2 PROFIT/(LOSS) FOR THE YEAR.


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For the year ended 31 December 2011

Notes

Risk and Savings
£m

Investment management
£m

International
£m

Group
capital and
financing
£m

Total
£m

1.

The expected return on in-force is based on the unwind of the risk discount rate on the opening, adjusted base value of in-force ([VIF]). The opening base VIF of the Risk and Savings business was £3,886m in 2011 (2010: £3,679m). This is adjusted for the effects of opening model changes of £200m (2010: £39m) to give an adjusted opening base VIF of £4,086m (2010: £3,718m). This is then multiplied by the opening risk discount rate of 7.3% and the result grossed up at the notional attributed tax rate of 23% (2010: 27%) to give a return of £387m (2010: £407m).

2.

Risk non-covered business primarily reflects general insurance operating profit of £42m (see Note 2(ii)(f) of the Group’s consolidated financial statements).

3.

Savings non-covered business mainly comprises Savings investments on an [IFRS] basis, adjusted for Suffolk Life, International (Ireland) and Nationwide.

4.

Investment management operating profit excludes £24m (2010: £27m) of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a look through basis and as a consequence are included in the Risk, Savings and Group capital and financing covered business on an [EEV] basis.

5.

Investment projects predominately relates to [Solvency II] and other strategic investments.

6.

International non-covered business includes our joint venture operations in Egypt, the Gulf, India and business unit costs of £5m (2010: £5m) allocated to the International segment.

7.

Primarily reflects the implementation of the UK planned future reductions in corporation tax to 23% on 1 April 2014.

Business reported on an EEV basis:

 

 

 

 

 

 

Contribution from new business after cost of capital

3

376

 

65

 

441

Contribution from in-force business:

 

 

 

 

 

 

– expected return1

 

387

 

107

 

494

– experience variances

4

112

 

125

 

237

– operating assumption changes

4

101

 

(68)

 

33

Development costs

 

(10)

 

 

(10)

Contribution from shareholder net worth

 

 

 

21

157

178

Operating profit on covered business

 

966

250

157

1,373

Business reported on an IFRS basis:

 

 

 

 

 

 

Risk non-covered business2

 

36

 

 

 

36

Savings non-covered business3

 

27

 

 

 

27

Investment management4

5

 

210

 

 

210

Group capital and financing

7

 

 

 

(113)

(113)

Investment projects5

 

 

 

 

(56)

(56)

International non-covered business6

 

 

 

(8)

 

(8)

Total operating profit

 

1,029

210

242

(12)

1,469

Variation from longer term investment return

8

124

(7)

(6)

(222)

(111)

Effect of economic assumption changes

9

43

(64)

(21)

Property losses attributable to non-controlling interests

 

(3)

(3)

Profit/(loss) before tax

 

1,196

203

172

(237)

1,334

Tax (expense)/credit on profit from ordinary activities

 

(279)

(38)

(63)

121

(259)

Effect of tax rate changes7

 

155

1

156

Profit/(loss) for the year

 

1,072

165

110

(116)

1,231

 

 

 

 

 

 

 

Operating profit attributable to:

 

 

 

 

 

 

Risk

 

801

 

 

 

 

Savings

 

228

 

 

 

 

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For the year ended 31 December 2010

Notes

Risk and Savings
£m

Investment management
£m

International
£m

Group capital and financing
£m

Total
£m

1.

The expected return on in-force is based on the unwind of the risk discount rate on the opening, adjusted base value of in-force (VIF). The opening base VIF of the Risk and Savings business was £3,679m in 2010. This is adjusted for the effects of opening model changes of £39m to give an adjusted opening base [VIF] of £3,718m. This is then multiplied by the opening risk discount rate of 8.0% and the result grossed up at the notional attributed tax rate of 27% to give a return of £407m.

2.

Risk non-covered business primarily reflects general insurance operating profit of £(8)m (see Note 2(ii)(f) of the Group’s consolidated financial statements).

3.

Savings non-covered business mainly comprises Savings investments on an IFRS basis, adjusted for Suffolk Life, International (Ireland) and Nationwide.

4.

Investment management operating profit excludes £27m of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a look through basis and as a consequence are included in the Risk, Savings and Group capital and financing covered business on an EEV basis.

5.

Investment projects predominately relates to Solvency II and other strategic investments.

6.

International non-covered business includes our joint venture operations in Egypt, the Gulf, India and business unit costs of £5m allocated to the International segment.

Business reported on an EEV basis:

 

 

 

 

 

 

Contribution from new business after cost of capital

3

333

 

44

 

377

Contribution from in-force business:

 

 

 

 

 

 

– expected return1

 

407

 

120

 

527

– experience variances

4

188

 

6

 

194

– operating assumption changes

4

(58)

 

(20)

 

(78)

Development costs

 

(15)

 

 

(15)

Contribution from shareholder net worth

 

 

 

22

138

160

Operating profit on covered business

 

855

172

138

1,165

Business reported on an IFRS basis:

 

 

 

 

 

 

Risk non-covered business2

 

(8)

 

 

 

(8)

Savings non-covered business3

 

20

 

 

 

20

Investment management4

5

 

179

 

 

179

Group capital and financing

7

 

 

 

(84)

(84)

Investment projects5

 

 

 

 

(39)

(39)

International non-covered business6

 

 

 

(9)

 

(9)

Total operating profit

 

867

179

163

15

1,224

Variation from longer term investment return

8

115

(8)

43

11

161

Effect of economic assumption changes

9

252

40

292

Property losses attributable to non-controlling interests

 

Profit/(loss) before tax

 

1,234

171

246

26

1,677

Tax (expense)/credit on profit from ordinary activities

 

(332)

(34)

(84)

4

(446)

Effect of tax rate changes

 

33

33

Profit for the year

 

935

137

162

30

1,264

 

 

 

 

 

 

 

Operating profit attributable to:

 

 

 

 

 

 

Risk

 

663

 

 

 

 

Savings

 

204

 

 

 

 

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