Interim Results - Part 4
Old Mutual PLC
4 September 2001
PART 4
OLD MUTUAL plc
Results for the six months ended 30 June 2001 continued
Notes to the financial statements continued
for the six months ended 30 June 2001
5 Segmental £m Rm
analysis
(continued)
South Rest of South Rest of
5(f) Funds Africa world Total Africa world Total
under
management
(continued)
At 31
December
2000
Investments 14,913 6,693 21,606 168,739 75,730 244,469
including
assets
held to
cover
linked
liabilities
Unit Trusts
Asset
management
worldwide
Old Mutual 1,266 779 2,045 14,325 8,814 23,139
Asset
Managers
Private - 1,252 1,252 - 14,166 14,166
client UK
Other - 200 200 - 2,263 2,263
financial
services
1,266 2,231 3,497 14,325 25,243 39,568
Third party
Asset
management
worldwide
Old Mutual 4,101 379 4,480 46,402 4,288 50,690
Asset
Managers
OMAM (US) - 50,153 50,153 - 567,471 567,471
Pilgrim - 11,735 11,735 - 132,779 132,779
Baxter
Other UAM - 57,223 57,223 - 647,465 647,465
4,101 119,490 123,591 46,402 1,352,003 1,398,405
Private - 19,619 19,619 - 221,985 221,985
client UK
Other 15 420 435 170 4,752 4,922
financial
services
4,116 139,529 143,645 46,572 1,578,740 1,625,312
Total 20,295 148,453 168,748 229,636 1,679,713 1,909,349
funds
under
management
At 30 June
2000
Investments 16,138 6,226 22,364 165,846 63,983 229,829
including
assets
held to
cover
linked
liabilities
Unit Trusts
Asset
management
worldwide
Old Mutual 2,053 588 2,641 21,098 6,043 27,141
Asset
Managers
Private - 1,221 1,221 - 12,548 12,548
client UK
Other 866 129 995 8,900 1,326 10,226
financial
services
2,919 1,938 4,857 29,998 19,917 49,915
Third party
Asset
management
worldwide
Old Mutual 4,444 379 4,823 45,670 3,895 49,565
Asset
Managers
Private - 20,384 20,384 - 209,481 209,481
client UK
Nedcor 2,022 301 2,323 20,780 3,093 23,873
Investment
Bank
Managers
Other 15 342 357 154 3,515 3,669
financial
services
6,481 21,406 27,887 66,604 219,984 286,588
Total 25,538 29,570 55,108 262,448 303,884 566,332
funds
under
management
Notes to the financial statements continued
for the six months ended 30 June 2001
6 Insurance long term investment return
In accordance with the requirements of the ABI SORP, profit on ordinary
activities is stated after allocating an investment return earned by
insurance businesses based on a long term investment return. This long term
investment return is based on achieved real rates of return adjusted for
current inflation expectations, and consensus economic investment forecasts.
For life assurance business, the return is applied to an average value of
investible shareholders' assets, adjusted for net fund flows. For general
insurance liabilities, the return is an average value of investible assets
supporting shareholders' funds and insurance liabilities, adjusted for net
fund flows. Short term fluctuations in investment return represent the
difference between actual return and long term investment return.
The long term investment rate of return used in South Africa is 14 per cent.
(2000: 14 per cent). The directors are of the opinion that this rate of
return is appropriate and has been selected with a view to ensuring that
returns credited to operating earnings are not inconsistent with the actual
returns expected to be earned over the long term.
£m Rm
Analysis of 6 6 Year 6 6 months Year
short term months months to 31 months to 30 to 31 Dec
fluctuations to 30 to 30 Dec to 30 June 2000
in investment June June 2000 June 2000
returns 2001 2000 2001
Life assurance
Actual 114 (129) 31 1,302 (1,331) 326
investment
return
attributable
to shareholders
Long term 82 114 215 937 1,178 2,262
investment
return
credited to
operating
result
32 (243) (184) 365 (2,509) (1,936)
General
insurance
Actual 49 (1) 55 560 (9) 579
investment
return
attributable
to shareholders
Long term 23 26 44 263 269 463
investment
return
credited to
operating
result
26 (27) 11 297 (278) 116
Other
shareholder's
income /
(expenses)
Actual 45 (3) 10 514 (31) 105
investment
return
attributable
to shareholders
Long term 9 9 17 103 93 179
investment
return
credited to
operating
result
36 (12) (7) 411 (124) (74)
Short term 94 (282) (180) 1,073 (2,911) (1,894)
fluctuations
in investment
return
7 Exceptional items
Profit attributable to shareholders is stated after crediting /
(charging) the following exceptional items.
