Final Results - Part 3 of 4

RNS Number : 6629C

Standard Life plc

10 March 2011

 



Standard Life plc

Preliminary Results

2010

Part 3 of 4

Notes to the IFRS financial information

2.1 Accounting policies

(a) Basis of preparation

The preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU), with interpretations issued by the International Financial Reporting Standards Interpretations Committee and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies as set out in the Group's Annual Report and Accounts for the year ended 31 December 2010 have been applied in the preparation of this preliminary announcement. The Group's accounting policies have not changed since the issue of the Annual Report and Accounts 2009, except as described below.

The Group has adopted the following amendments to IFRSs, International Accounting Standards (IASs) and interpretations which are effective from 1 January 2010 and management considers that the implementation of these amendments and interpretations has had no significant impact on the Group's financial statements:

·   IFRS 3 Business Combinations (revised)

·   IAS 27 Consolidated and Separate Financial Statements (revised)

·   Improvements to IFRSs 2009

·   Amendments to IFRS 2 Share-based Payment - Group Cash-settled Transactions

·   Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

·   IFRIC 17 Distributions of Non-Cash Assets to Owners

·   IFRIC 18 Transfers of Assets from Customers

Change in the Group's chosen supplementary measure of IFRS performance

During 2010, the Group adopted operating profit as its main IFRS performance measure in place of IFRS underlying profit. This performance measure was reported for the first time in the Half Year Results 2010. The Directors consider that this change will provide equity holders and other stakeholders with a better understanding of the Group's long-term operating performance by removing the impact of short-term economic volatility. In addition, the change will better reflect the Group's internal management approach while also allowing for greater comparability with others in the industry. The key differences between the previous and the new measure are as follows:

Removal of short-term fluctuations in investment return and economic assumption changes:

·   Under the previous method of reporting, short-term fluctuations in investment return were only partly excluded from IFRS underlying profit through an adjustment for the volatility arising on different asset and liability valuation bases.

·   Operating profit is calculated based on expected returns on investments backing equity holder funds, with a consistent treatment of the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments and the corresponding impact on liabilities are excluded from operating profit, and are reported within the statutory IFRS profit before tax. The impact of certain changes in economic assumptions is also excluded from operating profit, and is reported within profit before tax.

Other adjustments:

·   Volatility arising from changes in insurance and investment contract liabilities caused by changes in tax provisions in our Canadian subsidiary was previously included in IFRS underlying profit. As this item has no overall impact on equity holder profit after tax, it will be excluded from operating profit.

·   Adjustment will also be made for one-off items which are outside the control of management and which, due to their size or nature, are not indicative of the long-term operating performance of the Group. Previously such items would have been included in IFRS underlying profit. In 2010 and 2009, no such one-off items were adjusted in determining operating profit.

The table below presents the effect of these changes to the Group's chosen measure of IFRS performance for the year ended 31 December 2009:

	Underlying profit 2009	Effect of change of measure	Operating profit 2009
	£m	£m	£m
Underlying/operating profit before tax from continuing operations
UK	184	38	222
Canada	(7)	120	113
International	18	5	23
Global investment management	66	7	73
Other	(45)	13	(32)
Underlying/operating profit before tax from continuing operations	216	183	399
Adjusted for the following items:
Short-term fluctuations in investment return and economic assumption changes	-	(214)	(214)
Volatility arising on different asset and liability valuation bases	(18)	18	-
Restructuring and corporate transaction expenses	(52)	-	(52)
Impairment of intangible assets	(2)	-	(2)
Other operating profit adjustments	-	13	13
Loss attributable to non-controlling interests	(33)	-	(33)
Profit before tax attributable to equity holders' profits	111	-	111
Tax credit/(expense) attributable to underlying/operating profit	3	(37)	(34)
Tax credit attributable to adjusted items	17	37	54
Total tax credit attributable to equity holders' profits	20	-	20
Profit for the year from continuing operations	131	-	131
Profit for the year from discontinued operations	49	-	49
Profit for the year	180	-	180

(b) Preliminary announcement

The preliminary announcement for the year ended 31 December 2010 does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. PricewaterhouseCoopers LLP have audited the consolidated statutory accounts for the Group for the years ended 31 December 2009 and 31 December 2010 and their reports were unqualified and did not contain a statement under Section 498(2) or (3) of the UK Companies Act 2006. The Group's consolidated statutory accounts for the year ended 31 December 2009 have been filed with the Registrar of Companies. The Group's Annual Report and Accounts for the year ended 31 December 2010 will be available from 4 April 2011.

2.2 Segmental analysis

(a) Basis of segmentation

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed. The Group's reportable segments are as follows:

UK

UK operations comprise life and pensions business and healthcare business. The life and pensions business provides a broad range of pensions, protection, savings and investment products to individual and corporate customers. The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010. It has therefore been classified as a discontinued operation, refer to Note 2.5 - Discontinued operations. UK operations previously included the Group's banking business, Standard Life Bank plc, which was sold on 1 January 2010.

Canada

Canadian operations offer a broad range of pensions and savings products to individual and corporate customers in addition to commercial mortgage products.

International

The businesses included in this reportable segment offer a range of life and pension products. The Group has operations in Ireland, Germany and Austria, which for 31 December 2009 reporting were included in the Europe reportable segment. The Group also holds investments in joint ventures in India and China and has a wholly owned subsidiary in Hong Kong, each of which were included in the Asia reportable segment for 31 December 2009 reporting. This change in composition of reportable segments corresponds to changes made during the reporting period to the way in which the Group is managed and the relevant 31 December 2009 segment information has been restated accordingly.

Global investment management

Investment management services are provided by global investment management operations to the Group's other reportable segments. Global investment management also provides a range of investment products for individuals and institutional customers through a number of different investment vehicles.

Other

This reportable segment primarily includes the group corporate centre and the shared service centre. 

(b) Reportable segments - income statement, operating profit and asset information

Income statement and asset information is presented by reportable segment in the tables that follow. As described beneath the IFRS pro forma reconciliation of consolidated operating profit to profit for the year, operating profit is considered to present an indication of the operating business performance of the Group. Operating profit is one of the key measures utilised by the Group's management in their evaluation of segmental performance and is therefore also presented by reportable segment.

