Group Finance Director's Report
Group Embedded Value Information (IFRS Basis)
The sources of profit from all long term assurance business accounted for as insurance contracts on an embedded value (‘EV’) basis under IFRS 4 are set out below. This table includes that part of our Repayment Insurance business accounted for on an EV basis but excludes investment contracts accounted under IAS 39.
| Year ended 31.12.2007 | Year ended 31.12.2006 | |||||||
| UK Investment £m |
Europe £m |
UK General Insurance £m |
Total £m |
UK Investment £m |
Europe £m |
UK General Insurance £m |
Total £m |
|
| Expected contribution from existing business | 162 | 53 | 5 | 220 | 135 | 44 | 5 | 184 |
| Actual vs expected experience on existing business | 33 | 42 | 46 | 121 | 16 | 19 | 33 | 68 |
| 195 | 95 | 51 | 341 | 151 | 63 | 38 | 252 | |
| Contribution from new business | 269 | 37 | 8 | 314 | 216 | 36 | 25 | 277 |
| Investment earnings on net assets using long term assumptions | 115 | 6 | 11 | 132 | 113 | 3 | 6 | 122 |
| Contribution from insurance contracts* | 579 | 138 | 70 | 787 | 480 | 102 | 69 | 651 |
* On an underlying basis
The embedded value of long term assurance business accounted for under IFRS 4, which excludes investment contract business accounted for under IAS 39, is set out below.
| As at 31.12.2007 | As at 31.12.2006 | |||||||
| UK Investment £m |
Europe £m |
UK General Insurance £m |
Total £m |
UK Investment £m |
Europe £m |
UK General Insurance £m |
Total £m |
|
| Shareholder funds | 2,573 | 100 | 177 | 2,850 | 2,315 | 69 | 162 | 2,546 |
| Value of in-force business (net of tax) | 1,497 | 565 | 48 | 2,110 | 1,544 | 419 | 52 | 2,015 |
| Total embedded value (net of tax) | 4,070 | 665 | 225 | 4,960 | 3,859 | 488 | 214 | 4,561 |
| Shareholder funds as a % of total EV | 63% | 15% | 79% | 57% | 60% | 14% | 76% | 56% |
| Year ended 31.12.2007 | ||||
| UK Investment £m |
Europe £m |
UK General Insurance £m |
Total £m |
|
| Opening embedded value | 3,859 | 488 | 214 | 4,561 |
| Contribution from insurance contracts | 579 | 138 | 70 | 787 |
| Developments costs, associated overheads and financing costs | (234) | (234) | ||
| Underlying embedded value profit before tax | 345 | 138 | 70 | 553 |
| Short term investment fluctuations | (111) | (13) | (124) | |
| Underlying tax charge | 113 | (20) | (8) | 85 |
| Shareholder tax rate change | 60 | 60 | ||
| Dividends paid | (200) | 10 | (51) | (241) |
| Other capital movements | 4 | 62 | 66 | |
| Movement in embedded value in the year | 211 | 177 | 11 | 399 |
| Closing embedded value | 4,070 | 665 | 225 | 4,960 |