£m Rm
6 months 6 months Year 6 months 6 months 6 months
to 30 to 30 to 31 to 30June to 30 to 31 Dec
June June Dec 2001 June 2000
2001 2000 2000 2000
(Loss) / gain (304) - 356 (3,467) - 3,746
on holding in
/
restructuring
of Dimension
Data Holdings
plc and other
interests
before
taxation and
minority
interests
Taxation - - (5) - - (52)
(Loss) / gain (304) - 351 (3,467) - 3,694
on holding in/
restructuring
of Dimension
Data Holdings
plc and other
interests
before
minority
interests
Minority 149 - (173) 1,702 - (1,821)
interests
(Loss) / gain (155) - 178 (1,765) - 1,873
on holding in/
restructuring
of Dimension
Data Holdings
plc and other
interests
after taxation
and minority
interests
In the second half of 2000, an exceptional gain was recognised following the
exchange of Nedcor Limited's 25.1% interest in Dimension Data International
Limited for the current holding of 8.2% of Dimension Data Holdings plc. In
light of market movements in the first half of 2001, an exceptional
diminution in the carrying value of the Group's investment in Dimension Data
Holding plc has been recognised, reflecting a market value of R15.50 per
share as at 23 July 2001. Although both events are exceptional in the context
of their significance to the Group, the current year loss will form part of
banking operating profit in the statutory financial statements, while the
prior year gain was classified as non-operating in accordance with Financial
Reporting Standard 3.
Notes to the financial statements continued
for the six months ended 30 June 2001
£m Rm
8 Tax on profit 6 6 Year 6 6 Year
on ordinary months months to 31 months months to 31
activities to 30 to 30 Dec to 30 to 30 Dec
June June 2000 June June 2000
2001 2000 2001 2000
United Kingdom
taxation
UK corporation 3 11 123 34 114 1,294
tax
Double taxation - - (104) - - (1,094)
relief
3 11 19 34 114 200
South African 43 50 171 491 516 1,799
tax
Rest of world 12 2 9 137 21 95
tax
Secondary 18 3 32 206 31 338
taxation on
companies (STC)
Deferred 31 18 (76) 354 186 (800)
taxation
Prior period - - 31 - - 326
adjustment
Tax for the year 107 84 186 1,222 868 1,958
Reconciliation
of tax charge
Tax at UK rate 53 50 310 604 512 3,262
of 30.0 per
cent. (2000:
30.0 per cent.)
on profit on
ordinary
activities
before tax
Untaxed income (65) 37 (204) (742) 382 (2,146)
(including tax
exempt
investment
return)
Disallowable 115 5 16 1,313 52 166
expenditure
STC 18 3 32 206 31 338
Other (14) (11) 32 (159) (109) 338
Reported tax 107 84 186 1,222 868 1,958
charge
Notes to the financial statements continued
For the six months ended 30 June 2001
9 Acquisitions
Americom
In March 2001, the Group acquired Unified Life Insurance Company, a life
assurance company licensed to do business in 43 states of the USA, for $25m.
This operation commenced business in May 2001 and now operates under the name
of Americom Life and Annuity Insurance company. The results of the company
are brought to account in the life assurance technical result.
Fidelity & Guaranty Life
In April 2001, the Group announced that it had entered into an agreement to
acquire Fidelity & Guaranty Life Insurance Company, a US based, fixed annuity
and life assurance specialist, for $635 million (£445 million) in cash and
ordinary shares. The acquisition is subject to receipt of regulatory
approvals.
Imperial Bank and Fleming Offshore Banking
During the period, the Group's listed banking subsidiary, Nedcor Limited,
acquired significant interests in the following:
* 50.1 per cent. of Imperial Bank with effect from 1 January 2001;
* 100 per cent. of Fleming Offshore Banking for R588 million (£52 million),
with effect from 1 June 2001.
It is expected that Old Mutual will acquire a 26 per cent. holding in Fleming
Offshore Banking in the second half of the year in return for the transfer of
Fairbairn Trust Company Limited, and that Fleming Offshore Banking will be
renamed Gerrard Private Bank.
US affiliate disposals
In addition to the disposals of Murray Johnstone, Hellman Jordan and Chicago
Asset Management Company during 2000, the Group has made further US affiliate
disposals in the current period, namely Investment Research Company, Sterling
Capital Management Inc. and Cooke & Bieler Inc. These have, in the current
period, generated after tax proceeds of $14.5 million (£10.1 million). With
the exception of Cooke & Bieler Inc., these affiliates were classified as
assets held for resale.