	UK1	Canada	International4	Global investment management	Other	Elimination	Total
2010	£m	£m	£m	£m	£m	£m	£m
Revenue
Net earned premium	1,319	919	909	3	-	-	3,150
Net investment return	11,553	2,077	937	-	9	(6)	14,570
Other segment income	464	136	46	209	23	(29)	849
Inter-segment revenue	11	3	-	111	544	(669)	-
Total net revenue	13,347	3,135	1,892	323	576	(704)	18,569
Expenses
Segment expenses	12,541	2,948	1,841	228	640	(689)	17,509
Finance costs	114	14	-	-	-	(15)	113
Total expenses	12,655	2,962	1,841	228	640	(704)	17,622
Share of profit/(loss) from associates and joint ventures	21	15	(23)	11	-	-	24
Profit/(loss) before tax	713	188	28	106	(64)	-	971
Tax attributable to policyholders' returns	385	-	16	-	(1)	-	400
Tax attributable to equity holders' profits	27	43	8	27	(7)	-	98
Profit/(loss) for the year from continuing operations	301	145	4	79	(56)	-	473
Profit for the year from discontinued operations1	20	-	-	-	-	-	20
Profit/(loss) for the year	321	145	4	79	(56)	-	493
Profit attributable to non-controlling interests from continuing operations	(61)	-	-	-	-	-	(61)
Profit/(loss) attributable to equity holders of Standard Life plc	260	145	4	79	(56)	-	432
Reconciliation to consolidated operating profit1
Tax expense/(credit) attributable to equity holders' profits from continuing operations	27	43	8	27	(7)	-	98
Non-operating (profit)/loss before tax from continuing operations	(33)	(78)	3	(3)	26	-	(85)
Less: Profit for the year from discontinued operations	(20)	-	-	-	-	-	(20)
Operating profit/(loss) before tax from continuing operations	234	110	15	103	(37)	-	425
Other income included in the income statement is as follows:
Interest income2	73	164	21	1	1	-	260
Other expenses included in the income statement include:
Impairment losses (reversed)/recognised 2	(9)	-	-	-	4	-	(5)
Amortisation of intangible assets:
From continuing operations	14	1	2	-	3	-	20
From discontinued operations	2	-	-	-	-	-	2
Amortisation of deferred acquisition costs:
From continuing operations	82	25	52	-	-	-	159
From discontinued operations	37	-	-	-	-	-	37
Depreciation of property, plant and equipment2	-	2	1	1	8	-	12
Interest expense2,3	123	21	1	-	113	(128)	130
Assets
Segment assets	114,931	24,246	11,290	419	913	(770)	151,029
Investments in associates and joint ventures	2,697	123	211	42	14	-	3,087
Total assets	117,628	24,369	11,501	461	927	(770)	154,116
Additions during the year
Intangible assets	39	2	4	-	32	-	77
Deferred acquisition costs	110	17	90	1	-	-	218
Property, plant and equipment	-	1	1	-	16	-	18
Investment properties	758	73	-	-	-	-	831
	907	93	95	1	48	-	1,144

¹      The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010 and has therefore been classified as a discontinued operation. The reconciliation to consolidated operating profit for the year ended 31 December 2010 includes continuing operations only.       

²      All from continuing operations.

³      Refer to Note 2.3 - Administrative expenses.

⁴    Included in the international reporting segment, total net revenue, excluding inter-segment revenue, for Germany, Ireland and Asia is £1,253m (2009: £1,188m), £548m (2009: £597m) and £91m (2009: £44m) respectively.

2.2 Segmental analysis continued

(b) Reportable segments - income statement, operating profit and asset information continued

	UK1	Canada	International2	Global investment management	Other	Elimination	Total
2009	£m	£m	£m	£m	£m	£m	£m
Revenue
Net earned premium	1,574	709	914	4	-	-	3,201
Net investment return	10,272	2,044	885	-	4	(34)	13,171
Other segment income	499	112	30	155	7	(8)	795
Inter-segment revenue	8	2	(5)	91	539	(635)	-
Total net revenue	12,353	2,867	1,824	250	550	(677)	17,167
Expenses
Segment expenses	11,850	2,833	1,781	200	603	(654)	16,613
Finance costs	120	13	-	5	-	(23)	115
Total expenses	11,970	2,846	1,781	205	603	(677)	16,728
Share of profit/(loss) from associates and joint ventures	7	(29)	(27)	19	1	-	(29)
Profit/(loss) before tax	390	(8)	16	64	(52)	-	410
Tax attributable to policyholders' returns	294	-	5	-	-	-	299
Tax attributable to equity holders' profits	(53)	33	(3)	13	(10)	-	(20)
Profit/(loss) for the year from continuing operations	149	(41)	14	51	(42)	-	131
Profit for the year from discontinued operations1	49	-	-	-	-	-	49
Profit/(loss) for the year	198	(41)	14	51	(42)	-	180
Loss attributable to non-controlling interests from continuing operations	33	-	-	-	-	-	33
Profit/(loss) attributable to equity holders of Standard Life plc	231	(41)	14	51	(42)	-	213
Reconciliation to consolidated operating profit1
Tax (credit)/expense attributable to equity holders' profits from continuing operations	(53)	33	(3)	13	(10)	-	(20)
Non-operating loss before tax from continuing operations	93	121	12	9	20	-	255
Less: Profit for the year from discontinued operations	(49)	-	-	-	-	-	(49)
Operating profit/(loss) before tax from continuing operations	222	113	23	73	(32)	-	399
Other income included in the income statement is as follows:
Interest income:
From continuing operations	154	145	60	1	5	-	365
From discontinued operations	350	-	-	-	-	-	350
Other expenses included in the income statement include:
Impairment losses recognised:
From continuing operations	30	4	-	-	7	-	41
From discontinued operations	19	-	-	-	-	-	19
Amortisation of intangible assets:
From continuing operations	9	1	2	-	3	-	15
From discontinued operations	2	-	-	-	-	-	2
Amortisation of deferred acquisition costs:
From continuing operations	82	12	45	-	-	-	139
From discontinued operations	34	-	-	-	-	-	34
Depreciation of property, plant and equipment3	-	2	1	1	6	-	10
Interest expense:4
From continuing operations	132	19	2	5	116	(139)	135
From discontinued operations	238	-	-	-	-	-	238
Assets
Segment assets	114,042	20,423	9,516	506	796	(839)	144,444
Investments in associates and joint ventures	1,915	104	80	32	38	-	2,169
Total assets	115,957	20,527	9,596	538	834	(839)	146,613
Additions during the year
Intangible assets	6	1	5	-	4	-	16
Deferred acquisition costs	105	14	82	-	-	-	201
Property, plant and equipment	1	2	-	1	9	-	13
Investment properties	348	4	13	-	-	-	365
	460	21	100	1	13	-	595

¹      The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010 and has therefore been classified as a discontinued operation. The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. The reconciliation to consolidated operating profit for the year ended 31 December 2009 includes continuing operations only.

²      The business areas included in the Europe and Asia reportable segments presented as at 31 December 2009 are included within the International reportable segment.

³      All from continuing operations.

⁴      Refer to Note 2.3 - Administrative expenses.

