2000 Bonus Declaration

Prudential PLC
22 February 2001



Embargo: 07.00 Hrs GMT Thursday 22 February 2001

PRUDENTIAL 2000 BONUS DECLARATION

  * Total bonuses of £2.8 billion added to with-profits policies
  * Annual bonus rates of 4.5 per cent for Prudence Bond and 5 per cent for
    personal pensions
  * Prudential supports calls for greater transparency in the operation of
    with-profits
  * Annual return of 10.1 per cent on a typical ten-year Prudence Bond
    maturing in 2001*

Prudential announced today that bonuses of £2.8 billion will be added to
policies in its main UK with-profits fund, providing returns on policies
maturing in 2001 that are significantly ahead of both inflation and
deposit-based returns.

Annual bonus rates of 4.5 per cent for Prudence Bond and 5 per cent for
personal pensions are 0.25 per cent lower than prior year to reflect the lower
long-term investment returns that can be expected in future in an environment
of low inflation and low interest rates. Including final bonuses, the returns
on typical ten-year policies maturing in 2001 are 10.1 per cent per annum for
a £10,000 single premium Prudence Bond* and 9.4 per cent per annum for a £200
per month regular premium personal pension.

The returns on a typical 25-year £50 per month regular premium savings plan
will be 12.3 per cent per annum compared with an average inflation rate of 4.8
per cent and net average returns from building societies of 5.5 per cent** per
annum over the same period.

Commenting on the bonus declaration, David Belsham, Prudential Assurance
Company's Appointed Actuary, said:

'Our policyholders continue to benefit from good real rates of return, and the
smoothing associated with Prudential's with-profits policies. The strength of
the company's with-profits fund has enabled Prudential to provide smooth
returns on with-profits policies in 2000 that are significantly ahead of both
the underlying investment return of 3 per cent earned on the with-profits fund
and the FTSE 100 index which fell by more than 10 per cent in the year.

'Prudential supports calls for greater transparency in the operation of
with-profits funds and is already actively engaged in initiatives that aim to
produce a benchmark for the insurance industry, such as the ABI's Raising
Standards initiative. '

**Building society returns are based on accounts available for a deposit of 
£2,500.

For further information please contact:

Stuart Blackmore     020 7548 3520

Steve Colton          020 7548 3721

Tina Christou          020 7548 3719

Notes to Editors:

Bonus Policy

Prudential's bonus policy is set out in detail in its With-Profits Guide
(available on request). The main aims of the company's bonus policy are:

  * To give each with-profits policyholder a return on the premiums which he
    or she has paid that reflects the earnings of the underlying investments,
    whilst smoothing out the peaks and the troughs of investment performance;
    and
  * To ensure that with-profits policyholders receive a fair share of the
    profits distributed from the with-profits fund by way of bonus additions
    to their policies.

Types of Bonus

There are two types of bonus:

Annual bonuses (or reversionary/regular bonuses) are added to policies each
year in order to gradually increase the guaranteed benefits under the policy.

Final bonuses (or terminal bonuses) are added when the benefits of a policy
are realised (i.e. on surrender, maturity or death). These bonuses are used to
make up the difference between the guaranteed benefits and the overall
smoothed claim value. Prudential uses these bonuses to return to each
policyholder a fair share of the assets of the with-profits fund, while
reducing the impact of market changes, especially around the date of maturity.

Determination of Bonus Rates

The balance between annual and final bonuses influences the investment
strategy that the fund can adopt. Annual bonuses increase the amounts
guaranteed to policyholders and so need to be backed by less risky (and so
normally less rewarding) investments. This, in turn, affects the overall level
of return achieved. Annual bonus rates are therefore targeted on a prudent
proportion of the investment return that we expect to earn in the future.
Annual bonus rates have been gradually reduced over the last ten years in line
with declining inflation and the associated reduction in expected future
investment returns.

Total claim values are set by reference to 'asset shares', which are
calculated for typical policies by accumulating the premiums paid, less
allowance for expenses and charges, at the actual rates of return earned on
the assets of the with-profits fund over the life times of those policies. The
asset shares also include allowance for distributions to shareholders and
profits from other sources arising in the with profits fund. These asset
shares provide a target level for claim values.

