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13 Group embedded value reconciliation.


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Covered business

 

 

For the year ended 31 December 2009

 

UK free surplus
£m

 

UK required capital
£m

 

UK value of in-force
£m

 

Total UK
£m

Inter- national
£m

Non-
covered
business
£m

    Total
£m

1.

The free surplus reduction of £189m to finance new business includes £27m [IFRS] new business strain and £155m additional required capital. Other items have a net negative impact of £7m.

2.

The increase in free surplus of £648m from the expected transfer from the in-force non profit business includes £496m of IFRS operational cash generation and a £147m reduction in required capital. Other items have a net positive impact of £5m.

3.

The transfer to non-covered business represents the IFRS profits arising in the period from the provision of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

At 1 January

 

 

 

 

 

 

 

 

 

 

 

Value of in-force business (VIF)

 

–

 

–

 

4,268

 

4,268

1,059

–

5,327

Shareholder net worth (SNW)

 

509

 

1,369

 

–

 

1,878

404

(1,088)

1,194

 

 

509

 

1,369

 

4,268

 

6,146

1,463

(1,088)

6,521

Exchange rate movements

 

–

 

–

 

–

 

–

(153)

65

(88)

 

 

509

 

1,369

 

4,268

 

6,146

1,310

(1,023)

6,433

Operating profit/(loss) for the year:

 

 

 

 

 

 

 

 

 

 

 

– New business contribution1

 

(189)

 

155

 

253

 

219

 

 

 

– Expected return on [VIF]

 

–

 

–

 

358

 

358

 

 

 

– Expected transfer from
Non profit VIF to [SNW]2

 

648

 

(147)

 

(501)

 

–

 

 

 

– With-profits transfer

 

46

 

–

 

(46)

 

–

 

 

 

– Experience variances

 

30

 

29

 

(31)

 

28

 

 

 

– Operating assumption changes

 

285

 

(23)

 

(152)

 

110

 

 

 

– Development costs

 

(21)

 

–

 

–

 

(21)

 

 

 

– Expected return on SNW

 

34

 

61

 

–

 

95

 

 

 

Operating profit/(loss)

 

833

 

75

 

(119)

 

789

117

42

948

Non-operating (loss)/profit for the year:

 

 

 

 

 

 

 

 

 

 

 

– Investment variances

 

(66)

 

2

 

(276)

 

(340)

 

 

 

– Economic assumption changes

 

(66)

 

75

 

(180)

 

(171)

 

 

 

– Tax impact of corporate restructure

 

59

 

–

 

–

 

59

 

 

 

Non-operating (loss)/profit

 

(73)

 

77

 

(456)

 

(452)

(21)

22

(451)

Profit/(loss) for the year

 

760

 

152

 

(575)

 

337

96

64

497

Capital movements

 

–

 

–

 

–

 

–

50

(50)

–

Intra-group distributions

 

(154)

 

–

 

–

 

(154)

(10)

164

–

Dividends to equity holders of the Company

 

–

 

–

 

–

 

–

–

(185)

(185)

Net movements in employee share schemes

 

–

 

–

 

–

 

–

–

19

19

Loss attributable to minority interests

 

–

 

–

 

–

 

–

–

19

19

Transfer to non-covered business3

 

(20)

 

–

 

–

 

(20)

–

20

–

Other reserve movements
including pension deficit

 

(28)

 

–

 

(14)

 

(42)

–

(46)

(88)

Embedded value

 

1,067

 

1,521

 

3,679

 

6,267

1,446

(1,018)

6,695

Represented by:

 

 

 

 

 

 

 

 

 

 

 

– Non profit

 

 

 

 

 

3,213

 

 

 

 

 

– With-profits

 

 

 

 

 

466

 

 

 

 

 

Value of in-force business

 

–

 

–

 

3,679

 

3,679

928

–

4,607

Shareholder net worth

 

1,067

 

1,521

 

–

 

2,588

518

(1,018)

2,088

(Download XLS:) Download Excel

 

Covered business

 

 

For the year ended 31 December 2008

 

UK free surplus
 
£m

 

UK required capital
 
£m

 

UK value of in-force
 
£m

 

Total UK
 
£m

Inter- national
 
£m

Non-
covered
business
Restated
£m

    Total
Restated
£m

1.