Inter-segment transactions are entered into under normal commercial terms and conditions that would be available to unrelated third parties. The allocation of total net revenue presented above is based on customer location and this basis is not materially different to geographical origin. The Group has a widely diversified policyholder base and is therefore not reliant on any individual customers. The Group utilises additional measures to assess the performance of each of the reportable segments, which are presented in the European Embedded Value financial information.

(c) Non-current non-financial assets by geographical location

	2010	2009
	£m	£m
UK	7,437	6,292
Continental Europe	48	51
Canada	1,223	1,035
Total	8,708	7,378

Non-current non-financial assets for this purpose consist of investment property, property, plant and equipment and intangible assets (excluding intangible assets arising from insurance or participating investment contracts).

2.3 Administrative expenses

		2010	Restated 2009
	Notes	£m	£m
Restructuring and corporate transaction expenses		73	60
Commission expenses		370	331
Interest expenses		17	250
Staff costs and other employee-related costs		586	599
Acquisition costs deferred during the year		(218)	(201)
Amortisation of deferred acquisition costs		196	173
Impairment losses on deferred acquisition costs		-	33
Other administrative expenses		622	608
Total administrative expenses		1,646	1,853
Less: administrative expenses from discontinued operations	2.5	(39)	(367)
Administrative expenses		1,607	1,486

Interest expense of £113m (2009: £123m) in respect of subordinated liabilities is included within finance costs. For the year ended 31 December 2010, total interest expense is £130m (2009: £373m).

Included in total restructuring costs of £73m (2009: £60m) are £1m (2009: £1m) of costs in relation to discontinued operations.

Restructuring costs from continuing operations incurred during the year include £64m of expenses in relation to the Group's Transformation and Solvency 2 Programmes (2009: £50m) and £8m (2009: £9m) of transaction costs incurred from the sale of Standard Life Bank plc and Standard Life Healthcare Limited.

Of the restructuring costs from continuing operations of £72m, £71m (2009: £52m) is adjusted when determining operating profit for the year, with the remaining £1m (2009: £1m) incurred by the Heritage With Profits Fund.

2.4 Tax expense/(credit)

The tax expense/(credit) is attributed as follows:

		2010	Restated 2009
	Notes	£m	£m
Tax expense attributable to policyholders' returns		400	299
Tax expense/(credit) attributable to equity holders' profits		98	(20)
		498	279
Tax (credit)/expense from discontinued operations	2.5	(3)	44
		495	323

From 1 April 2011, the UK corporation tax rate will be reduced from 28% to 27%. This rate change has been included in the calculation of UK deferred tax. The 2010 Budget statement also announced the government's intention to make further reductions in corporation tax. These reductions have not been included in the calculation of deferred tax as they are subject to legislation being enacted in future years.

The share of tax of associates and joint ventures is £4m (2009: £9m) and is included above the line 'Profit before tax' in the summary consolidated income statement in 'Share of profit/(loss) from associates and joint ventures'.

The total tax expense is split as follows:

		2010	Restated 2009
		£m	£m
Income tax:
UK		253	162
Double tax relief		(1)	(1)
Canada and international		42	28
Adjustment to tax expense in respect of prior years		4	(3)
Total income tax		298	186
Deferred tax:
Deferred tax expense arising from the current year		197	137
Total deferred tax		197	137
Total tax expense		495	323
Less: Income tax credit/(expense) attributable to discontinued operations		3	(44)
Total income tax expense attributable to continuing operations		498	279
Attributable to equity holders' profits		98	(20)

Tax relating to components of other comprehensive income is as follows:

		2010	2009
		£m	£m
Tax on actuarial gains/(losses) on defined benefit pension schemes		59	(27)
Revaluation of land and buildings		1	(1)
Tax on fair value gains on cash flow hedges attributable to discontinued operations		6	3
Tax relating to each component of other comprehensive income		66	(25)

2.5 Discontinued operations

The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010 for a cash consideration of £138m and has therefore been classified as a discontinued operation. The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010 for a cash consideration of £246m and was classified as a discontinued operation for the year ended 31 December 2009. The assets and liabilities attributable to Standard Life Bank plc as at 31 December 2009 have been classified as held for sale.

The profit included in the consolidated income statement in respect of discontinued operations is as follows:

		2010	Restated 2009
		£m	£m
Revenue
Net earned premium		152	266
Net investment return		(27)	392
Fee and commission income		-	4
Other income		1	(1)
Net revenue		126	661
Expenses
Net insurance benefits and claims		105	190
Change in insurance and participating liabilities		2	(7)
Administrative expenses		39	367
Finance costs		-	8
Expenses		146	558
Gain/(loss) recognised on the measurement of the assets of disposal group		37	(10)
Profit before tax		17	93
Tax (credit)/expense		(3)	44
Profit for the year		20	49

The comprehensive income included in the consolidated statement of comprehensive income in respect of discontinued operations is as follows:

		2010	2009
		£m	£m
Profit for the year from discontinued operations		20	49
Fair value gains on cash flow hedges		30	11
Aggregate equity holder tax effect of items not recognised in the income statement		(6)	(3)
Other comprehensive income for the year from discontinued operations		24	8
Total comprehensive income for the year from discontinued operations		44	57

2.6 Earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year is the weighted average number of shares in issue less the weighted average number of shares owned by employee share trusts that have not vested unconditionally to employees.

	2010	Restated 2009
Profit from continuing operations (£m)	412	164
Profit from discontinued operations (£m)	20	49
Profit attributable to equity holders of Standard Life plc (£m)	432	213
Weighted average number of ordinary shares in issue (millions)	2,242	2,201
Basic earnings per share from continuing operations (pence per share)	18.4	7.5
Basic earnings per share from discontinued operations (pence per share)	0.9	2.2
Basic earnings per share (pence per share)	19.3	9.7

(b) Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has one category of dilutive potential ordinary shares - share awards and share options awarded to employees. 

For share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated is compared with the number of shares that would have been issued, or purchased, assuming the exercise of the share options. 

	2010	Restated 2009
Profit from continuing operations (£m)	412	164
Profit from discontinued operations (£m)	20	49
Profit attributable to equity holders of Standard Life plc (£m)	432	213
Weighted average number of ordinary shares for diluted earnings per share (millions)	2,248	2,203
Diluted earnings per share from continuing operations (pence per share)	18.3	7.5
Diluted earnings per share from discontinued operations (pence per share)	0.9	2.2
Diluted earnings per share (pence per share)	19.2	9.7

The dilutive effect of share awards and options included in the weighted average number of ordinary shares above was six million (2009: two million).

(c) Alternative earnings per share

Earnings per share is also calculated based on the operating profit before tax as well as on the profit attributable to equity holders. The Directors believe that earnings per share based on operating profit provides a better indication of the operating business performance of the Group.