Smoothing

Smoothing is applied so that the claim values actually paid change only
gradually over time. In normal investment conditions, we aim to ensure that
total payouts on equivalent policies do not change by more than 10 per cent
from one year to the next.

Prudential's intention is that any smoothing of profits or losses should
balance out over time, so that in the long run with-profits policyholders
neither gain nor lose as a result of the smoothing policy.

Over the last five years, the aggregate claim values paid on maturing policies
have amounted to around 101 per cent of the corresponding asset shares.

Distribution of profits from the with-profits fund

Prudential's with-profits policyholders currently receive 90 per cent of the
profits distributed from the with-profits fund as bonus additions to their
policies and shareholders receive the remaining 10 per cent as dividend
payments. Since policyholders and shareholders share proportionately in these
profits, their interests are exactly aligned.

For the year 2000, profits distributed from Prudential's main with-profits
fund will amount to £3.1 billion, of which £2.8 billion (90 per cent) will be
added to policies as bonuses, and £307 million (10 per cent) will be
distributed to shareholders.

Investment Strategy

The company's investment strategy is to seek to secure on behalf of its
policyholders the highest combination of income and growth in capital value
while maintaining the security of the fund.

The table below shows the investment mix of Prudential's with-profits fund.

                                                    End 2000           End 1999

                                                           %                  %
Equity shares

                                                          47                 58
    - UK shares
                                                          14                 14
    - Non-UK shares
                                                           0                  0
    - Unlisted shares

Fixed interest                                            20                 13
Property                                                  14                 12
Other investments                                          5                  3
Total                                                    100                100

During 2000 a number of changes were made to the investment strategy of the
fund, including a gradual but significant shift away from UK equities, with
the proceeds being invested predominantly in UK and overseas corporate debt.
The reason for the shift is that equities have performed well in recent years,
and prospective equity returns are no longer viewed as being so attractive
relative to other asset classes. Market volatility also means that the risk of
holding equities has increased. Conversely, the UK and overseas corporate debt
markets are now considered attractive.

The asset mix will continue to be kept under review and should equities appear
more attractive, and the markets less volatile, our intention would be to
switch back into equities in future.

Investment Returns

The underlying investment return on the Prudential with-profits fund was 3 per
cent in 2000 compared with a decline of 10.2 per cent in the FTSE 100 index
and a decline of 8 per cent in the FTSE all share index. Returns on the
with-profits fund in recent years have been as follows:

Year                      1996   1997     1998        1999      2000
Gross Return %            12.6   19.8     12.6        19.3      3.0

Bonus Tables

Specimen claim values are shown below, with last year's figures in brackets.

Contract        Term Premium       Claim Value       Effective rate of return
                                                     p.a.
Savings*        10   £50 per month £9,058 (£9,973)   8.0% (9.2%)
                25   £50 per month £88,976 (£95,874) 12.3% (12.8%)
Personal        10   £200 per      £38,968 (£40,462) 9.4% (10.1%)
Pension              month
                20   £200 per      £190,941 (£       12.3% (12.8%)
                     month         203,930)

*Based on a policy taken out by a male aged twenty-nine

For the two specimen savings policies, the claim values represent increases of
7 per cent and 11 per cent respectively over the policy values a year earlier,
after allowing for the premiums paid during the year.

The effective rates of return on savings policies exclude the benefit of life
assurance premium tax relief which would have been available for the 25 year
policy. The rate of return on pensions policies ignores tax relief on premiums
and tax on benefit payments.

The total value of bonuses declared for 2000 is £2,796 million for the PAC
main fund and a further £641 million for the closed Scottish Amicable Fund.

The Prudence Bond return is based on 100.25% allocation, 5% bid /offer spread,
invested for ten years to 1 March 2001.

Reversionary bonus rates on unitised life business have been reduced from
4.75% to 4.50%, and on unitised personal pension business from 5.25% to 5.00%.

 Past performance is not necessarily a guide to the future and existing bonus
    rates cannot be guaranteed in the future. The return on surrender of a
   with-profits Prudence Bond can be reduced by the application of a market
    reduction. Terminal bonuses can be reduced or removed retrospectively.

Approved by The Prudential Assurance Company Limited, regulated in the conduct
         of investment business by the Personal Investment Authority.