502 888

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . 1,081 655 (627) (68) 673 431

As of and for the year ended December 31,

2003(1) 2003 2002 2001 2000 1999

(In $ Millions, (In £ Millions, Except Share Information)ExceptShare

Information)Balance sheet data—UK GAAP basisTotal assets* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266,848 161,726 151,991 156,540 154,703 150,643Long-term business provision* . . . . . . . . . . . . . . . . . . . . 165,474 100,287 99,048 98,422 90,910 84,430Technical provision for linked liabilities . . . . . . . . . . . . . . . . 33,322 20,195 16,007 17,783 18,719 19,043Subordinated liabilities and debenture loans . . . . . . . . . . . . . 5,120 3,103 2,310 2,244 1,585 1,546Total shareholders’ funds* . . . . . . . . . . . . . . . . . . . . . . . 5,409 3,278 3,613 3,876 3,891 3,404Balance sheet data—US GAAP basisTotal assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,064 160,645 150,379 155,668 153,024 148,922Policyholder benefit liabilities . . . . . . . . . . . . . . . . . . . . . 149,007 90,307 89,304 84,190 76,711 71,179Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . 50,304 30,487 25,793 29,729 32,337 33,477Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . 8,461 5,128 4,878 5,964 6,455 6,046Other dataLong-term businessNew business from continuing operations:

Single premium sales(8) . . . . . . . . . . . . . . . . . . . . . . . 14,508 8,793 11,802 10,610 9,788 10,609New regular premium sales(6)(8) . . . . . . . . . . . . . . . . . . . 1,172 710 707 693 538 489

Gross investment product contributions(7)(8) . . . . . . . . . . . . . 36,224 21,954 17,392 11,303 6,852 2,286Funds under management . . . . . . . . . . . . . . . . . . . . . . . 227,200 168,000 155,000 163,000 165,000 170,000Basic earnings per share:

Based on operating profit from continuing operations beforeamortization of goodwill, exceptional items and before tax ona UK GAAP basis* . . . . . . . . . . . . . . . . . . . . . . . . 29.5¢ 17.9p 22.6p 28.0p 37.7p 37.3p

Based on operating profit before amortization of goodwill andafter tax and related minority interests on a UK GAAP basis* 21.2¢ 12.9p 16.7p 23.6p 26.1p 26.0p

Based on total profit for the financial year after tax on a UKGAAP basis* . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2¢ 10.4p 23.5p 20.0p 29.4p 24.2p

Net income (loss) per share on a US GAAP basis . . . . . . . . . 54.9¢ 33.3p (18.0)p (20.6)p 25.6p 45.6pDiluted earnings per share—UK GAAP* . . . . . . . . . . . . . . 17.2¢ 10.4p 23.5p 19.9p 29.3p 24.1pDiluted earnings (loss) per share—US GAAP . . . . . . . . . . . 54.9¢ 33.3p (17.9)p (20.6)p 25.5p 45.3p

Dividend per share(9) . . . . . . . . . . . . . . . . . . . . . . . . . . 26.4¢ 16.0p 26.0p 25.4p 24.5p 23.0pEquivalent cents per share(10) . . . . . . . . . . . . . . . . . . . . . 27.8¢ 41.8¢ 36.6¢ 34.8¢ 36.9¢Market price at end of period . . . . . . . . . . . . . . . . . . . . . $ 7.79 472p 439p 796p 1,077p 1,220pAverage number of shares (in millions) . . . . . . . . . . . . . . . . 1,996 1,988 1,978 1,959 1,947

* Figures have been restated where relevant for the adoption of the revised Statement of Recommended Practice on accounting forinsurance business issued by the Association of British Insurers in November 2003. See Note 4 of the notes to Prudential’sconsolidated financial statements. Certain other minor reclassifications and presentational changes have been made to the amountspresented for prior periods to conform these periods to the current presentation. Such reclassifications and presentational changes hadno overall effect on the shareholders’ funds, profits or cashflows.

(1) Amounts stated in US dollars have been translated from pounds sterling at the rate of $1.65 per £1.00 (the average of the noonbuying rates on the last business day each month for 2003).

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(2) Discontinued operations relate to the UK personal lines property and casualty insurance business. The sale was completed onJanuary 4, 2002. See Note 7 of the notes to Prudential’s consolidated financial statements.

(3) Investment returns credited to operating profits for investments attributable to shareholders are determined using the long-term rate ofreturn. For the purposes of determining long-term investment returns, Jackson National Life averages realized investment gains andlosses arising on debt securities over five years. For equity related investments Jackson National Life has assumed a long-term rate ofreturn of 7.75%.

(4) Due to the long-term nature of Prudential’s business, the basis of presentation of operating profit may not be comparable with otherUK companies. See Note 5 of the notes to Prudential’s consolidated financial statements for a description of the basis.

(5) Short-term fluctuations in investment returns represent the difference between the long-term return credited to operating profit andthe actual investment returns achieved for the year.

(6) New regular premium sales are reported on an annualized basis, which represents a full year of installments in respect of regularpremiums irrespective of the actual payments made during the year.

(7) Gross investment product contributions now include inflows relating to M&G’s external institutional fund business that were previouslyexcluded from this table. Comparative figures have been restated.

(8) New business premiums reflect the amount of business we generated during each period shown and do not include renewal premiumson policies written during prior periods. Prudential considers new business premiums to be a measure of its operating performancebecause they represent new sales of insurance policies during a specified period, rather than its revenues or profitability during thatperiod. This operating measure enables us to compare its operating performance across periods without regard to revenues orprofitability related to policies sold in prior periods. Gross investment product contributions reflect the amount invested by Institutionaland Retail customers in the period. We consider these to be a measure of its operating performance because it measures the flow ofmonies into the funds managed by the Group. This operating measure enables us to measure its operating performance across periods.

(9) The final dividend with respect to any year is paid in the following year. Final dividends are included in the year to which they relaterather than in the year paid. Annual dividends comprise both interim and final dividend payments.

(10) Translated into US dollars at the noon buying rate on the date each payment was made, apart from the 2003 final dividend due to bepaid on May 26, 2004 which has been translated at the rate on May 14, 2004.

Dividend Data

Under UK company law, Prudential may pay dividends only if ‘‘distributable profits’’ are available forthat purpose. ‘‘Distributable profits’’ are accumulated, realized profits not previously distributed orcapitalized less accumulated, realized losses not previously written off. Even if distributable profits areavailable, under UK law Prudential may pay dividends only if the amount of its net assets is not less thanthe aggregate of its called-up share capital and undistributable reserves (such as, for example, the sharepremium account) and the payment of the dividend does not reduce the amount of its net assets to lessthan that aggregate.

As a holding company, Prudential is dependent upon dividends and interest from its subsidiaries topay cash dividends. Many of its insurance subsidiaries are subject to regulations that restrict the amountof dividends that they can pay to Prudential. These restrictions are discussed in more detail in Item 4,‘‘Information on the Company—Supervision and Regulation of Prudential—UK Supervision andRegulation—Regulation of Insurance Business—Distribution of Profits and With-profits Business’’ andItem 4, ‘‘—Information on the Company—Supervision and Regulation of Prudential—US Supervision andRegulation—General’’.