Notes to the financial statements continued
for the six months ended 30 June 2001
£m Rm
10 Goodwill At At At At At At
30 June 31 Dec 30 June 30 June 31 Dec 30 June
2001 2000 2000 2001 2000 2000
At the 2,279 164 164 25,786 1,629 1,629
beginning of
the period
Adjustment in 12 - (3) 137 - (31)
respect of
prior year
acquisitions
Additions 50 2,162 485 571 22,747 5,031
arising on
acquisitions
during the
period
Disposals (4) - - (46) - -
Amortisation (63) (33) (10) (720) (347) (103)
for the period
Foreign 105 (14) (2) 1,306 1,757 (11)
exchange and
other movements
At the end of 2,379 2,279 634 27,034 25,786 6,515
the period
The goodwill amortisation charge for the period of £69 million (R788 million)
(June 2000: £10 million (R103 million); December 2000: £54 million (R568
million)) comprises £63 million (R720 million) (June 2000: £10 million (R103
million); December 2000: 33 million (R347 million)) disclosed in note 10
above, and £6 million (R68 million) (June 2000: £ nil (R nil); December 2000:
£21 million (R221 million)) included in interests in associated undertakings.
In accordance with Financial Reporting Standard 7, adjustments have been made
to the goodwill of £1,795 million (R19,147 million) that arose on the
acquisition in September 2000 of Old Mutual (US) Holdings. The increase of
£12 million (R137 million) reflects the latest estimate of the consideration
paid in respect of the purchase of revenue shares of certain affiliates
combined with the effect of disposing of affiliates held for resale at values
in excess of the original estimated carrying amount. The ultimate costs of
purchasing these revenue shares will remain uncertain as they are dependent
upon future events and hence are subject to adjustment in future years.
Notes to the financial statements continued
for the six months ended 30 June 2001
£m Rm
11 Amounts owed At At At At At At
to credit 30 June 31 Dec 30 June 30 June 31 Dec 30 June
institutions 2001 2000 2000 2001 2000 2000
(including
convertible
bond)
Bank overdrafts 3 22 - 34 249 -
Bank loans 659 544 55 7,489 6,156 565
Other loans 527 658 107 5,989 7,445 1,100
1,189 1,224 162 13,512 13,850 1,665
Repayable
Within one year 67 398 107 762 4,090 1,100
Greater than 1,122 826 55 12,750 9,760 565
one year
1,189 1,224 162 13,512 13,850 1,665
Of the £527 million of other loans, £448 million relates to US$650 million
3.625 per cent. Convertible Bonds 2005 issued by Old Mutual Finance (Cayman
Islands) Limited on 2 May 2001 guaranteed by and convertible into the
ordinary shares of Old Mutual plc, at a conversion price of 190p. The
proceeds of the issue were used to repay senior debt which had previously
financed the acquisition of the Old Mutual (US) Holdings.
Embedded Value Information
1. Embedded value
The embedded value of Old Mutual plc at 30 June 2001 is set out below,
together with the corresponding positions at 31 December 2000 and 30 June
2000.
£m Rm
At At At At At At
30 June 31 Dec 30 June 30 June 31 Dec 30 June
2001 2000 2000 2001 2000 2000
Adjusted net 4,815 4,730 4,450 54,723 53,517 45,737
worth
Equity 3,692 3,618 3,361 41,954 40,937 34,540
shareholders'
funds
Excess of market 1,143 1,132 1,108 12,994 12,805 11,388
value of listed
subsidiaries
over their net
asset value
Adjustment to (20) (20) (19) (225) (225) (191)
include OMI life
subsidiaries on
a statutory
solvency basis
Value of 880 823 764 9,999 9,314 7,846
in-force business
Value of 968 886 840 10,998 10,028 8,628
in-force
business before
cost of solvency
capital
Cost of solvency (88) (63) (76) (999) (714) (782)
capital
Embedded value 5,695 5,553 5,214 64,722 62,831 53,583
An embedded value is an actuarially determined estimate of the economic value
of a life assurance company, excluding any value that may be attributed to
future new business. Old Mutual plc's embedded value is the sum of its
adjusted net worth and the present value of the projected stream of future
after-tax profits from its life assurance business in force at the valuation
date, adjusted for the cost of holding solvency capital equal to the South
African Statutory Capital Adequacy Requirement (or equivalent for non-African
operations).