The free surplus reduction of £661m to finance new business includes £101m of the short term default allowance, as well as £334m [IFRS] new business strain and £232m additional required capital. Other items have a net positive impact of £6m.

2.

Included in the loss for the period is a non profit inter-fund transfer from free surplus to VIF of £710m.

3.

Capital movements within the UK comprise the £252m cost of acquiring Nationwide Life and £8m (€10m) of capital injected from Society into France. The acquisition of Suffolk Life (£63m) was funded from the non-covered business element of Group capital and financing. The International capital movements comprise £52m ($96m) of capital injected into the USA and the £8m (€10m) of capital injected into France.

4.

The transfer to non-covered business represents the IFRS profits arising in the period from the provision of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

At 1 January

 

 

 

 

 

 

 

 

 

 

 

Value of in-force business (VIF)

 

–

 

–

 

3,460

 

3,460

782

–

4,242

Shareholder net worth (SNW)

 

2,639

 

1,198

 

–

 

3,837

324

(275)

3,886

 

 

2,639

 

1,198

 

3,460

 

7,297

1,106

(275)

8,128

Exchange rate movements

 

–

 

–

 

–

 

–

386

(190)

196

Opening adjustment

 

27

 

–

 

(27)

 

–

–

–

–

 

 

2,666

 

1,198

 

3,433

 

7,297

1,492

(465)

8,324

Operating profit for the year:

 

 

 

 

 

 

 

 

 

 

 

– New business contribution1

 

(661)

 

232

 

620

 

191

 

 

 

– Expected return on [VIF]

 

–

 

–

 

267

 

267

 

 

 

– Expected transfer from
Non profit VIF to SNW

 

565

 

(115)

 

(450)

 

–

 

 

 

– With-profits transfer

 

77

 

–

 

(77)

 

–

 

 

 

– Experience variances

 

39

 

3

 

(38)

 

4

 

 

 

– Operating assumption changes

 

(31)

 

1

 

(38)

 

(68)

 

 

 

– Development costs

 

(37)

 

–

 

–

 

(37)

 

 

 

– Expected return on [SNW]

 

140

 

51

 

–

 

191

 

 

 

Operating profit/(loss)

 

92

 

172

 

284

 

548

65

27

640

Non-operating (loss)/profit for the year:

 

 

 

 

 

 

 

 

 

 

 

– Investment variances

 

(1,092)

 

(83)

 

189

 

(986)

 

 

 

– Economic assumption changes

 

(531)

 

(3)

 

175

 

(359)

 

 

 

– Tax impact of corporate restructure

 

28

 

–

 

53

 

81

 

 

 

Non-operating (loss)/profit

 

(1,595)

 

(86)

 

417

 

(1,264)

(148)

(201)

(1,613)

(Loss)/profit for the year2

 

(1,503)

 

86

 

701

 

(716)

(83)

(174)

(973)

Capital movements3

 

(260)

 

–

 

–

 

(260)

60

(115)

(315)

Embedded value of business acquired

 

71

 

85

 

143

 

299

–

–

299

Intra-group distributions

 

(405)

 

–

 

–

 

(405)

(6)

411

–

Dividends to equity holders of the Company

 

–

 

–

 

–

 

–

–

(367)

(367)

Issue of share capital

 

–

 

–

 

–

 

–

–

10

10

Share buyback

 

–

 

–

 

–

 

–

–

(523)

(523)

Net movements in employee share schemes

 

–

 

–

 

–

 

–

–

(4)

(4)

Loss attributable to minority interests

 

–

 

–

 

–

 

–

–

63

63

Transfer to non-covered business4

 

(25)

 

–

 

–

 

(25)

–

25

–

Other reserve movements
including pension deficit

 

(35)

 

–

 

(9)

 

(44)

–

51

7

Embedded value

 

509

 

1,369

 

4,268

 

6,146

1,463

(1,088)

6,521

Represented by:

 

 

 

 

 

 

 

 

 

 

 

– Non profit

 

 

 

 

 

3,845

 

 

 

 

 

– With-profits

 

 

 

 

 

423

 

 

 

 

 

Value of in-force business

 

–

 

–

 

4,268

 

4,268

1,059

–

5,327

Shareholder net worth

 

509

 

1,369

 

–

 

1,878

404

(1,088)

1,194

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