Historically, Prudential has declared an interim and a final dividend for each year (with the finaldividend being paid in the year following the year to which it relates, after approval of the accounts atPrudential’s annual general meeting). Subject to the restrictions set out above, Prudential’s directorshave the discretion to determine whether to pay a dividend and the amount of any such dividend butmust take into account the company’s financial position.

The following table shows certain information regarding the dividends that Prudential paid for theperiods indicated in pence sterling and converted into US dollars at the noon buying rate in effect oneach payment date. Interim dividends for a specific year have generally had a record date in September

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and a payment date in November of that year, and final dividends have generally had a record date inthe following March and a payment date in the following May.

Final Dividend Final DividendYear Interim Dividend Interim Dividend per Share per Share

(pence) (US Dollars) (pence) (US Dollars)

1999 . . . . . . . . . . . . . . . . . . 7.7 0.12292 15.3 0.246202000 . . . . . . . . . . . . . . . . . . 8.2 0.11652 16.3 0.231052001 . . . . . . . . . . . . . . . . . . 8.7 0.12528 16.7 0.240482002 . . . . . . . . . . . . . . . . . . 8.9 0.13821 17.1 0.279592003 . . . . . . . . . . . . . . . . . . 5.3 0.08987 10.7 0.18832

In February 2003, the Prudential’s Board of Directors (the ‘‘Board’’) announced that it would reviewPrudential’s dividend policy. Since then the Board has determined a dividend policy which reflectsoperating cashflows, and the strategy to invest in the business for long-term growth. The Board believesthat a dividend of 16 pence for the 2003 full year reflects an appropriate balance between the cashgenerated by the Group, the ability to finance growth, maintain financial flexibility and the developmentof modified statutory basis profits over the medium to long-term. The Board believes that this level ofdividend is one that it will be possible to grow the dividend from.

Exchange Rate Information

Prudential publishes its consolidated financial statements in pounds sterling. References in thisdocument to ‘‘US dollars’’, ‘‘US$’’, ‘‘$’’ or ‘‘¢’’ are to US currency, references to ‘‘pounds sterling’’, ‘‘£’’,‘‘pounds’’, ‘‘pence’’ or ‘‘p’’ are to UK currency (there are 100 pence to each pound) and references to‘‘euro’’ or ‘‘e’’ are to the European single currency. The following table sets forth for each year theaverage of the noon buying rates on the last business day of each month of that year, as certified forcustoms purposes by the Federal Reserve Bank of New York, for pounds sterling expressed in US dollarsper pound sterling for each of the five most recent fiscal years. Prudential has not used these rates toprepare its consolidated financial statements.

Year ended December 31, Average rate

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.612000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.512001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.442002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.512003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.65

The following table sets forth the high and low noon buying rates for pounds sterling expressed inUS dollars per pound sterling for each of the previous six months:

High Low

November 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.72 1.67December 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.78 1.72January 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.85 1.79February 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90 1.82March 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.87 1.79April 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.86 1.77

On May 14, 2004, the noon buying rate was £1.00 = $1.76

4

RISK FACTORS

Prudential’s operating results, financial condition and trading price are affected by a number offactors including economic and market conditions, foreign currency exchange rate fluctuations,regulation, government policy and legislation, competition, credit ratings, and operational systems andprocesses.

Prudential’s businesses are inherently subject to market fluctuations and general economicconditions.

Prudential’s businesses are inherently subject to market fluctuations and general economicconditions. In the UK, this is largely because Prudential’s shareholders’ profit is related to bonuses forpolicyholders declared on its with-profits products, which are broadly based on historic and current ratesof return on equity, real estate and fixed income securities, as well as Prudential’s expectations of futureinvestment returns.

In the US, fluctuations in prevailing interest rates can affect results from Jackson National Life whichis predominantly a spread-based business with the majority of its assets invested in fixed incomesecurities. In particular, fixed annuities and stable value products in Jackson National Life expose theGroup to the risk that changes in interest rates which are not fully reflected in the interest rates creditedto customers will reduce spread. The spread is the difference between the amounts that JacksonNational Life is required to pay under the contracts, and the rate of return it is able to earn on itsgeneral account investments to support the obligations under the contract. Declines in spread fromthese products or other spread businesses that Jackson National Life conducts could have a materialimpact on its businesses or results of operations.

Similar factors can also impact on Prudential’s operations in Asia.

In all markets in which Prudential operates, its businesses are susceptible to general economicconditions, which can change the level of demand for Prudential’s products. Past uncertain trends ininternational economic and investment climates which have adversely affected Prudential’s business andprofitability could be repeated. This adverse effect would be felt principally through reduced investmentreturns and credit defaults in fixed interest corporate bonds, and may continue to affect the businessunless conditions improve. In addition, falling investment returns could impair Prudential’s operationalcapability, including its ability to write significant volumes of new business.

See Item 4, ‘‘Information on the Company—Business of Prudential—Investments’’ for a descriptionof Prudential’s invested assets, investment strategies and investment yields. See also Item 5, ‘‘Operatingand Financial Review and Prospects—Factors Affecting Results of Operations—General Economic andMarket Conditions’’.

Prudential is subject to the risk of exchange rate fluctuations owing to the geographicaldiversity of its business.

Due to the geographical diversity of Prudential’s businesses, it is subject to the risk of exchangerate fluctuations. Prudential’s international operations in the US, Asia and Europe, which represent asignificant proportion of operating profit and shareholders’ funds, generally write policies and invest inassets denominated in local currency. Although this practice limits the effect of exchange ratefluctuations on local operating results, it can lead to significant fluctuations in Prudential’s consolidatedfinancial statements upon translation of results into pounds sterling. The currency exposure relating tothe translation of reported earnings is not separately managed. Consequently, this could impact on theGroup’s gearing ratios (defined as debt over debt plus shareholders’ funds). The impact of gains orlosses on currency translations is recorded as a component of shareholders’ funds within theconsolidated statement of total recognized gains and losses.

5

Of core structural borrowings at December 31, 2003 of £2,567 million, £827 million wasdenominated in US dollars, partially to hedge the currency exposure arising from Prudential’s investmentin its US operations. Consequently this could impact on the Group’s gearing ratios. In 2003, a loss of£253 million net of related tax was recorded in the consolidated statement of total recognized gains andlosses. This loss primarily arises upon translation into pounds sterling of the investments in Prudential’sUS and Asian operations, but is after offset of exchange gains of £87 million on the carrying value ofthe US dollar denominated borrowings, reflecting movements in the US dollar to pounds sterlingexchange rate during 2003. See Item 11, ‘‘Quantitative and Qualitative Disclosures about Market Risk’’.

Prudential conducts its businesses subject to regulation and associated regulatory risks,including the effects of changes in the laws, regulations, policies and interpretations in themarkets in which it operates.

