The following significant events are reflected in the 2008 results:
Credit Default Reserving
We have increased our reserves for credit default in our non profit annuity portfolio, by £650m (before tax). This brings total credit default reserves to £1.2bn. This additional level of reserving is equivalent to 130 basis points of reserving for each of the next four years, followed by a return to a more normal 30 basis point default assumption.
(Download XLS:)  |
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Fig 1. Summary of Financial Impacts Arising from Credit Default Reserving | ||||
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As reported |
Credit default reserving impact | ||
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[IFRS] |
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Operating (loss) |
£(189)m |
£(650)m | ||
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(Loss) after tax |
£(1,130)m |
£(468)m | ||
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[EEV] |
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Operating (loss) |
£870m |
– | ||
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(Loss) after tax |
£(973)m |
£(232)m | ||
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Capital1 |
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[IGD] surplus capital |
£1.8bn |
£(0.5)bn | ||
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[Society] surplus capital |
£1.6bn |
£(0.5)bn | ||
Investment Variances
Investment variances in 2008 were £(1,239)m. During the year, as part of our ongoing de-risking of the balance sheet, we reduced shareholder exposure to UK equities and re-deployed funds largely in cash investments. Market movements across a range of asset classes, including equity, fixed income and property were very pronounced in 2008.There have been further sales of shareholder equities in early 2009 taking sales to over £1.1bn since the beginning of 2008.
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