	2010	2010	Restated 2009	Restated 2009
	£m	p per share	£m	p per share
Operating profit before tax from continuing operations	425	19.0	399	18.1
Short-term fluctuations in investment return and economic assumption changes	127	5.7	(214)	(9.7)
Restructuring and corporate transaction expenses	(71)	(3.2)	(52)	(2.4)
Impairment of intangible assets	-	-	(2)	(0.1)
Impairment of investments in associates	(1)	-	-	-
Other operating profit adjustments	30	1.3	13	0.6
Profit/(loss) attributable to non-controlling interests	61	2.7	(33)	(1.5)
Profit before tax from continuing operations	571	25.5	111	5.0
Tax (expense)/credit attributable to:
Operating profit	(89)	(4.0)	(34)	(1.5)
Adjusted items	(9)	(0.4)	54	2.5
(Profit)/loss attributable to non-controlling interests	(61)	(2.7)	33	1.5
Profit from discontinued operations	20	0.9	49	2.2
Profit attributable to equity holders of Standard Life plc	432	19.3	213	9.7

The table above represents basic alternative earnings per share. On a diluted basis short-term fluctuations in investment return and economic assumption changes is 5.6p (2009: (9.7p)) per share.

2.7 Operating profit

(a) Short-term fluctuations in investment return and economic assumption changes

Operating profit is based on expected returns on investments backing equity holder funds and the difference between the expected return and actual return on investments is excluded from operating profit and presented within profit before tax. Adjustments are also made consistently to allow for expected movements in equity holder liabilities. As a result, the components of IFRS profit attributable to market movements and interest rate changes which give rise to variances between actual and expected investment returns, as well as the impact of changes in economic assumptions on equity holder liabilities, are excluded from operating profit and disclosed separately within the heading of short-term fluctuations in investment return and economic assumption changes.

The expected rates of return for debt securities, equity securities and property are determined separately for each of the Group's operations and are consistent with the expected rates of return as determined under the Group's published European Embedded Value (EEV) methodology. The expected rates of return for equity securities and property, with the exception of the Canadian operations, are determined based on the gilt spot rates of an appropriate duration plus an equity risk premium or property risk premium, respectively. The expected rates of return on equity securities and property for Canadian operations are determined by the Appointed Actuary in Canada. 

The principal assumptions as set at the start of the year in respect of gross investment returns underlying the calculation of the expected investment return for equity securities and property are as follows:

	2010		2009
	UK	Canada	UK	Canada
	%	%	%	%
Equity securities	7.11	8.60	6.42	8.60
Property	6.11	8.60	5.42	8.60

In respect of debt securities, the expected rate of return is determined based on the average prospective yields for the debt securities actually held or, in respect of the Canadian operations, is determined by the Appointed Actuary in Canada.

Gains and losses on foreign exchange are deemed to represent short-term fluctuations in investment return and economic assumption changes and thus are excluded from operating profit.

Short-term fluctuations in investment return and economic assumption changes for the year ended 31 December 2010 were £127m (2009: (£214m)). Short-term fluctuations in investment return relate principally to the investment volatility in Canada non-segregated funds, UK annuities and in respect of the Group's subordinated liabilities and assets backing those liabilities.

2.7 Operating profit continued

(b) Other operating profit adjustments

The volatility arising from changes in insurance and investment contract liabilities caused by changes in tax provisions in the Group's Canadian subsidiary was £30m (2009: £13m). This volatility has no impact on equity holder profit after tax and as such is excluded from operating profit before tax.

2.8 Dividends

The Company paid a final dividend of 8.09 pence per share (final 2008: 7.7 pence) totalling £180m in respect of the year ended 31 December 2009 on 28 May 2010 (final 2008: £168m) and an interim dividend of 4.35 pence per share (interim 2009: 4.15 pence) totalling £98m (interim 2009: £92m) in respect of the year ended 31 December 2010 on 19 November 2010.

Subsequent to 31 December 2010, the Directors have proposed a final dividend for the year ended 31 December 2010 of 8.65 pence per ordinary share, £197m in total. The dividend will be paid on 27 May 2011 to shareholders on the Company's register as at 18 March 2011, subject to approval at the Annual General Meeting on 17 May 2011. This dividend will be recorded as an appropriation of retained earnings in the financial statements for the year ended 31 December 2011.

Investors taking part in the Scrip scheme receive their dividend entitlement in the form of shares rather than cash and the distribution under Scrip is recorded as an appropriation of retained earnings. Dividends paid during the year ended 31 December 2010 comprise £92m (2009: £102m) settled by the issue of shares under the Scrip scheme and £186m paid in cash (2009: £158m).

2.9 Issued share capital and shares held by trusts

(a) Issued share capital

The movement in the issued share capital of the Company during the year was:

	2010	2010	2009	2009
	Number	£m	Number	£m
At 1 January	2,236,292,157	224	2,177,799,354	218
Shares issued in lieu of cash dividends	44,854,401	4	55,018,211	6
Shares issued in respect of employee share plans	566,626	-	630,003	-
Shares issued in respect of share options	1,305,584	-	2,842,293	-
Demutualisation shares	490	-	449	-
Shares issued in respect of bonus issue	583	-	1,847	-
At 31 December	2,283,019,841	228	2,236,292,157	224

During the year ended 31 December 2010, 44,854,401 shares have been issued in respect of dividends declared in the year under the Scrip dividend scheme (2009: 55,018,211).

The Group operates share incentive plans, allowing employees the opportunity to buy shares from their salary each month. The maximum purchase that an employee can make in any one year is £1,500. The Group offers to match the first £25 of shares bought each month. During the year ended 31 December 2010, the Company allotted 566,626 (2009: 630,003) ordinary shares to Group employees under the share incentive plans.

The Group also operates a Long-Term Incentive Plan (LTIP) for executives and senior management. During the year ended 31 December 2010, 1,305,584 (2009: 2,842,293) ordinary shares were issued on exercise of share options in respect of the LTIP.

The Scheme of Demutualisation sets a 10-year limit, ending in 2016, for those eligible members of The Standard Life Assurance Company (SLAC) who were not allocated shares at the date of demutualisation to claim their entitlements. During the year ended 31 December 2010, 490 ordinary shares were issued to eligible members in respect of their demutualisation entitlements (2009: 449).

As part of the offer on the demutualisation of SLAC and flotation of Standard Life plc, holders of demutualisation shares, employee shares or shares acquired in the preferential offer who retained their shares for a continuous period of one year from 10 July 2006 were entitled to one bonus share for every 20 shares. Equity holders who are entitled to bonus shares but were not allocated shares on 10 July 2007 had until 10 July 2010 to claim their entitlements. During the year ended 31 December 2010, 583 ordinary shares were issued to equity holders entitled to receive bonus shares (2009: 1,847).