Changes in government policy, legislation or regulatory interpretation applying to companies in thefinancial services and insurance industries in any of the markets in which Prudential operates mayadversely affect Prudential’s product range, distribution channels, capital requirements and,consequently, reported results and financing requirements. These changes include possible changes ingovernment pension arrangements and policies, the regulation of selling practices and solvencyrequirements. For instance, in the UK the Financial Services Authority’s (FSA) proposals on reformingthe UK polarization regime and consultation paper on treating with-profits policyholders fairly and theHM Treasury report on medium and long-term retail savings could have a significant effect on types ofproducts sold by Prudential, how its products are priced, distributed and sold and on shareholders’return on with-profits business.

Similar changes in regulation in other jurisdictions could also have an impact elsewhere in theGroup.

The EU Insurance Groups Directive, which was implemented in the UK in 2001, together with theFinancial Conglomerates Directive, which will be implemented by 2005, will require European financialservices groups to demonstrate net aggregate surplus capital in excess of solvency requirements at theGroup level in respect of shareholder-owned entities. The EU is also currently reviewing future solvencyrequirements (the Solvency II review). The manner of the implementation of these directives is likely tolead to Prudential being required to maintain a somewhat higher level of capital at the Group level thancurrently necessary in respect of its businesses, or alternatively, to constrain the growth of thosebusinesses, or to take other appropriate action. In addition, an inconsistent application of thesedirectives by regulators in different EU member states may place Prudential at a competitivedisadvantage to other European financial services groups.

Various jurisdictions in which Prudential operates have created investor compensation schemes thatrequire mandatory contributions from market participants in some instances in the event of a failure of amarket participant. As a major participant in the majority of its chosen markets, circumstances couldarise where Prudential, along with other companies, may be required to make such contributions.

See Item 5, ‘‘Operating and Financial Review and Prospects—Factors Affecting Results ofOperations—Government Policy and Legislation’’ and Item 4, ‘‘Information on the Company—Supervisionand Regulation of Prudential’’.

6

The resolution of several issues affecting the financial services industry, including in the UKthe requirement to provide redress to certain past purchasers of pension and mortgageendowment policies and regulatory reviews on products sold and industry practices, couldhave a negative impact on Prudential’s reported results or on its relations with current andpotential customers.

Prudential is, and in the future may be, subject to legal and regulatory actions in the ordinarycourse of its business, both in the UK and internationally. This could be a review of business sold in thepast under previously acceptable market practices at the time. Pending legal and regulatory actionsinclude proceedings relating to aspects of Prudential’s business and operations and which are typical ofthe business it operates, including in the latter case businesses it has closed. Although Prudentialbelieves it has adequately reserved in all material aspects for the costs of litigation and regulatorymatters, no assurance can be provided that such reserves are sufficient. It is possible that Prudential’sfuture performance could be affected by an unfavorable outcome in these matters.

Prudential’s businesses are conducted in highly competitive environments and Prudential’scontinued profitability depends on its management’s ability to respond to these pressures.

The markets for UK, US and Asian financial services are highly competitive, with several factorsaffecting Prudential’s ability to sell its products, including price and yields offered, financial strength andratings, range of product lines and product quality, brand strength and name recognition, investmentmanagement performance and historical bonus levels. In some of its markets Prudential facescompetitors who are larger, have greater financial resources or a greater market share, offer a broaderrange of products or have higher bonus rates or claims-paying ratios.

Within the UK, Prudential’s principal competitors in the life market include many of the major stockand mutual retail financial services companies including, in particular, Aviva, Legal and General, ScottishWidows and Standard Life. In 2003 Prudential had a 48% market share of group additional voluntarycontributions, 23% of the individual annuity market and in the fourth quarter had a 51% share of thewith-profits bond market sold through IFAs.

Jackson National Life’s competitors in the US include major stock and mutual insurance companies,mutual fund organizations, banks and other financial services companies. Jackson National Life’s principallife insurance company competitors in the US include AXA Financial, Inc., Lincoln National Corporation,Transamerica Corporation, Nationwide Financial Services, Inc., SunAmerica, Inc. and Hartford Life, Inc.At December 31, 2003 in the United States Jackson National Life was the twelfth-largest life insurancecompany in terms of General Account assets, the fifth-largest provider of individual fixed annuities interms of sales and the fifteenth largest provider of variable annuities in terms of sales.

Within Asia, Prudential’s main regional competitors are international financial companies, includingAIG, Allianz, ING and Manulife. At December 31, 2003 by new business premiums Prudential had topfive new business market positions in eight life markets (Singapore, Malaysia, Hong Kong, India,Vietnam, the Philippines, Guangzhou (China) and Indonesia), two mutual fund markets (Taiwan andIndia) and Hong Kong’s Mandatory Provident Fund market.

Prudential believes competition will intensify across all regions in response to consumer demand,technological advances, the impact of consolidation, regulatory actions and other factors. Prudential’sability to generate an appropriate return depends significantly upon its capacity to anticipate andrespond appropriately to these competitive pressures. See Item 4, ‘‘Information on the Company—Business of Prudential—Competition’’.

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Downgrades in Prudential’s financial strength and credit ratings could significantly impact itscompetitive position and hurt its relationships with creditors or trading counterparties.

Prudential’s financial strength and credit ratings, which are intended to measure its ability to meetpolicyholder obligations, are an important factor affecting public confidence in most of Prudential’sproducts, and as a result its competitiveness. Downgrades in Prudential’s ratings could have an adverseeffect on its ability to market products and retain current policyholders. In addition, the interest ratesPrudential pays on its borrowings are affected by its debt credit ratings, which are in place to measurePrudential’s ability to pay its contractual obligations. On December 20, 2002, Moody’s downgraded thefinancial strength rating of Prudential Assurance’s long-term fund from Aaa (on review for possibledowngrade) to Aa1 (stable outlook). On January 29, 2003, Standard & Poor’s downgraded the financialstrength rating of Prudential Assurance’s long-term fund from AAA (negative outlook) to AA+ (stableoutlook). AM Best Co rates the strength of Prudential Assurance’s long term fund as A++. Prudentialbelieves the downgrades that it, and the rest of the UK insurance industry, experienced have not to datehad a discernible impact on its performance. The ratings from Standard & Poor’s and Moody’s forPrudential Assurance’s long-term fund represent the second highest ratings in their respective ratingcategories, and the rating from AM Best Co represents the third highest rating in their rating category.

Prudential’s long-term senior debt is rated as A2 (stable outlook) by Moody’s, AA- (negativeoutlook) by Standard & Poor’s and aa- by AM Best Co. The rating from Moody’s represents their thirdhighest category out of 9, the rating from Standard & Poor’s represents the second highest category outof 10 and the rating from AM Best Co represents the second highest category out of 10. Prudential’sshort-term debt is rated as P-1 by Moody’s and A1+ by Standard & Poor’s. These ratings represent thehighest rating category out of 4 and out of 6 categories for each rating agency, respectively.

Adverse experience in the operational risks inherent in Prudential’s business could have anegative impact on its results of operations.

Operational risks are present in all of Prudential’s businesses, including the risk of direct or indirectloss resulting from inadequate or failed internal and external processes, systems and human error orfrom external events. Prudential’s business is dependent on processing a large number of complextransactions across numerous and diverse products, and is subject to a number of different legal andregulatory regimes. In addition, Prudential manages several outsourced operations which include certainUK processing and information technology functions. In turn, Prudential is reliant upon the operationalprocessing performance of its outsourcing partners.

