Operational Cash Generation

Our mature in-force business is strongly cash generative and in 2008 our UK businesses released £654m of operational cash, with major contributions from:

• Our non profit risk and savings businesses – expected release of £453m
• With-profits – cash profit transfer of £77m
• Investment management – net [IFRS] earnings of £115m
• Income on other shareholder assets are cash profits from Legal & General Insurance and Legal & General Retail Investments, Suffolk Life and Nationwide Life, together with cash dividends and coupons earned on Group capital and financing; all net of interest expense and unallocated corporate expenses of £9m.

Sources of Cashflow

The cashflow from our non profit and With-profits, Risk and Savings businesses is underpinned by the value of business in-force which was £4.6bn before allowing for cost of capital at 31 December 2008; 60% of this is expected to monetise over the next five years.

These operational cash resources are available each year to meet a number of requirements. Of the £654m of operational cash generated in 2008, £334m was invested in new business. Net operational cash resources were £320m in 2008. In any particular year, this balance is available either to pay a dividend or to replenish the Group’s capital resources. In considering the final dividend for 2008, the Board has considered not only the cashflows of the Group, but also its capital position.