(b) Shares held by trusts

The Employee Share Trust (EST) purchases and holds shares in the Company for delivery to employees under various employee share schemes. Shares purchased by the EST are presented as a deduction from equity in the summary consolidated statement of financial position. Share-based liabilities to employees may also be settled by the issue of new shares.

Shares held by trusts also include shares held by the Unclaimed Asset Trust (UAT). The shares held by the UAT are those not yet claimed by the eligible members of the Standard Life Assurance Company (SLAC) following its demutualisation on 10 July 2006.

Any corresponding obligation to deliver a fixed number of the Company's equity instruments to employees, or eligible members of the SLAC, is offset within the shares held by trusts reserve.

The number of shares held by trusts at 31 December 2010 which were not offset by a corresponding obligation to deliver a fixed number of equity instruments was 12,209,946.

2.10 Insurance contract liabilities, non-participating investment contract liabilities, participating investment contract liabilities and reinsurance assets

		2010	2009
		£m	£m
Non-participating insurance contract liabilities		23,564	22,164
Non-participating investment contract liabilities		75,600	63,728
Non-participating contract liabilities		99,164	85,892
Participating insurance contract liabilities		17,357	16,568
Participating investment contract liabilities		15,329	14,993
Unallocated divisible surplus		788	791
Participating contract liabilities		33,474	32,352

The movement in insurance contract liabilities, participating investment contracts and reinsurance assets during 2010 was as follows:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Total insurance and participating contracts	Reinsurers' share of liabilities (reinsurance asset)	Net
2010	£m	£m	£m	£m	£m	£m
At 1 January	16,568	22,164	14,993	53,725	(7,032)	46,693
Expected change	(362)	(525)	(546)	(1,433)	307	(1,126)
Methodology/modelling changes	2	(11)	8	(1)	(7)	(8)
Effect of changes in:
Economic assumptions	38	583	2	623	(251)	372
Non-economic assumptions	(34)	(43)	(12)	(89)	54	(35)
Effect of:
Economic experience	1,062	536	769	2,367	(19)	2,348
Non-economic experience	146	(434)	57	(231)	15	(216)
New business	39	816	90	945	(2)	943
Total change in contract liabilities	891	922	368	2,181	97	2,278
Foreign exchange adjustment	(102)	625	(32)	491	(31)	460
Movements attributable to discontinued healthcare operations	-	(147)	-	(147)	4	(143)
At 31 December	17,357	23,564	15,329	56,250	(6,962)	49,288

2.10 Insurance contract liabilities, non-participating investment contract liabilities, participating investment contract liabilities and reinsurance assets continued

Due to changes in economic and non-economic factors, certain assumptions used in estimating insurance and investment contract liabilities have been revised. Therefore, the change in liabilities reflects actual performance over the year, changes in assumptions and, to a limited extent, improvements in modelling techniques.

The movement in insurance contract liabilities, participating investment contracts and reinsurance assets during 2009 was as follows:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Total insurance and participating contracts	Reinsurers' share of liabilities (reinsurance asset)	Net
2009	£m	£m	£m	£m	£m	£m
At 1 January	17,625	19,635	15,674	52,934	(6,076)	46,858
Expected change	(627)	(379)	(828)	(1,834)	184	(1,650)
Methodology/modelling changes	(17)	(70)	(12)	(99)	(27)	(126)
Effect of changes in:
Economic assumptions	(311)	1,759	(268)	1,180	(1,117)	63
Non-economic assumptions	(22)	(90)	-	(112)	52	(60)
Effect of:
Economic experience	205	593	133	931	(25)	906
Non-economic experience	(21)	(324)	272	(73)	(4)	(77)
New business	38	777	110	925	(5)	920
Total change in contract liabilities	(755)	2,266	(593)	918	(942)	(24)
Foreign exchange adjustment	(302)	276	(88)	(114)	(14)	(128)
Movements attributable to discontinued healthcare operations	-	(13)	-	(13)	-	(13)
At 31 December	16,568	22,164	14,993	53,725	(7,032)	46,693

The change in non-participating investment contract liabilities during the year was as follows:

	2010	2009
	£m	£m
At 1 January	63,728	52,273
Contributions	11,145	8,997
Initial charges and reduced allocations	(9)	(21)
Account balances paid on surrender and other terminations in the year	(7,589)	(6,682)
Investment return credited and related benefits	7,740	9,088
Foreign exchange adjustment	955	376
Recurring management charges	(370)	(303)
At 31 December	75,600	63,728

2.11     Borrowings

		2010	2009
		£m	£m
Certificates of deposit, commercial paper and medium term notes		-	816
Securitisations - mortgage backed floating rate notes		-	1,967
Bank overdrafts		104	87
Other		141	140
Total borrowings		245	3,010
Less: Borrowings classified as held for sale		-	(2,783)
Borrowings		245	227

2.12 Defined benefit and defined contribution plans

(a) Analysis of amounts recognised in the summary consolidated income statement

The amounts recognised in the summary consolidated income statement for defined contribution and defined benefit schemes are as follows:

		2010	2009
		£m	£m
Current service cost		(67)	(53)
Interest cost on benefit obligation		(110)	(93)
Expected return on plan assets		119	91
Past service cost		59	1
Gains on curtailment		-	4
Credit/(expense) recognised in the summary consolidated income statement		1	(50)

In 2010 a credit from past service costs of £59m has been recognised as a result of a change in the basis of future pension increases in the UK staff pension scheme.

(b) Analysis of amounts recognised in the summary consolidated statement of financial position

The present value of the defined benefit obligation less the fair value of gross scheme assets is as follows:

	2010				2009
	UK	Canada	Ireland	Total	UK	Canada	Ireland	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Present value of funded obligation	(1,724)	(175)	(51)	(1,950)	(1,700)	(135)	(43)	(1,878)
Present value of unfunded obligation	-	(56)	-	(56)	-	(41)	-	(41)
Fair value of plan assets	2,005	175	48	2,228	1,644	144	48	1,836
Adjustment for unrecognised past service costs	-	(6)	-	(6)	-	(6)	-	(6)
Net asset/(liability) in the summary consolidated statement of financial position	281	(62)	(3)	216	(56)	(38)	5	(89)

The Group also recognises a net liability of £6m (2009: £5m) arising from a scheme with a total defined benefit obligation of £6m (2009: £5m) administered for the benefit of employees in Germany, resulting in a net asset of £210m (2009: liability of £94m). The summary consolidated statement of financial position presents any net scheme assets within other assets and any net scheme liabilities within other liabilities.

