47 ASSETS ANALYSIS.


The Group has categorised its assets and liabilities in the following disclosure in accordance with the level of shareholder exposure to market and credit risks. The four categorisations presented are:

  • Unit linked

For unit linked contracts, there is a direct link between the investments and the obligations. Unit linked business is written in both the Society LTF and in the LTF of PMC. The financial risk on these contracts is borne by the policyholders. The Group is, therefore, not directly exposed to any market risk, currency risk or credit risk for these contracts. As a result, risk disclosures have not been presented for unit linked assets and liabilities.

  • With-profits

Policyholders and shareholders share in the risks and returns of the with-profits part of the Society LTF. The return to shareholders on virtually all participating products is in the form of a transfer to shareholders’ equity, which is analogous to a dividend from the Society LTF and is dependent upon the bonuses credited or declared on policies in that year. The bonuses are broadly based on historic and current rates of [return on equity], property and fixed income securities, as well as expectations of future investment returns. With-profits also includes participating business in the LGF operation which shares similar characteristics. The with-profits classification excludes unit linked contracts.

  • Non profit non-unit linked

Shareholders are exposed to the risk and rewards of ownership of assets backing non profit non-unit linked business held within UK LTFs.

  • Shareholder

All other assets are classified as shareholder assets. Shareholders of the Group are directly exposed to market and credit risk on these assets. This includes the assets and liabilities of our overseas insurance operations.

The table overleaf presents an analysis of the balance sheet by category. All of the quantitative risk disclosures in Note 48 (Risk management and control) have been provided using this categorisation.

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As at 31 December 2011

Shareholder
£m

Non profit non-unit linked
£m

With-profits
£m

Unit linked
£m

Total
£m

Assets

 

 

 

 

 

Purchased interest in long term business

107

4

37

148

Investment in associates

60

60

Plant and equipment

69

9

78

Investments1

9,104

30,314

18,927

261,063

319,408

Reinsurers’ share of participating insurance contracts

1

1

Reinsurers’ share of non-participating insurance contracts

311

1,788

8

8

2,115

Reinsurers’ share of non-participating investment contracts

11

162

173

Other operational assets

2,410

965

279

879

4,533

Total assets

12,061

33,071

19,272

262,112

326,516

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Subordinated borrowings

1,934

(13)

1,921

Participating contract liabilities

1

23

16,583

215

16,822

Non-participating contract liabilities

2,368

27,966

2,110

252,907

285,351

Senior borrowings

1,147

97

85

1,329

Other liabilities1

2,864

3,631

450

8,882

15,827

Total liabilities

8,314

31,620

19,240

262,076

321,250

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As at 31 December 2010

Shareholder
£m

Non profit non-unit linked
£m

With-profits
£m

Unit linked
£m

Total
£m

1.

For risk management purposes, bespoke consolidated CDOs are considered on a net basis. Accordingly, the table above presents derivative liabilities of £203m (2010: £164m) as a deduction to non profit non-unit linked investments and other liabilities.

Assets

 

 

 

 

 

Purchased interest in long term business

121

36

157

Investment in associates

57

57

Plant and equipment

58

6

64

Investments1

8,631

25,746

19,931

262,705

317,013

Reinsurers’ share of participating insurance contracts

2

2

Reinsurers’ share of non-participating insurance contracts

304

1,789

8

2,101

Reinsurers’ share of non-participating investment contracts

233

233

Other operational assets

2,132

826

328

796

4,082

Total assets

11,303

28,361

20,303

263,742

323,709

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Subordinated borrowings

1,909

(12)

1,897

Participating contract liabilities

2

28

17,559

209

17,798

Non-participating contract liabilities

2,496

25,036

2,067

255,152

284,751

Senior borrowings

1,239

87

109

1,435

Other liabilities1

2,531

1,710

583

8,130

12,954

Total liabilities

8,177

26,774

20,296

263,588

318,835

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