Further, because of the long-term nature of much of Prudential’s business, accurate records have tobe maintained for significant periods. Prudential’s systems and processes are designed to ensure that theoperational risks associated with its activities are appropriately controlled, but any weakness in thesystems could have a negative impact on its results of operations during the effective period. Prudentialhas not experienced or identified any operational risks in its systems or processes during the financialperiods covered by this annual report or subsequently which have caused, or are expected to cause, asignificant negative impact on its results of operations. See Item 11, ‘‘Quantitative and QualitativeDisclosures about Market Risk—Risk Management of Prudential—Operational, Compliance and FiscalRisk’’ and Item 4, ‘‘Business of Prudential—UK and Europe Business—Compliance’’.

Changes in mortality experienced by Prudential’s UK pension annuity policyholders couldsignificantly affect Prudential’s results of operations.

Prudential is a major participant in the UK pensions annuity market. In exchange for a premiumequal to the capital value of their accumulated pension fund, each pension annuity policyholder receivesa guaranteed payment, usually monthly, for as long as they are alive. For a smaller monthly payment,certain annuity contracts extend the right to the payment to surviving spouses. As part of its pension

8

annuity pricing and reserving policy Prudential assumes that current rates of mortality continuouslyimprove over time. Annuity mortality assumptions have been revised in 2003 to assume futureimprovements in mortality for males and females at levels projected on the Continuous MortalityInvestigations medium cohort table as published by the Institute and Faculty of Actuaries. Thiscorresponds to annual improvement rates at the current time of 2.6% and 3.5% respectively for 65 and70 year olds and 2.4% and 1.9% for the same ages in 5 years time. In addition and for the purposes ofprudent statutory reserves these improvement rates were for male lives subject to a minimum of 2% ayear. If mortality improvement rates significantly exceed the improvement assumed, Prudential’s resultsof operations could be adversely affected.

As a Holding Company, Prudential is dependent upon its subsidiaries to cover operatingexpenses and dividend payments.

Prudential’s insurance and investment management operations are generally conducted throughdirect and indirect subsidiaries. As a holding company, Prudential’s principal sources of funds aredividends from subsidiaries, shareholder backed funds, the shareholder transfer from Prudential’slong-term funds and any amounts that may be raised through the issuance of debt and commercialpaper.

Certain of the subsidiaries have regulatory restrictions that can limit the payment of dividends,which can limit the Group’s ability to pay dividends to shareholders.

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FORWARD-LOOKING STATEMENTS

This annual report may contain certain ‘‘forward-looking statements’’ with respect to certain ofPrudential’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. Bytheir nature, all forward-looking statements involve risk and uncertainty because they relate to futureevents and circumstances which are beyond Prudential’s control including among other things, UKdomestic and global economic and business conditions, market related risks such as fluctuations ininterest rates and exchange rates, and the performance of financial markets generally; the policies andactions of regulatory authorities, the impact of competition, inflation, and deflation; experience inparticular 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 theimpact of changes in capital, solvency or accounting standards, and tax and other legislation andregulations in the jurisdictions in which Prudential and its affiliates operate. This may for example resultin changes to assumptions used for determining results of operations or re-estimations of reserves forfuture policy benefits, together with other factors discussed in ‘‘—Risk Factors’’. As a result, Prudential’sactual future financial condition, performance and results may differ materially from the plans, goals andexpectations set forth in Prudential’s forward-looking statements contained in this document or any otherforward-looking statement it may make.

In particular, the following are forward-looking in nature:

• certain statements in Item 4, ‘‘Information on the Company’’ with regard to strategy andmanagement objectives, trends in market shares, prices, market standing and product volumesand the effects of changes or prospective changes in regulation, and

• certain statements in Item 5, ‘‘Operating and Financial Review and Prospects’’ with regard totrends in results, prices, volumes, operations, margins, overall market trends, risk managementand exchange rates and with regard to the effects of changes or prospective changes inregulation.

Prudential may also make or disclose written and/or oral forward-looking statements in reports filedor furnished to the US Securities and Exchange Commission, Prudential’s annual report and accounts toshareholders, proxy statements, offering circulars, registration statements and prospectuses, pressreleases and other written materials and in oral statements made by directors, officers or employees ofPrudential to third parties, including financial analysts. Prudential undertakes no obligation to update anyof the forward-looking statements contained in this annual report or any other forward-lookingstatements it may make.

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Item 4. Information on the Company

BUSINESS OF PRUDENTIAL

Overview

Prudential is a leading international financial services group, providing retail financial services andfund management in its chosen markets: the United Kingdom, the United States, Asia and continentalEurope. At December 31, 2003, Prudential was one of the 30 largest public companies in the UnitedKingdom in terms of market capitalization on the London Stock Exchange. Prudential is not affiliatedwith Prudential Financial, Inc. or its subsidiary, The Prudential Insurance Company of America.

Prudential has been writing life insurance in the United Kingdom for over 150 years and has hadthe largest long-term fund in the United Kingdom for over a century. Prudential began writing propertyand casualty insurance in 1915, and expanded its business into British Commonwealth countries,including Singapore and Malaysia, in the 1920s and 1930s. In 1986, Prudential acquired JacksonNational Life Insurance Company, a US insurance company writing life and fixed annuity business. Agroup strategy review in the early 1990s identified significant opportunities for Prudential in the Asianlife sector and Prudential Corporation Asia (referred to as PCA) was established in 1994 to develop amaterial and profitable Asian business. In 1998, Prudential launched Egg, now a leading e-commerceretail financial services provider, and in 1999, Prudential acquired M&G, a leading UK fund manager. InJune 2000, Prudential completed its listing on the New York Stock Exchange and completed an initialpublic offering of Egg plc on the London Stock Exchange. In January 2002, Prudential completed thetransfer of its personal lines property and casualty insurance business to Winterthur Insurance and theChurchill Group, its UK subsidiary, for consideration of £353 million.

In the United Kingdom, Prudential offers a range of retail financial products and services, includinglong-term insurance and asset accumulation products (life insurance, pensions and pension annuities),retail investment and unit trust products, fund management services and banking products. Prudentialprimarily distributes these products through independent financial advisers, referred to as IFAs, bankbranches, and direct marketing, by telephone, mail and the internet.

At December 31, 2003, in the United Kingdom, Prudential was:

• the second-largest life insurance group in terms of market capitalization,

• the proprietor of the largest long-term fund of investment assets supporting long-term insuranceproducts,

• the third largest retail fund manager in terms of funds under management,

• through Egg, the world’s largest pure on-line bank, and

• rated as Aa1 (stable outlook) by Moody’s, AA+ (stable outlook) by Standard and Poor’s and A++by AM Best Co for the long-term fund of Prudential Assurance Company Limited (‘‘PrudentialAssurance’’ or ‘‘PAC’’). The ratings from Standard & Poor’s and Moody’s for PrudentialAssurance’s long-term fund represent the second highest ratings out of 8 and out of 9 in theirrespective rating categories, and the rating from AM Best Co represents the highest rating out oftheir 16 rating categories.