(c) Principal assumptions

The principal economic assumptions used in determining pension benefit obligation for the Group's plans are as follows:

	2010			2009
	UK	Canada	Ireland	UK	Canada	Ireland
	%	%	%	%	%	%
Rate of increase in salaries	4.65-5.65	3.50	3.50	4.80-5.80	3.50	3.50
Rate of increase in pensions	3.05-3.65	1.33	1.00	3.80	1.33	1.00
Discount rate	5.30	5.50	5.25	5.60	6.25	6.00
Inflation assumption	3.05-3.65	2.00	2.00	3.80	2.00	2.00
Expected return on plan assets	6.15	7.00	5.00	6.30	7.00	5.93

2.13 Contingent liabilities, indemnities and guarantees

(a) Legal proceedings and regulations

The Group, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, the Directors do not believe that such proceedings (including litigation) will have a material effect on the results and financial position of the Group.

The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts, and it has complied in material respects with local solvency and other regulations. Therefore, there are no contingencies in respect of these regulations.

(b) Issued share capital

The Scheme of Demutualisation sets a 10-year time limit, ending in 2016, for those eligible members of The Standard Life Assurance Company who were not allocated shares at the date of demutualisation to claim their entitlements. As future issues of these shares are dependent upon the actions of eligible members, it is not practical to estimate the financial effect of this potential obligation.

(c) Other

In the ordinary course of business, Standard Life Trust Company (SLTC) enters into agreements which contain guarantee provisions for clearing system arrangements related to investment activities. Under such arrangements, the company, together with other participants in the clearing systems, may be required to guarantee certain obligations of a defaulting member. The guarantee provisions and amounts vary based upon the agreement. The company cannot estimate the amount, if any, that may be payable upon default. To facilitate its participation in the clearing system, SLTC has provided as security a bank credit facility up to a maximum of CA$84m.

2.14 Commitments

(a) Capital commitments

As at 31 December 2010, capital expenditure that was authorised and contracted for, but not provided and incurred, was £251m (2009: £296m) in respect of investment properties. Of this amount, £239m (2009: £283m) and £12m (2009: £13m) relates to the contractual obligations to purchase, construct or develop investment property and repair, maintain or enhance investment property respectively.

(b) Unrecognised financial instruments

As at 31 December 2010, the Group had committed the following unrecognised financial instruments to customers and third parties:

		2010	2009
		£m	£m
Commitments to extend credit:
Original term to maturity of one year or less		51	112
Original term to maturity of more than one year		7	1,859
Other commitments		335	715

Included in other commitments is £315m (2009: £696m) committed by certain subsidiaries which are not fully owned by the Group. These commitments are funded through (contractually agreed) additional investments in the subsidiary by the Group and the non-controlling interests. The levels of funding are not necessarily in line with the relevant percentage holdings.

The commitments to extend credit with an original term to maturity of more than one year as at 31 December 2009 were primarily in respect of the Group's banking business, Standard Life Bank plc, which was sold on 1 January 2010. 

2.15 Related party transactions

(a) Transactions with/from related parties

Transactions with related parties carried out by the Group were as follows:

		2010	2009
		£m	£m
Sale to:
Associates		17,340	11,607
Joint ventures		32	2
		17,372	11,609
Purchase from:
Associates		18,052	10,907
Joint ventures		19	100
		18,071	11,007

Transactions with associates presented above relate primarily to the sales and purchases of holdings in investment funds managed by the Group.

In addition to the amounts shown above, the Group's defined benefit pension schemes have assets of £655m (2009: £528m) invested in investment vehicles managed by the Group.

(b) Transactions with key management personnel

All transactions between key management personnel and the Group are on commercial terms which are equivalent to those available to all employees of the Group.

During the year ended 31 December 2010, the key management personnel contributed £1.9m (2009: £11.1m) to products sold by the Group.

2.16 Capital statement

The Group's capital position is analysed between UK regulated life business, overseas life operations and other activities. The UK regulated life business is analysed by the nature of the underlying funds and includes German and Irish business written by branches of UK regulated companies. Other activities comprise investment management, general insurance and group corporate centre. The Group's capital position, based on draft regulatory returns, is set out below:

	UK regulated life business
	Heritage With Profits Fund1	Proprietary business funds	Life business equity holders' funds	Total UK regulated life business	Overseas life operations	Total life business	Other activities2	Group total
2010	£m	£m	£m	£m	£m	£m	£m	£m
Available capital resources
Equity holders' funds
Held outside life assurance funds	-	-	1,008	1,008	1,220	2,228	796	3,024
Held within life assurance funds	-	879	-	879	-	879	-	879
Equity attributable to ordinary equity holders of Standard Life plc	-	879	1,008	1,887	1,220	3,107	796	3,903
Unallocated divisible surplus	788	-	-	788	-	788	-	788
Other qualifying capital
Subordinated liabilities	-	-	-	-	-	-	1,799	1,799
Internal subordinated liabilities	-	-	1,799	1,799	257	2,056	(2,056)	-
	-	-	1,799	1,799	257	2,056	(257)	1,799
Adjustments onto regulatory basis
Changes to the valuation of contract liabilities	3,262	(2)	-	3,260	(80)	3,180	-	3,180
Exclusion of deferred acquisition costs and other inadmissible assets	(122)	(528)	(326)	(976)	(111)	(1,087)	(43)	(1,130)
Exclusion of deferred income	114	231	-	345	(1)	344	-	344
Changes to the valuation of other assets and liabilities	(11)	(259)	(120)	(390)	128	(262)	208	(54)
	3,243	(558)	(446)	2,239	(64)	2,175	165	2,340
Total available capital resources to meet regulatory requirement	4,031	321	2,361	6,713	1,413	8,126	704	8,830
Analysed as follows:
Capital not subject to constraints	-	-	2,336	2,336	577	2,913	623	3,536
Capital subject to constraints	4,031	321	25	4,377	836	5,213	81	5,294
Total available capital resources	4,031	321	2,361	6,713	1,413	8,126	704	8,830
Regulatory capital requirement				2,910	709	3,619	33	3,652

¹    Capital resources amounting to £34m in respect of other with profits funds are disclosed within the Heritage With Profits Fund (HWPF) column.

²      The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010 and its capital resources are not, therefore, included in the analysis.