The adjusted net worth is equal to the consolidated equity shareholders'
funds adjusted to reflect the Group's listed subsidiaries at market value,
and Old Mutual International (OMI) life assurance subsidiaries on a statutory
solvency basis.
The embedded value does not include a market valuation of the Group's asset
management subsidiaries (including asset management business written through
the life assurance companies), nor of any other in-force non-life business of
the Group.
The economic basis and assumptions have been revised as shown in section 4
below. The embedded value at 30 June 2001 also allows fully for the capital
gains tax due to be introduced in South Africa with effect from 1 October
2001. The impact of the revised economic assumptions and allowance for
capital gains tax is set out in section 2 below. The embedded values at 31
December 2000 and 30 June 2000 have not been restated.
The assumptions used to calculate the embedded value are set out in section 4.
The table below sets out a geographical analysis of the value of in-force
business at 30 June 2001, 31 December 2000 and 30 June 2000.
£m Rm
At At At At At At
30 June 31 Dec 30 June 30 June 31 Dec 30 June
2001 2000 2000 2001 2000 2000
South Africa 769 706 650 8,735 7,988 6,686
Individual 512 451 424 5,814 5,098 4,362
business
Group business 257 255 226 2,921 2,890 2,324
Rest of World 111 117 114 1,264 1,326 1,160
Value of 880 823 764 9,999 9,314 7,846
in-force
business
2. Embedded value profits
Embedded value profits represent the change in embedded value over the
period, adjusted for any capital raised and dividends proposed. The after-tax
embedded value profits for the six months to 30 June 2001 are set out below,
together with the corresponding figures for the six months to 30 June 2000
and the year to 31 December 2000.
£m Rm
6 6 Year 6 6 Year to
months months to months months 31 Dec
to to 31 to to 2000
30 June 30 Dec 30 30
2001 June 2000 June June
2000 2001 2000
Embedded value at 5,695 5,214 5,553 64,722 53,583 62,831
end of period
Embedded value at 5,553 5,414 5,414 62,831 53,794 53,794
beginning of period
Increase/(decrease) 142 (200) 139 1,891 (211) 9,037
in embedded value
Less capital raised (4) - (177) (46) - (1,956)
Issue of new capital - - (153) - - (1,691)
in respect of
re-equitisation of
Pilgrim Baxter &
Associates and
employee share
option schemes
Proceeds from sale (4) - (24) (46) - (265)
of shares previously
held to satisfy
claims and errors on
demutualisation and
issue of new shares
Plus dividends 59 55 163 674 569 1,714
proposed
Embedded value 197 (145) 125 2,519 358 8,795
profits
The components of the embedded value profits are set out below:
£m Rm
6 months 6 months Year to 6 months 6 months Year
to to 31 Dec to to to
30 June 30 June 2000 30 June 30 June 31 Dec
2001 2000 2001 2000 2000
Profits from 27 26 74 310 272 782
new business
- Point of 26 25 68 300 259 718
sale
- Expected 1 1 6 10 13 64
return to end
of period
Expected 69 70 144 791 728 1,514
return
Experience 17 27 28 198 280 289
variances
Experience - 72 - 757
assumption
changes
Profits 113 123 318 1,299 1,280 3,342
before
investment
and
exceptional
items
Investment 13 (22) (14) 146 (228) (143)
variances
Economic 109 10 1,244 101
assumption
changes
Impact of (52) - - (592) - -
capital gains
tax
Development (9) - - (103) - -
costs
Investment 51 (38) 484 585 (388) 5,092
return on
adjusted net
worth
Exchange rate (28) (208) (673) (60) (306) 403
movements
Embedded 197 (145) 125 2,519 358 8,795
value profits
The profits from new life assurance business comprise the value of new
business written during the period, determined initially at the point of sale
and then accumulated to the end of the period by applying the discount rate
to the value of new business at the point of sale and adding back the
expected cost of solvency capital between the point of sale and the end of
the period. The profits from new life assurance business for the six months
to 30 June 2001 are based on the revised economic assumptions, and allow
fully for the impact of capital gains tax in South Africa (figures for prior
periods have not been restated).
The profits from existing life assurance business consist of the expected
return on the in-force business, experience variances and changes in
experience assumptions. The expected return is determined by applying the
discount rate to the value of in-force business at the beginning of the
period and adding back the expected cost of solvency capital over the period.
The experience variances are caused by differences between the actual
experience in the period and the assumptions used to calculate the value at
the start of the period.