In the United States, Prudential offers a range of products through Jackson National Life InsuranceCompany, including fixed, equity-indexed and variable annuities, life insurance, guaranteed investmentcontracts and funding agreements. Prudential distributes these products through independent insuranceagents, securities broker-dealers and banks, credit unions and other financial institutions. AtDecember 31, 2003, in the United States, Jackson National Life was:

• the twelfth largest life insurance company in terms of General Account assets,

11

• the fifth-largest provider of individual fixed annuities in terms of sales,

• the fifteenth largest provider of variable annuities in terms of sales, and

• rated AA (negative outlook) by Standard & Poor’s, AA (stable outlook) by Fitch Ratings, A+(stable outlook) by AM Best Co and A1 (stable outlook) by Moody’s in terms of financial strengthrating. The ratings from Standard & Poor’s represents the third highest category, second highestfrom Fitch, third highest from AM Best Co and the fifth highest from Moody’s.

PCA is the leading European-based life insurer in Asia, with 23 operations in 12 Asian countries.PCA offers life insurance with accident and health options, selected personal lines property and casualtyinsurance and mutual funds with the product range tailored to suit the individual country markets. Itsinsurance products are distributed mainly through an agency sales-force and complementarybancassurance agreements while the majority of mutual funds are sold through banks and brokers. Itslife operations in China and India are through joint ventures in which it holds 50% and 26% respectively.

At December 31, 2003 PCA had:

• top five new business market positions in eight life markets (Singapore, Malaysia, Hong Kong,India, Vietnam, the Philippines, Guangzhou (China) and Indonesia), two mutual fund markets(Taiwan and India) and Hong Kong’s Mandatory Provident Fund market,

• life insurance licenses in 2 cities, Beijing and Guangzhou, in China.

• 112,000 agents and 28 bank distribution agreements covering eleven countries, and

• over five million policies.

Prudential’s operating profit under UK GAAP on the modified statutory basis before amortization ofgoodwill and tax for the periods indicated is set forth in the table below.

Year EndedDecember 31,

2003 2002 2001

(In £ Millions)

UK and Europe Insurance Operations* . . . . . . . . . . . . . . . . . . . . . . . 256 372 374M&G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 71 75Egg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (20) (88)

Total UK and Europe operations* . . . . . . . . . . . . . . . . . . . . . . . . . 305 423 361US operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 153 298Asian operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 62 25Group activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (181) (189) (130)

Total continuing operations* . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 449 554Discontinued operations: UK personal lines property and casualty

insurance operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 72

Total operating profit before amortization of goodwill and tax*(1) . . . . . . 357 449 626

* Figures have been restated where relevant for the adoption of the revised Statement of Recommended Practice on accountingfor insurance business issued by the Association of British Insurers in November 2003. See Note 4 of the notes to Prudential’sconsolidated financial statements.

(1) For purposes of this annual report, operating profit is determined on a long-term investment basis before amortization ofgoodwill and tax.

(2) In determining operating profit, the Group has used the expected long-term investment return and excluded amortization ofgoodwill and exceptional items. The directors believe that such presentation better reflects the Group’s underlyingperformance on a statutory basis of measurement.

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Strategy

Shareholder Focus

Prudential’s strong mix of business around the world positions it well to benefit from the growth incustomer demand for asset accumulation and income in retirement. Prudential believes that itsinternational reach and diversity of earnings will continue to give it a significant advantage.

Prudential’s commitment to its shareholders is to maximize the value over the time of theirinvestment. Prudential does this by investing for the long-term to develop and bring out the best in itspeople, and its business to produce superior products and services, and hence superior financial returns.Prudential’s aim is to deliver top quartile performance among its international peer group in terms oftotal shareholder returns.

Prudential’s aim is to develop lasting relationships with its customers and policyholders, throughproducts and services that offer value for money and security. Prudential seeks to continually enhance itsreputation, built over 150 years, for integrity and for acting responsibly within society.

Building the Platform

In recent years, the global retail financial services industry has undergone significant change.Changes in underlying demographics, government attitudes, regulatory requirements, technology andcustomer demands are all driving fundamental change in the industry. Prudential is committed todelivering superior returns to its shareholders and has therefore reconfigured its business to competemore effectively in this changing environment.

Over the past six years, Prudential has transformed itself from a business with a narrow productrange and limited distribution channels focus into a multi-channel, multi-brand business with a broadproduct range and a clear retail financial services focus. At the same time, Prudential has withdrawnfrom those operations or markets that did not meet its target returns or that did not offer theopportunities to achieve critical mass in the desired timeframe.

Prudential has significantly restructured its operations in both the United Kingdom and the UnitedStates to improve its customer focus and management accountability, and to broaden its product rangeand distribution reach.

In the United Kingdom, Prudential has restructured its long-term savings business into a singleintegrated business combining Prudential’s UK businesses with that of Scottish Amicable, which wasacquired in 1997, to form Prudential UK Insurance Operations. The new simplified organizationalstructure was effective from January 1, 2002. This has resulted in improved operational effectivenessthrough removal of duplication, greater customer focus and reduced operating costs. Meanwhile, Eggadded banking products to Prudential’s product range and has a market leading on-line position inproviding banking and insurance products. Meanwhile the acquisition of M&G in 1999 has enhancedPrudential’s retail, institutional and internal fund management capability.

In the United States, Prudential has significantly diversified its product range and distributionstrategy. Prudential has launched and developed its own equity-based, index-linked and stable valueproduct ranges complementing its fixed annuity products, successfully entered the broker-dealer marketand significantly grown its presence in the bank channel.

In Asia, building on a solid base of established operations in Singapore, Hong Kong and Malaysia,Prudential has followed since 1994 a clear, value creating strategy of entering new markets, building anddiversifying distribution and launching innovative products through targeting profitable market segments.

The cost of development initiatives has adversely impacted, and will continue to adversely impact,short-term earnings, but Prudential believes these investments are building long-term shareholder value.

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This value is clearly demonstrated by the scale and mix of Prudential’s new business sales. In 2003,new business inflows exceeded £31 billion with over half coming from mutual fund sales, and 74%coming from outside the United Kingdom.

This transformation has created a strong platform to pursue strategic initiatives for future growthand shareholder value creation.

Growing the Business

Prudential is conscious that the retail financial services industry continues to evolve, and it expectsto continue to adapt its business to maintain a strong advantage over its competitors while deliveringreturns to shareholders. Prudential’s goal is to pursue its key strategic themes of maintaining focus on itscustomers, investing in technology to improve further customer access and service, driving down costsand driving growth in new and expanding markets. In furtherance of these themes, Prudential hasalready restructured and broadened its UK distribution channels to become more customer focused, andin Asia entered new life insurance markets in Japan and South Korea and new selective mutual fundmarkets in Asia.

Driving Growth in New and Expanding Markets

Within its existing major markets of the United Kingdom, the United States and Asia, Prudentialbelieves fundamental shifts in demographics and in the manner of pension provision will createsignificant opportunities for future profitable growth. At the same time as pursuing growth in its existingmarkets, Prudential continues to seek new markets in which it believes it can create value for itsshareholders.