	UK regulated life business
	Heritage With Profits Fund1	Proprietary business funds	Life business equity holders' funds2	Total UK regulated life business	Overseas life operations	Total life business	Other activities	Group total
2009	£m	£m	£m	£m	£m	£m	£m	£m
Available capital resources
Equity holders' funds
Held outside life assurance funds	-	-	1,077	1,077	1,053	2,130	710	2,840
Held within life assurance funds	-	617	-	617	-	617	-	617
Equity attributable to ordinary equity holders of Standard Life plc	-	617	1,077	1,694	1,053	2,747	710	3,457
Unallocated divisible surplus	791	-	-	791	-	791	-	791
Other qualifying capital
Subordinated liabilities	-	-	265	265	-	265	1,846	2,111
Internal subordinated liabilities	-	-	1,876	1,876	236	2,112	(2,112)	-
	-	-	2,141	2,141	236	2,377	(266)	2,111
Adjustments onto regulatory basis
Changes to the valuation of contract liabilities	1,485	20	-	1,505	(75)	1,430	-	1,430
Exclusion of deferred acquisition costs and other inadmissible assets	(143)	(496)	(484)	(1,123)	(87)	(1,210)	(119)	(1,329)
Exclusion of deferred income	132	207	-	339	(2)	337	-	337
Changes to the valuation of other assets and liabilities	(610)	(90)	645	(55)	79	24	225	249
	864	(359)	161	666	(85)	581	106	687
Total available capital resources to meet regulatory requirement	1,655	258	3,379	5,292	1,204	6,496	550	7,046
Analysed as follows:
Capital not subject to constraints	-	-	3,112	3,112	422	3,534	432	3,966
Capital subject to constraints	1,655	258	267	2,180	782	2,962	118	3,080
Total available capital resources	1,655	258	3,379	5,292	1,204	6,496	550	7,046
Regulatory capital requirement				2,040	666	2,706	81	2,787

¹      Capital resources amounting to £13m in respect of other with profits funds are disclosed within the Heritage With Profits Fund column.

²      The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. For the year ended 31 December 2009, its capital resources were included within life business equity holders' funds.

UK regulated life business

Standard Life Assurance Limited's (SLAL) regulatory solvency position is determined using the Financial Services Authority's (FSA) 'twin peaks' approach, which requires liabilities to be valued on both a realistic and a regulatory basis. The realistic basis removes some of the margins for prudence included in calculations under the regulatory basis. However, it requires discretionary benefits that are not considered under the regulatory basis, such as final bonuses, to be valued. The extent to which the realistic peak is more onerous than the regulatory peak increases the amount of the Capital Resources Requirements (CRR).

Based on draft regulatory returns at 31 December 2010, SLAL had available capital resources of £6.7bn (2009: £5.3bn) and a CRR of £2.9bn (2009: £2.0bn). The capital resources shown in the capital statement are based on the value of assets and liabilities valued on a regulatory basis. However, the CRR reflects the higher value required as a result of the application of the realistic peak.

Capital subject to constraints for the UK regulated life business of £4.4bn at 31 December 2010 (2009: £2.2bn) represents capital resources held within long-term business funds, or in relation to other regulated entities, the amount of the CRR.

2.16 Capital statement continued 

Overseas life operations

Capital resources of £1,413m (2009: £1,204m), which relate mainly to operations in Canada, also include operations in Asia. The capital resources of the operations in Canada are based on local Generally Accepted Accounting Principles financial statements adjusted where necessary to reflect the fair value of assets with a corresponding adjustment to liabilities. The Canadian regulator sets the minimum required capital. It also requires certain assets to be held in trust to increase policyholder protection (vested assets). As a result of the combination of the capital requirement and vested assets, the overseas life capital subject to constraints amounted to £836m at 31 December 2010 (2009: £782m).

Other activities

At 31 December 2010, capital resources of £704m (2009: £550m) and capital subject to constraints of £81m (2009: £118m) relate to the Group's investment management businesses and group corporate centre activities. 

Intra-group transactions

The Group, through subsidiaries and joint ventures, provides insurance and other financial services in the UK, Canada, India and China. Through branches, the Group also provides such services in Ireland and Germany. With the exception of the requirements of the Scheme and the intra-group subordinated debt referred to below and the capital support mechanisms, there are no formal arrangements to provide capital to particular funds or business units. Any allocations of capital would need to be approved on a case-by-case basis by the Board.

SLAL has issued subordinated loans to the Company, which SLAL treats as capital for regulatory purposes. The Standard Life Assurance Company of Canada has issued subordinated liabilities of £257m (2009: £236m) to the Company. During the year, Standard Life Investments Limited repaid the subordinated liabilities of £15m that it had issued. This amount of subordinated liabilities is included within the capital resources of that business during 2009. At Group level only subordinated liabilities issued to external parties are included in the Group's capital resources.

Group capital requirement

The Group must also calculate a group solvency position under the Insurance Groups Directive (IGD). The IGD calculation is a very prudent aggregate value for the Group's capital resources. The capital held within the long-term business funds of approximately £4.4bn (2009: £1.9bn) is restricted to the level of the CRR of those funds of approximately £2.6bn (2009: £1.6bn). Therefore, the Group recognises no net surplus in respect of capital within the long-term business funds.

The estimated IGD position at 31 December 2010 is shown in the Business review Section 1.5 - Capital and cash generation.

In respect of the Group's IGD reporting there were no breaches of regulatory capital requirements at any time during the year.

Movements in capital

The movements in the total capital resources shown in the capital statement are set out below. 

	UK regulated life business
	Heritage With Profits Fund	Proprietary business funds	Life business equity holders funds	Total UK regulated life business	Overseas life operations	Total life business	Other activities	Group total
2010	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January	1,655	258	3,379	5,292	1,204	6,496	550	7,046
Methodology/modelling changes	675	4	-	679	(47)	632	-	632
Change in assumptions used to measure life assurance contract liabilities and experience differences	(56)	8	-	(48)	(6)	(54)	-	(54)
New business	(16)	(138)	-	(154)	(26)	(180)	-	(180)
Investment surplus	2,415	87	5	2,507	98	2,605	-	2,605
Equity holder/inter-fund transfers	(71)	71	-	-	32	32	(32)	-
Dividend transfers	-	-	(205)	(205)	-	(205)	19	(186)
Other factors	(571)	31	(818)	(1,358)	158	(1,200)	167	(1,033)
At 31 December	4,031	321	2,361	6,713	1,413	8,126	704	8,830

	UK regulated life business
	Heritage With Profits Fund	Proprietary business funds	Life business equity holders funds	Total UK regulated life business	Overseas life operations	Total life business	Other activities	Group total
2009	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January	2,976	267	2,756	5,999	1,188	7,187	558	7,745
Methodology/modelling changes	113	12	-	125	(38)	87	-	87
Change in assumptions used to measure life assurance contract liabilities and experience differences	19	13	-	32	7	39	-	39
New business	(20)	(117)	-	(137)	(26)	(163)	-	(163)
Investment surplus	(124)	17	6	(101)	102	1	-	1
Equity holder/inter-fund transfers	(869)	(63)	932	-	16	16	(16)	-
Dividend transfers	-	-	(173)	(173)	-	(173)	15	(158)
Other factors	(440)	129	(142)	(453)	(45)	(498)	(7)	(505)
At 31 December	1,655	258	3,379	5,292	1,204	6,496	550	7,046

Changes in assumptions used to measure contract liabilities have not had a significant impact on capital resources.

