Our performance.

The financial model above separately identifies the Group’s capital stock and operational cashflows. Operational cash generation is defined as the flow of cash expected to be generated by the business each year and is available to:

– replenish the capital stock;
– reinvest back into the business; and
– finance the dividend.

The capital stock is represented by the Group’s IGD surplus and is available to provide financial strength to absorb experience variances and reserve changes incurred by the Group.

The IGD surplus is also available to support solvency capital required to be held for regulatory purposes in the businesses.

FOCUS ON VALUE OF IN-FORCE (VIF) BUSINESS

A key component of future operational cash generation is the monetisation of the in-force business. This consists of the expected release in the non profit business, the shareholders’ share of with-profits bonuses, and dividends from the international businesses. At the end of 2009, the undiscounted value of the worldwide [VIF] was £10.2bn. The profile in the adjacent table shows that £860m of the VIF is expected to monetise in 2010.

When reconciling to operational cash for 2010, we remove identifiable short term variances and assumption changes which are charged directly to the capital stock.

The resultant expected release from non profit business forms the operational cash generated by the non profit business.

(Download XLS:)

Estimated monetisation of worldwide VIF (undiscounted)1
£m	Total	2010	2011	2012
1 Management estimates. 2 Based on 2009 assumptions.
Business in-force at start of year2	7,200	700	630	560
2009 new business cash flows	700	70	50	50
UK [VIF] monetisation	7,900	770	680	610
International VIF monetisation	2,300	90	90	80
	10,200	860	770	690