The investment variances represent the differences between the actual returns
in the period and the assumptions used to calculate the value at the start of
the period. The economic assumption changes for June 2001 represent the
combined impact of declining interest rates in South Africa and the changes
to the differentials between the various economic assumptions and the risk
discount rate shown in section 4.
The impact of capital gains tax relates to capital gains tax to be introduced
in South Africa in October 2001. Development costs reflect the costs incurred
in developing the Group's new businesses in the US (Americom) and UK (due to
launch later this year).
The investment return on adjusted net worth represents the actual investment
return earned on the shareholder portfolio investments (which includes the
return on the market value of the shareholders' investments in Nedcor, Mutual
& Federal and Nedcor Investment Bank), as well as the profits arising from
other non-life businesses within the Group
3. Value of new business
The value of new business (VNB) written in the period is the present value of
the projected stream of after-tax profits from that business, adjusted for
the cost of holding solvency capital. The value is determined initially at
the point of sale and then accumulated to the end of the period as described
in section 2 above.
The tables below set out a geographical analysis of the value of new business
for the six months to 30 June 2001, six months to 30 June 2000 and year to 31
December 2000. New business profitability (as measured by the ratio of the
value of new business to the Annual Premium Equivalent) is also shown. Annual
Premium Equivalent (APE) is calculated as recurring premiums (RP) plus 10% of
single premiums (SP).
6 months to 30 June 2001 6 months to 30 June 2001
RP SP APE VNB Margin RP SP APE VNB
£m £m £m £m Rm Rm Rm Rm
South Africa 62 521 114 25 22% 704 5,954 1,300 287
Individual 58 382 96 18 19% 663 4,367 1,100 210
business
Group business 4 139 18 7 38% 41 1,587 200 77
Rest of World 8 62 14 2 15% 87 712 158 23
Total 70 583 128 27* 21% 791 6,666 1,458 310*
* Value of new business net of cost of solvency capital of £2 million (R24
million).
The increase in the value of new business arising from the net impact of the
revised economic assumptions and the allowance for future capital gains tax
in South Africa amounted to £3 million (R35 million).
6 months to 30 June 2000 6 months to 30 June 2000
RP SP APE VNB Margin RP SP APE VNB
£m £m £m £m Rm Rm Rm Rm
South Africa 86 564 142 24 17% 884 5,825 1,467 247
Individual 65 395 104 9 9% 670 4,075 1,078 97
business
Group business 21 169 38 15 39% 214 1,750 389 150
Rest of World 11 98 21 2 12% 113 1,014 214 25
Total 97 662 163 26* 16% 997 6,839 1,681 272*
* Value of new business net of cost of solvency capital of £2 million (R23
million).
Year to 31 December 2000 Year to 31 December 2000
RP SP APE VNB Margin RP SP APE VNB
£m £m £m Rm Rm Rm Rm
£m
South 179 1,097 289 67 23% 1,886 11,542 3,040 708
Africa
Individual 131 805 212 38 18% 1,384 8,465 2,230 399
business
Group 48 292 77 29 38% 502 3,077 810 309
business
(excl
free
shares)
Rest of 20 211 41 5 13% 212 2,216 434 56
World
Total 199 1,308 330 72 22% 2,098 13,758 3,474 764
(pro
forma)
SA Group - 78 8 2 22% - 818 82 18
(free
shares)
Total 199 1,386 338 74* 22% 2,098 14,576 3,556 782*
* Value of new business net of cost of solvency capital of £5 million (R52
million).
The value of new group business for the year to 31 December 2000 includes an
amount of £2 million (R18 million) in respect of the proceeds of free shares
issued to retirement funds at demutualisation, and re-invested with Old
Mutual. The results for the prior periods have not been restated to reflect
the new economic assumptions and the impact of capital gains tax.
The value of new business excludes the value of new individual unit trust and
some group market-linked business written by the life companies, as the
profits on this business arise in the asset management subsidiaries. It also
excludes premium increases arising from indexation arrangements in respect of
existing business, as these are already included in the value of in-force
business. The value of new business however includes the value of new
Investment Frontiers business that originated from existing policies that
matured. A reconciliation of the new business premiums shown in the notes to
the financial statements to those shown above is set out below.
£m Rm
Recurring Single Recurring Single
premiums premiums premiums Premiums
New business premiums in the 90 727 1,028 8,303
notes to the financial
statements
Less:
- Group market-linked - (165) - (1,877)
business not valued
- Unit trust business not - (34) - (388)
valued
- New business premiums (20) - (237) -
arising from indexation
Plus transfer of maturing - 55 - 628
policies to Investment
Frontiers
New Business premiums as per 70 583 791 6,666
embedded value report
The assumptions used to calculate the value of new business are set out in
section 4 below.
