Insurance & Investment
2007 Performance
Underlying profit before tax in Insurance & Investment increased by 11% to £644m (2006 £581m). General Insurance profit fell by 24% to £232m (2006 £304m) reflecting severe flooding in June and July which cost £135m. Investment profit increased by 49% to £412m (2006 £277m).
On the Full Embedded Value (‘EV’) basis, underlying profit before tax in Insurance & Investment was £884m (2006 £843m), £240m (2006 £262m) higher than reported under IFRS. Full EV balance sheet embedded value, net of tax for the UK Investment Business was £6,794m (2006 £6,384m) and was £2,724m (2006 £2,525m) higher than reported under IFRS. In 2007, the Division contributed £312m to the capital position of the Group through dividend payments.
Investment sales increased by 14% to £16,300m (2006 £14,356m) as measured by the PVNBP. Net fund inflows increased by 17% to £2.8bn (2006 £2.4bn). General Insurance sales (excluding Paymentshield) fell 1% to £1,761m GWP (2006 £1,786m).
Our continued focus on cost efficiency resulted in underlying operating expenses increasing by only 4% whilst underlying non-interest income increased by 6%, despite this income figure being subdued by the exceptional flood costs.
| Income Statement | Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
| Net interest income | (98) | (93) |
| Underlying non-interest income | 1,591 | 1,494 |
| Fees and commission income | 91 | 91 |
| Fees and commission expense | (806) | (784) |
| Change in value of in-force long term assurance business | (80) | 179 |
| Net income from long term business | 1,446 | 947 |
| Investment earnings on surplus assets attributable to shareholders using long term assumptions | 115 | 113 |
| Net earned premiums on General Insurance (‘GI’) contracts | 1,247 | 1,315 |
| Net GI claims incurred and net change in GI contract liabilities | (509) | (398) |
| Investment and other operating income in GI | 89 | 68 |
| Share of losses of associates and jointly controlled entities | (2) | (37) |
| Underlying net operating income | 1,493 | 1,401 |
| Underlying operating expenses | (849) | (820) |
| Staff | (396) | (359) |
| Accommodation, repairs and maintenance | (20) | (20) |
| Technology | (42) | (34) |
| Marketing and communication | (47) | (39) |
| Depreciation: Property and equipment and intangible assets | (57) | (51) |
| Other | (174) | (219) |
| Sub total | (736) | (722) |
| Recharges: | ||
| Technology | (48) | (45) |
| Accommodation | (35) | (35) |
| Other shared services | (30) | (18) |
| Underlying profit before tax | 644 | 581 |
| Underlying profit before tax (IFRS basis) | 644 | 581 |
| Additional contribution from new business | 457 | 474 |
| Lower contribution from existing business | (217) | (222) |
| Additional investment earnings on net assets | 10 | |
| Increase in underlying profit before tax | 240 | 262 |
| Underlying profit before tax (Full EV basis) | 884 | 843 |