In February 2002, M&G announced the launch of M&G International, focused initially on thedistribution of M&G branded mutual funds to retail investors in Germany, Austria, Luxembourg and Italythrough large IFAs and other institutions. At the end of 2003 M&G international had £69 million ofassets under management.

In early 2002, Prudential reviewed the strategy for its Prudential and Scottish Amicable brandedlong-term business within continental Europe. The review concluded that an organic growth strategybased on investment in the German and French markets would be too slow and expensive to createvalue in these markets and would require significant acquisitions to create scale. Further, the analysisindicated that the returns achievable from any available acquisition would be too low to justify theinvestment of capital. As a consequence, in November 2002, Prudential agreed to sell its Germanlong-term business to Canada Life for £82 million. This sale was completed in January 2003. InNovember 2003, Prudential agreed the sale of Prudential Europe Management Services Limited, itsEuropean administration company to Capita Life and Pensions Services Ireland Limited for £16 million.As part of this transaction a ten year third-party administration contract was put in place between thecompany and Capita Life and Pensions Ireland Limited to ensure continuity of administration services tothe company.

Prudential believes that Asia offers significant long-term growth opportunities and its strategy isdesigned to create material and sustainable value in Asia by focusing on three dimensions: enteringcountries with opportunities to leverage its strengths, building and diversifying distribution and providinginnovative customer-focused products. At present Prudential is not looking to expand the number ofcountries in Asia in which it operates. Prudential will however continue to diversify both channels andproducts within existing territories and increase its coverage within countries where it is alreadyoperating.

In March 2003, Prudential and its Chinese joint venture partner CITIC were granted a life insurancelicense for Beijing in addition to the existing life insurance license for Guangzhou where operations

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commenced in the last quarter of 2000. In February 2004, Prudential announced a distributionpartnership with E Sun Financial Holding Company in Taiwan. The 2.7 million E Sun customers will haveaccess to Prudential Taiwan’s range of life insurance and savings products. In March 2004, Prudentialand its joint venture partner CITIC were granted a third life insurance licence for Suzhou. CITICPrudential’s Suzhou branch is expected to open for business in the third quarter of 2004.

In January 2002, Egg announced its acquisition of 100% of Zebank, a French direct financial servicescompany, and in October 2002 launched a credit card, ‘‘la Carte Egg’’, its first retail financial servicesproduct in France. As at the end of 2003 Egg France had 130,000 customers, 66,000 credit cards inissue and an unsecured lending balance of £120 million.

In October 2003, Egg announced that the execution of its French business plan would take longerand require a greater level of investment than Egg was prepared to undertake on a standalone basis. Atthat time, Egg considered forming an alliance with a strategic partner, and to that end entered intonegotiations that might have led to a joint venture. These conversations led to other options beingpresented by various parties and as a result Prudential announced on January 14, 2004 that it was inpreliminary discussions regarding a possible transaction with respect to its 79% shareholding in Egg. OnJanuary 26, 2004 Prudential announced that while these discussions were continuing, it had receivedunsolicited indications of interest from a number of parties. These discussions continue and may or maynot lead to a transaction.

In April 2004, Prudential was appointed to continue work with Sesame on the detailed design anddelivery of its multi-tie proposition and has secured a place on its multi-tie panel. Prudential is the firstappointed provider and subsequent appointments will be announced later in the year as a consequenceof the work being undertaken with Sesame. Sesame has over 6,500 independent financial advisors(‘‘IFAs’’) representing approximately 25 per cent of the UK IFA marketplace. As a result of itsappointment, Prudential is very well positioned to increase its market share.

In April 2004, Prudential announced that it is jointly setting up a new private healthcare insurancecompany in the UK with Discovery, a South African company. Operating as Prudential Health it willcombine Prudential’s strength of brand and distribution with Discovery’s product underwriting andhealth insurance expertise.

Prudential continues to consider opportunities to acquire businesses to further the strategy ofgrowing its business, particularly in new and expanding markets. Prudential may finance theseacquisitions with bank borrowings, debt or equity issuances or a combination of such financings.

Focusing on Customers

Prudential’s goal is to deliver products that its customers want to buy, through the distributionchannels they wish to use. Prudential is continually exploring opportunities to expand its distributionreach and broaden its product offering.

In the United Kingdom, Prudential has complementary businesses and market-leading positions inkey product areas, enabling it to deliver sustained growth in the low margin environment in which itnow operates. The businesses comprising Prudential’s UK Insurance Operations have undergoneenormous strategic transformations in recent years, bringing together several operating units under thepowerful Prudential brand and improving service to over seven million customers. In 2002, Prudential’sUK Insurance Operations announced the development of an outsourced customer service operation inMumbai, India. In May 2003 the customer service center opened and at the end of the year employedover 800 people and has handled over 1.1 million calls since launch.

M&G’s market position, investment capabilities and brand strength make it one of the leading fundmanagers in the United Kingdom. At December 31, 2003 M&G had over £111 billion of funds undermanagement and is one of the largest fund managers in the United Kingdom.

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During 2003, Egg acquired 635,000 net new customers, giving it a total of almost 3.2 millioncustomers by the end of the year. Of the 3.2 million customers, 2.6 million relate to its ‘‘Egg Card’’credit card business.

In the United States, Prudential, through Jackson National Life, is one of the few providers to havea significant market position across the range of fixed, variable and equity-indexed annuity products. Italso offers life and institutional products. Jackson National Life has expanded its distribution channels toinclude independent agents, broker-dealers, banks, registered investment advisors and other financialinstitutions. Prudential will continue to seek opportunities to expand its product range and distributioncapability in the United States.

In Asia, Prudential has a reputation for developing customer-focused and innovative savings andinsurance products. It leverages UK and US product expertise and works with Asian regulators to bringnew products to market, achieving particular success with unit-linked products. While Prudentialbelieves it can best manage customer service quality in Asia through ownership of distribution channels,it also gives customers the choice to access its products through complementary bancassurancearrangements.

Summary

Prudential’s strategic initiatives over the past few years have significantly changed the shape andfocus of the group and have built a platform for further growth and value generation. Prudential believesthat by continuing to implement its strategy of product innovation for the benefit of its customers,improve efficiency and develop new distribution channels, it will maximize value for its shareholdersover the long term.

Significant Subsidiaries

The table below sets forth Prudential’s significant subsidiaries.

Percentage Country ofName of Company Owned(1) Incorporation

The Prudential Assurance Company Limited . . 100% England and WalesPrudential Annuities Limited(2) . . . . . . . . . . . 100% England and WalesPrudential Retirement Income Limited(2) . . . . . 100% ScotlandM&G Investment Management Limited(2) . . . . 100% England and WalesEgg Banking plc(2)(3) . . . . . . . . . . . . . . . . . . 79% England and WalesJackson National Life Insurance Company(2) . . 100% United StatesPrudential Assurance Company Singapore

(Pte) Limited(2) . . . . . . . . . . . . . . . . . . . 100% Singapore

(1) Percentage of equity owned by Prudential directly or indirectly. The percentage of voting power held is the same as thepercentage owned. Each subsidiary has one class of ordinary shares and operates mainly in its country of incorporation,except for Prudential Retirement Income Limited which operates mainly in England and Wales.