4. Assumptions
The principal assumptions used in the calculation of the value of in-force
business and the value of new business are set out below.
* The pre-tax economic assumptions used for South African business were as
follows:
South Africa At At At
30 June 31 Dec 30 June
2001 2000 2000
Fixed Interest Return 11.0% 13.0% 14.5%
Equity Return 13.0% 16.0% 17.5%
Property Return 12.0% 16.0% 17.5%
Inflation 7.0% 9.0% 10.5%
Risk Discount Rate 13.5% 17.0% 18.5%
For the non-South African operations, appropriate economic assumptions were
chosen on bases consistent with those adopted in South Africa.
* Rates of future bonuses have been set at levels consistent with the
economic assumptions.
* For the in-force business, projected company taxation is based on the
current tax basis that applies to the life companies, and includes full
allowance for Secondary Tax on Companies that may be payable in South Africa.
Full account has been taken of the impact of capital gains tax to be
introduced in South Africa with effect from 1 October 2001. For the purpose
of determining the capital gains tax impact, it has been assumed that 10% of
the equity portfolio is traded each year.
* The assumed future mortality, morbidity and voluntary discontinuance rates
have been based as far as possible on analyses of recent operating
experience. Allowance has been made where appropriate for the effect of
expected AIDS-related claims.
* The management expenses attributable to life assurance business have been
analysed between expenses relating to the acquisition of new business and the
maintenance of business in force. All acquisition expenses have been allowed
for in the calculation of the value of new business. Assumed future expenses
were based on levels experienced up to 31 December 2000, and increased with
assumed inflation to 30 June 2001. The future expenses attributable to life
assurance business do not include Group holding company expenses.
* Future investment expenses were based on the current scales of fees payable
by the life insurance companies to the asset management subsidiaries. To the
extent that these fees include profit margins for the asset management
subsidiaries, these margins have not been included in the value of in-force
business or the value of new business.
* The effect of increases in premiums over the period for policies in-force
as at 30 June 2001, 31 December 2000 and 30 June 2000 has been included in
the value of in-force business only where such increases are associated with
indexation arrangements. Other increases in premiums of existing policies are
included in the value of new business.
* Conversions between Rand and Sterling were carried out at the following
exchange rates:
Exchange rates Rand per £1
At 30 June 2001 11.3634
At 30 June 2000 10.2767
At 31 December 2000 11.3148
6 months to 30 June 2001 (average) 11.4211
6 months to 30 June 2000 (average) 10.3330
Year to 31 December 2000 (average) 10.5213
5. Alternative Assumptions
The discount rate appropriate to an investor will depend on the investor's
own requirements, tax position and perception of the risks associated with
the realisation of the future profits. To illustrate the effect of using
different discount rates, the table below shows the embedded value of Old
Mutual plc at 30 June 2001 at alternative discount rates. In determining the
values at different discount rates, all other assumptions have been left
unchanged.
£m Rm
Value at Value at Value at Value at Value at Value at
central central central central central central
discount discount discount discount discount discount rate
rate - 1% rate rate +1% rate - 1% rate + 1%
Adjusted 4,815 4,815 4,815 54,723 54,723 54,723
net
worth
Value of 1,002 880 769 11,382 9,999 8,737
in-force
business
Value 1,024 968 916 11,634 10,998 10,404
before
cost of
capital
Cost of (22) (88) (147) (252) (999) (1,667)
solvency
capital
Embedded 5,817 5,695 5,584 66,105 64,722 63,460
value
The table below sets out the value of new life assurance business for the 6
months to 30 June 2001 at alternative discount rates.
£m Rm
Value at Value at Value at Value at Value at Value at
central central central central central central
discount discount discount discount discount discount rate
rate - 1% rate rate +1% rate - 1% rate + 1%
Value 31 29 28 359 334 315
before
cost of
capital
Cost of (1) (2) (4) (6) (24) (40)
solvency
capital
Value of 30 27 24 353 310 275
new
business
6. External Review
These results have been reviewed by Tillinghast-Towers Perrin, who have
confirmed to the Directors that the methodology and assumptions used to
determine the embedded value are reasonable and that the embedded value
profits are reasonable in the context of the operating performance and
experience of the life assurance business during the six months to 30 June
2001.
Monday, 20th May 2024
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