Equity holder/inter-fund transfers include the transfer of £nil (2009: £844m) from the HWPF to the Shareholder Fund in respect of the recourse cash flows for UK and Ireland and £71m (2009: £25m) to the Proprietary Business Funds (PBF) in relation to additional expenses charged on German unitised with profits business.

Equity holder/inter-fund transfers in 2009 of £844m include £588m relating to a contingent loan agreement. In 2010, a £195m repayment of this contingent loan was made from the Shareholder Fund to SLAL's HWPF. This loan repayment is included in other factors.

2.17 Events after the reporting period

On 11 January 2011, the Group's offer for the entire issued and to be issued share capital of Focus Solutions Group plc (Focus) was declared wholly unconditional and therefore is the effective date of the acquisition. Focus is a provider of software and consultancy solutions to the financial services industry, enabling its clients to automate the delivery of financial products and services to their customers across multiple distribution channels in a rapid and efficient manner. Continued investment in innovative technology is central to the delivery of the Group's accelerated growth strategy. The acquisition will enable the development of new and existing propositions, enhancing the customer experience and driving greater efficiencies. The consideration, acquisition date fair value of net assets acquired and resulting goodwill are as follows:

		£m
Purchase consideration
Cash paid		41
Loan notes issued		7
Total purchase consideration		48
Fair value of net assets acquired:
Intangible assets		22
Other assets		8
Cash and cash equivalents		1
Deferred tax assets		3
Other creditors		(6)
Deferred tax liabilities		(6)
		22
Goodwill		26

The goodwill is attributable to the workforce of the acquired business and its growth prospects as well as the significant synergies expected to arise as a result of the acquisition. None of the goodwill recognised is expected to be deductible for income tax purposes.

3  European Embedded Value (EEV)

EEV consolidated income statement

For the year ended 31 December 2010

		20101	Restated 20091
	Notes	£m	£m
Covered business
UK		436	506
Canada		250	192
International		93	29
HWPF TVOG		(8)	143
Covered business operating profit	3.2(a)	771	870
Global investment management2	3.6(b)	33	42
UK		28	(18)
Group corporate centre costs		(54)	(50)
Other	3.6(c)	9	-
Non-covered business operating profit/(loss)		16	(26)
Operating profit before tax from continuing operations		787	844
Non-operating items
Long-term investment return and tax variances		578	70
Effect of economic assumption changes		(209)	(539)
Impairment of investments in associates		(1)	-
Restructuring and corporate transaction expenses3		(71)	(52)
Other non-operating items		-	(9)
Consolidation adjustment for different accounting bases4		51	67
Non-operating profit/(loss) before tax from continuing operations		348	(463)
Profit before tax from continuing operations		1,135	381
Tax attributable to:
Operating profit		(249)	(247)
Non-operating items		(90)	122
Profit after tax from continuing operations		796	256
Profit after tax from discontinued operations		20	49
Total profit after tax		816	305

¹      The Group's healthcare business, Standard Life Healthcare Limited, was sold on 31 July 2010 and has therefore been classified as a discontinued operation. The presentation of the 2009 comparatives in certain primary statements and in the corresponding notes has been reclassified accordingly, as indicated. The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010 and was classified as a discontinued operation for the year ended 31 December 2009. Refer to Note 3.1 - Basis of preparation.

²    Global investment management operating profit before tax is stated after excluding profits of £70m (2009: £33m) which have been generated by life and pensions business. Refer to Note 3.17 - EEV methodology.

³    Refer to IFRS financial information Note 2.3 - Administrative expenses.

⁴    This adjustment reflects the removal of accounting differences for the Canada subordinated liability as explained in Note 3.17 - EEV methodology.

EEV earnings per share (EPS)

For the year ended 31 December 2010

	2010	Restated 2009
EEV operating profit after tax from continuing operations (£m)1	538	597
Basic EPS (pence) from continuing operations	24.0	27.1
Weighted average number of ordinary shares in issue (millions)	2,242	2,201
Diluted EPS (pence) from continuing operations	23.9	27.1
Weighted average number of ordinary shares on a diluted basis (millions)	2,248	2,203

¹      EEV operating profit before tax from continuing operations of £787m (2009: £844m) less attributed tax on operating profit from continuing operations of £249m (2009: £247m).

EEV consolidated statement of comprehensive income

For the year ended 31 December 2010

		2010	Restated 2009
	Notes	£m	£m
Profit after tax		816	305
Less: Profit after tax from discontinued operations		20	49
Profit from continuing operations		796	256
Fair value (losses)/gains on cash flow hedges1		(2)	1
Actuarial gains/(losses) on defined benefit pension schemes1		184	(77)
Exchange differences on translating foreign operations2		152	26
Net investment hedge1		(39)	(12)
Aggregate tax effect of items not recognised in income statement		(59)	27
Other		9	13
Other comprehensive income/(expense) for the period		245	(22)
Total comprehensive income for the period attributable to equity holders from continuing operations		1,041	234
Profit after tax from discontinued operations		20	49
Other comprehensive income from discontinued operations3		24	8
Total comprehensive income for the period attributable to equity holders from discontinued operations		44	57
Total comprehensive income for the period attributable to equity holders	3.7	1,085	291

¹      Consistent with the IFRS consolidated statement of comprehensive income for the year ended 31 December 2010.

²      Exchange differences primarily relate to Canada £139m.

³      Refer to IFRS financial information Note 2.5 - Discontinued operations.

EEV consolidated statement of financial position

As at 31 December 2010

		31 December  2010	31 December 2009
	Notes	£m	£m
Covered business
Free surplus		1,202	925
Required capital		1,031	956
Net worth		2,233	1,881
Present value of in-force		4,277	3,775
Cost of required capital		(439)	(391)
Total embedded value of covered business	3.2(c)	6,071	5,265
Non-covered business
Global investment management		256	195
UK		271	(19)
Group corporate centre		457	389
Other		221	255
Discontinued operations		-	343
Total net assets of non-covered business	3.6(a)	1,205	1,163
Consolidation adjustment for different accounting bases1		45	7
Total Group embedded value	3.7	7,321	6,435
Equity
Share capital		228	224
Shares held by trusts		(21)	-
Share premium reserve		976	888
Retained earnings on an IFRS basis		1,094	685
Other reserves		1,626	1,660
Additional retained earnings on an EEV basis		3,418	2,978
Total equity		7,321	6,435

¹      This adjustment reflects the removal of accounting differences for the Canada subordinated liability as explained in Note 3.17 - EEV methodology.

EEV per share

As at 31 December 2010

		31 December 2010	31 December 2009
Total Group embedded value (£m)		7,321	6,435
EEV per share (pence)		322	288
Diluted closing number of ordinary shares in issue (millions)		2,275	2,237

 

END

 

 

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