(2) Owned by a subsidiary of Prudential.

(3) Egg Banking plc is a subsidiary of Egg plc, a listed subsidiary of Prudential. The ordinary shares of Egg plc, of which there isonly one class, are 79% owned by Prudential and 21% owned by shareholders external to the Prudential group.

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UK and Europe Business

Introduction

Prudential’s UK business is structured into business units, each focusing on its respective targetcustomer markets. Prudential’s UK business units are UK and Europe Insurance Operations, M&G andEgg.

The following discussion describes:

• the UK retail financial services market,

• Prudential’s UK business units and products,

• Prudential’s reinsurance arrangements and reserving practices,

• shareholders’ participation in Prudential’s long-term insurance business, and

• compliance matters, including pension mis-selling.

In 2003, Prudential’s UK business generated operating profit from continuing operations beforeamortization of goodwill and tax of £305 million and total UK and Europe new business insurancepremiums of £4,448 million and investment flows of £3,797 million. As of December 31, 2003, M&Ghad over £111 billion funds under management and Egg had customer deposits of £6,452 million and acredit card book of £3,131 million

UK Retail Financial Services Market Overview

The United Kingdom is one of the world’s largest life insurance markets in terms of premiums andis one of the largest retail banking markets. In recent years, the UK insurance and banking markets havechanged significantly and are continuing to evolve as a result of changes in regulation and governmentpolicy, demographics, technological development and consumer awareness and attitudes. Retail financialservices providers are adapting to these changes to meet consumer needs by broadening the range ofproducts that they offer and the means by which those products are distributed to and accessed bycustomers.

The historical divisions between insurance, banking and other financial products are being eroded.It is increasingly common for providers to offer a range of pension products, life products and services,property and casualty insurance, banking products and retail investment products and services.Consumers are increasingly being offered access to these products through direct marketing and overthe internet, as well as through the traditional company salesforce, IFAs, and bank branch distributionchannels. However, for more complicated products, detailed ‘‘fact finds’’ are often required andconsequently face-to-face advice is still preferred.

Competition among retail financial service companies is focused on product range, distributionreach, brand, investment performance and the specific benefits offered by products, charges andfinancial strength.

UK Products and Profitability

In common with other UK long-term insurance companies, Prudential’s products are structured aseither with-profits (participating) or non-participating, including unit-linked. Depending on the structure,the level of shareholders’ interest in the value of policies, and the related profit or loss, varies.

With-profits policies are supported by a with-profits fund and can be single premium (for example,the Prudence Bond) or regular premium (for example, certain corporate pension products). Prudential’sprimary with-profits fund is part of Prudential Assurance Company’s long-term fund. The return toshareholders on with-profits products is in the form of a statutory transfer from the Prudential Assurance

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long-term with-profits fund to Prudential Assurance shareholders’ funds (analogous to a dividend) whichis dependent upon the bonuses credited or declared on policies in that year. Prudential’s with-profitspolicyholders currently receive 90% of that distribution as bonus additions to their policies whileshareholders receive 10% as a statutory transfer.

In 2003, profits distributed from Prudential’s primary with-profits fund amounted to £2,093 million,of which £1,884 million (90%) was added to policies as bonuses, and £209 million (10%) was availablefor distribution to shareholders.

The majority of Prudential branded non-participating business is written in Prudential Assurance’slong-term fund or by subsidiaries owned by the fund. Prudential’s principal non-participating business isPrudential Annuities Limited, which is wholly owned by Prudential Assurance’s long-term fund. Theprofits from this business accrue to the long-term with-profits fund. In 2001, Prudential started to writecertain annuity business through Prudential Retirement Income Limited (‘‘PRIL’’), the profits of whichaccrue solely to shareholders. The proportion of annuity business written in PRIL constituted 39% oftotal annuity business written in 2003.

Products

The traditional life insurance product offered by UK life insurance companies was a long-termsavings product with a life insurance component. The life insurance element conferred tax advantagesthat distinguished the traditional life insurance products offered in the United Kingdom from the savingsproducts offered by banks, building societies and unit trust companies. The gradual reduction of thesetax advantages and increasing sales of single premium life products have resulted in the distinctionbetween life insurance and other long-term savings products becoming less important. Pension productsremain tax-advantaged within certain limits.

Demand for private personal pension and savings products has increased during recent years, inpart reflecting a change in the UK government’s approach to social security that has encouragedlong-term savings through tax advantages, but also in reaction to the growing realization that state-provided pensions are unlikely to provide sufficient retirement income. An ageing population is focusingon asset-accumulation and other retirement products to supplement their state benefits, while youngergenerations are focusing on pension and long-term savings products as well as health and incomeprotection cover.

During the late 1980s, the UK government began encouraging individuals to invest in equities, withparticular emphasis on UK equities. The UK government’s privatization program and the introduction in1988 of tax-advantaged Personal Equity Plans, referred to as PEPs, considerably widened the UK equityinvestor base. The current UK government replaced PEPs in April 1999 with Individual SavingsAccounts, referred to as ISAs, a new tax-advantaged product that offers equity, insurance and depositinvestment options.

The UK government introduced ‘‘stakeholder pensions’’ in April 2001 with the intention of creatinga pension for individuals who were earning enough to be able to afford to make a contribution towardsa pension but were not currently doing so. This initiative built on previous changes, such as theintroduction of personal pensions in 1988.

Until the late 1990s, the UK’s regulation of savings has largely focused on the sales process, ratherthan on the product design. With the advent of ’stakeholder’ pensions, the government made a tentativestep into product regulation—a pension product can only use the name ‘Stakeholder’ if it meets certainconditions, concerning charges, access and terms. However, the sales regulation for these pensions wasjust as onerous as for non-stakeholder pensions, with all sales requiring a full fact find of the customerto check suitability.

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Following the Sandler Review of 2001, the HM Treasury has been developing regulatory constraintsfor a new set of ’Stakeholder’ products based on simplicity, charge caps, and safety (by controllinginvestment risk). These new stakeholder products will include a short-term cash deposit account, amedium-term savings vehicle, a pension (the existing stakeholder pension), and a Child Trust Fund (towhich the government will contribute for every new-born child in the UK). It is proposed that this suiteof products will operate within a lighter-touch regulatory regime, whilst minimizing potential customerdetriment. See ‘‘—Supervision and Regulation of Prudential—UK Supervision and Regulation—Application of 2000 Act Regulatory Regime to Prudential—Regulation of Insurance Business’’.

The product requirements, with the exception of the charge caps, have been determined. However,the lighter-touch sales approach is yet to be finalized. The HM Treasury is expected to issue aconsultation paper on this subject in May 2004 and following consultation will complete its review in thelast quarter of 2004. The extent of the industry’s participation in the new stakeholder regime is likely todepend very heavily on the balance of charges available and costs associated with the new salesapproach.

