2 Profit/(loss) for the year.

(XLS:) Notes to the Supplementary Financial Statements – profit/(loss) for the year 2012

For the year ended 31 December 2012

Notes

P&A and Savings
£m

Invest­ment manage­ment
£m

US Protection
£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 UK Protection and Annuities and Savings business was £4,247m in 2012 (2011: £3,886m). This is adjusted for the effects of opening model changes of £86m (2011: £200m) to give an adjusted opening base VIF of £4,333m (2011: £4,086m). This is then multiplied by the opening risk discount rate of 6.2% (2011: 7.3%) and the result grossed up at the notional attributed tax rate of 21% (2011: 23%) to give a return of £340m (2011: £387m). The same approach has been applied for the overseas Protection and Annuities businesses.

2.

Protection and Annuities non-covered business primarily reflects GI operating profit of £30m (2011: £42m). See Note 2(ii)(f) in the Group consolidated financial statements.

3.

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

4.

Investment management operating profit excludes £27m (2011: £24m) 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 Protection and Annuities, Savings and Group capital and financing covered business on an EEV basis.

5.

Investment projects predominantly relate to Solvency II and other strategic investments.

6.

US Protection non-covered business includes business unit costs of £4m (2011: £4m) allocated to the US Protection segment.

7.

Investment variances include £18m of restructuring costs relating to a number of reorganisation initiatives around the Group, including the restructuring of the International segment.

8.

Primarily reflects the implementation of the UK planned future reductions in corporation tax to 21% on 1 April 2014, and improvements in the US to the recognition of tax losses and DAC tax assets.

Business reported on an EEV basis:

 

 

 

 

 

 

Contribution from new business
after cost of capital

3

377

 

98

 

475

Contribution from in-force business:

 

 

 

 

 

 

– expected return1

 

372

 

76

 

448

– experience variances

4

12

 

(59)

 

(47)

– operating assumption changes

4

(11)

 

(18)

 

(29)

Development costs

 

(37)

 

 

(37)

Contribution from shareholder net worth

 

6

 

5

134

145

Operating profit on covered business

 

719

102

134

955

Business reported on an IFRS basis:

 

 

 

 

 

 

Protection and Annuities
non-covered business2

 

27

 

 

 

27

Savings non-covered business3

 

11

 

 

 

11

Investment management4

5

 

216

 

 

216

Group capital and financing

6

 

 

 

(114)

(114)

Investment projects5

 

 

 

 

(50)

(50)

US Protection non-covered business6

 

 

 

(4)

 

(4)

Total operating profit

 

757

216

98

(30)

1,041

Investment variances7

 

7

(5)

6

(40)

(32)

Effect of economic assumption changes

7

(164)

2

(162)

Losses attributable to
non-controlling interests

 

(12)

(12)

Profit/(loss) before tax

 

600

211

106

(82)

835

Tax (expense)/credit on profit from ordinary activities

9

(128)

(39)

(28)

27

(168)

Effect of tax rate changes and other taxation impacts8

9

89

(22)

67

Profit/(loss) for the year

 

561

172

56

(55)

734

 

 

 

 

 

 

 

Operating profit attributable to:

 

 

 

 

 

 

Protection and Annuities

 

668

 

 

 

 

Savings

 

89

 

 

 

 

(XLS:) Notes to the Supplementary Financial Statements – profit/(loss) for the year 2011

For the year ended 31 December 2011

Notes

P&A and Savings
£m

Invest­ment manage­ment
£m

US Protection
£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 UK Protection and Annuities and Savings business was £3,886m. This is adjusted for the effects of opening model changes of £200m to give an adjusted opening base VIF of £4,086m. 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% to give a return of £387m. The same approach has been applied for the overseas Protection and Annuities businesses.

2.

Protection and Annuities non-covered business primarily reflects GI operating profit of £42m. (See Note 2(ii)(f) of the Group consolidated financial statements).

3.

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

4.

Investment management operating profit excludes £24m 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 Protection and Annuities, Savings and Group capital and financing covered business on an EEV basis.

5.

Investment projects predominantly relate to Solvency II and other strategic investments.

6.

US Protection non-covered business includes business unit costs of £4m allocated to the US Protection 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

372

 

69

 

441

Contribution from in-force business:

 

 

 

 

 

 

– expected return1

 

421

 

73

 

494

– experience variances

4

87

 

150

 

237

– operating assumption changes

4

95

 

(62)

 

33

Development costs

 

(10)

 

 

(10)

Contribution from shareholder net worth

 

9

 

12

157

178

Operating profit on covered business

 

974

242

157

1,373

Business reported on an IFRS basis:

 

 

 

 

 

 

Protection and Annuities
non-covered business2

 

35

 

 

 

35

Savings non-covered business3

 

25

 

 

 

25

Investment management4

5

 

210

 

 

210

Group capital and financing

6

 

 

 

(114)

(114)

Investment projects5

 

 

 

 

(56)

(56)

US Protection non-covered business6

 

 

 

(4)

 

(4)

Total operating profit

 

1,034

210

238

(13)

1,469

Investment variances

 

102

(7)

16

(222)

(111)

Effect of economic assumption changes

7

16

(37)

(21)

Losses attributable to
non-controlling interests

 

(3)

(3)

Profit/(loss) before tax

 

1,152

203

217

(238)

1,334

Tax (expense)/credit on profit from ordinary activities

9

(266)

(38)

(76)

121

(259)

Effect of tax rate changes and other taxation impacts7

9

156

156

Profit/(loss) for the year

 

1,042

165

141

(117)

1,231

 

 

 

 

 

 

 

Operating profit attributable to:

 

 

 

 

 

 

Protection and Annuities

 

808

 

 

 

 

Savings

 

226