The majority of the life and pensions business traditionally written in the United Kingdom iswith-profits business. However, in response to regulatory scrutiny and subsequent changes in theregulatory environment and customer requirements, with-profits products are being increasinglysupplemented by simpler unit-linked products. For a detailed description of Prudential’s with-profitsproducts and policies, ‘‘—Shareholders’ Interests in Prudential’s Long-term Insurance Business—With-profits Products’’.

Distribution

Retail financial services and products are distributed face-to-face, through branches, tied agents,company salesforces and IFAs, or directly by mail, telephone and over the internet. Tied agents areexclusive agents who represent only one insurer and must offer customers the products most suitable totheir needs, but only from the range of products offered by that insurer. In recent years the high costsof company salesforces and tied agency networks, combined with customers perceiving a lack of choice,have meant that salesforces and tied agents have lost significant market share to IFAs, with the resultthat many insurers, including Prudential, have chosen to close these tied agents and direct salesforcenetworks.

Increasingly, consumers require wider access to financial products than agents can provide. IFAs,banks, direct marketing and, to a lesser extent, e-commerce distribution are gaining market share at theexpense of traditional company salesforces. Direct and e-commerce distribution methods are generallylower-cost than other methods but have not been conducive to providing financial advice to theconsumer to date. Accordingly, products distributed directly are generally more straightforward and havelower, often fee-based, charges.

IFAs are required by the UK polarization laws to provide the best advice to customers, consideringall of the products available in the market and the customer’s particular circumstances, and are legallyresponsible for their own advice. In contrast, company salesforces may only sell the products of thecompany of which they are employed, but must nevertheless provide the best advice in light of thecustomer’s particular circumstances. A company has legal responsibility for the advice its salesforceprovides and the conduct of its tied agents.

The FSA announced a relaxation of the polarization rules in March 2001 with respect to stakeholderpension schemes and direct offer financial promotions for packaged products (which include life policiesother than pure protection policies, pensions, regulated collective investment schemes and investmenttrust savings schemes). As a result of these changes, tied sales forces and appointed representatives ofproduct provider firms are now free to market stakeholder pensions manufactured by any othercompany.

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The FSA indicated in January 2003 (in Consultation Paper 166, ‘‘Reforming Polarization: Removingthe Barriers to Choice’’, in which the FSA makes a number of proposals for the reform of polarizationwhich, if adopted, would fundamentally alter the relationship between product manufacturers anddistributors) that further relaxation of the polarization restrictions will not be carried out until the FSAhas concluded a separate consultation on introducing more transparency for customers on the cost ofadvice. The closing date for that consultation is June 1, 2004. See ‘‘—Supervision and Regulation ofPrudential—UK Supervision and Regulation—Application of 2000 Act Regulatory Regime to Prudential—Regulation Application to Prudential’s Insurance, Investment and Banking Business—FSA Conduct ofBusiness Rules’’.

UK Business Units

UK and Europe Insurance Operations

In 2003, operating profit before taxation from Prudential’s long-term UK and Europe InsuranceOperations was £256 million. This represented 84% of the total £305 million operating profit beforeamortization of goodwill and taxation recorded by Prudential in the United Kingdom and Europe fromlong-term and other operations. See Item 5, ‘‘—Operating and Financial Review and Prospects—Overview of Consolidated Results—Analysis by Geographic Region—UK Operating Results’’. The UKinsurance operation’s profit accounts for over 99% of the combined UK and Europe InsuranceOperation’s profit. Therefore this section primarily focuses on the UK Insurance Operation.

UK Insurance Operations

Products

Prudential offers a wide range of products, which traditionally have been marketed under the‘‘Prudential’’ and ‘‘Scottish Amicable’’ brands. From January 2003, however, products have only beensold under the Prudential brand. See ‘‘—UK Restructurings’’. The products distributed include long-termproducts consisting of:

• life insurance savings-type products and pure protection products,

• individual and corporate pensions, and

• pension annuities.

Until December 2001, Prudential also offered personal lines property and casualty insurancethrough its UK Insurance Operations. However it transferred this business in January 2002 to WinterthurInsurance and the Churchill Group, Winterthur’s UK subsidiary. This business is still branded as‘‘Prudential’’. See ‘‘—Transfer of Business to Winterthur’’.

Long-term Products

Prudential’s long-term products in the United Kingdom consist of life insurance, pension productsand pensions annuities. The following table shows Prudential’s UK Insurance Operations new business

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insurance and investment premiums by product line for the periods indicated. New business premiumsinclude deposits for policies with limited or no life contingencies.

Year Ended December 31,

2003 2002 2001

(In £ Millions)

Life insuranceWith-profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 1,875 2,222Unit-linked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 396 339

Total life insurance . . . . . . . . . . . . . . . . . . . . . . . . . 1,149 2,271 2,561Pensions

With-profits individual . . . . . . . . . . . . . . . . . . . . . . . . 35 57 153Unit-linked individual . . . . . . . . . . . . . . . . . . . . . . . . 59 88 186Department of Work and Pensions rebates . . . . . . . . . . 383 305 249Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 555 588

Total pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,165 1,005 1,176Pension annuities and other retirement products

Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,855 2,055 1,265Retail Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 293 439With-profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 117 131

Total pension annuities . . . . . . . . . . . . . . . . . . . . . . 2,047 2,465 1,835

Total new business premiums . . . . . . . . . . . . . . . . . . . . . 4,361 5,741 5,572

New business premiums in 2003 were £4,361 million, down 24% and 22% respectively on 2002 and2001. This reduction principally reflects a 65% contraction in the with-profit bond market in 2003.

Life Insurance Products

Prudential’s UK life insurance products are predominantly medium to long-term savings productswith life cover attached, and also include pure protection (term) products. The main savings productsPrudential offers are investment bonds.

Savings Products—Investment Bonds

Prudential offers customers a choice through a range of investment funds to meet different risk andreward objectives. Prudential launched the Flexible Investment Plan (‘‘FIP’’) in November 2003. Throughthis plan, our customers have the option to invest in the Prudence Bond along with a range of unitlinked bonds. Advisers can build an individual portfolio and asset allocation model to accurately match aclient’s risk / reward profile. FIP also gives financial advisers the opportunity to choose from differentexternal fund management groups and the flexibility to make changes to portfolio and asset allocationover time.

The Prudence Bond, a single premium, unitized with-profits policy with no fixed term, is in terms ofmarket share one of the United Kingdom’s leading investment bond products. Prudential launched theProspect Bond, another single premium with-profits bond, in October 2003. The Prospect Bond givesinvestors the opportunity to move out of under-performing funds elsewhere in the market, and into thePrudential With-Profits Fund. In 2003, total new business premiums attributable to the Prudence Bond,Prospect Bond and the Prudential Investment Bond, were in excess of £511 million. Sales of Prudential’sinternational with-profits bond, the International Prudence Bond, were £199 million in 2003.

These with-profits products aim to provide capital growth over the medium to long-term, andaccess to a different range of investment sectors without the costs and risks associated with direct

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investment into these sectors. Capital growth for the policyholder on with-profits bonds is achieved bythe addition of reversionary or regular bonuses, which are credited to the bond on a daily basis frominvestment returns achieved within Prudential Assurance’s long-term with-profits fund, off-set by chargesand expenses incurred