Final Results - Part 2 of 3
Standard Life plc
Preliminary Results
2009
Part 2 of 3
Notes to the EEV financial information
2.1 Basis of preparation
The European Embedded Value (EEV) basis results have been prepared in accordance with the EEV Principles and Guidance issued in May 2004 by the CFO Forum of European Insurance Companies and the Additional Guidance issued in October 2005. EEV reports the value of business in-force based on a set of best estimate assumptions, allowing for the impact of uncertainty inherent in future assumptions, the cost of holding required capital and the value of free surplus. The total profit recognised over the lifetime of a policy is the same as under International Financial Reporting Standards (IFRS), but the timing of recognition of profits is different.
EEV includes the net assets of the businesses that are owned by equity holders of Standard Life plc plus the present value of future profits expected to arise from in-force long-term insurance policies (PVIF) where these future profits are attributable to equity holders under the Scheme of Demutualisation (the Scheme) or from sales of new business since 10 July 2006.
The opening and closing EEV numbers, and therefore the profit arising in the period, for the covered business are determined on an after-tax basis. The tax assumptions are based upon the best estimate of the actual tax expected to arise. Profit before tax is derived by grossing up profit after tax at the long-term rate of corporation tax appropriate to each territory. While for some territories this rate does not equate to the actual effective rate of tax used in the calculation of after-tax profits, it provides a consistent grossing up basis upon which to compare results from one year to another and is in line with the Group's expectation of the rate of tax applicable to business sold after demutualisation.
A detailed description of EEV methodology is provided in Note 2.16. There have been no significant changes to EEV methodology from that adopted in the previous reporting period except as noted below.
Covered business
A detailed description of EEV covered business is provided in Note 2.16 - EEV methodology.
The inclusion of Asia business for the first time on an EEV basis is reflected in the EEV results for the 12 months to 31 December 2009 with an opening adjustment of £33m, which captures the PVIF and cost of capital as at 1 January 2009 and removes any intangibles.
Prior to the 12 months to 31 December 2009, Asia was included on an IFRS basis. This business was previously immaterial in the context of both the Group embedded value and the Group EEV operating profit, and therefore the Group was not required to report Asia on an EEV basis. The EEV results for the 12 months to 31 December 2008 have not been restated.
2.1 Basis of preparation continued
Segmentation
Under the EEV Principles and Guidance we are required to provide business classifications which are consistent with those used for the primary statements. In the IFRS financial statements the Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed, as required under IFRS 8 for the first time. The EEV segmentation has been prepared in a consistent manner, whilst also distinguishing between covered and non-covered business. The Heritage With Profits Fund time value of options and guarantees (HWPF TVOG) is disclosed separately in EEV, as explained in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement.
Within the IFRS segmental analysis, UK operations primarily comprise life and pensions business and healthcare business. We distinguish between covered and non-covered business within our EEV results. UK non-covered business is shown within Note 2.6 - Non-covered business.
The Europe segment within the IFRS financial statements includes the Germany and Ireland life and pensions businesses which are treated as covered business under EEV. The Ireland operations include the offshore bond business, which is sold by Standard Life International Limited (SLIL). Prior to the implementation of IFRS 8, the results for SLIL were included within the UK covered business under EEV. Comparative results for the 12 months to December 2008 have been restated for UK and Europe to reflect this change.
Continuous Improvement Programme (CIP)
In March 2007, we announced our aim to reduce underlying costs by a further £100m by 2009. This cost efficiency target was achieved one year early. In March 2009, we announced the next phase of efficiency savings with a target of achieving a further £75m of annualised efficiency savings by the end of 2010. In the 12 months to 31 December 2009, £50m of costs have been incurred in progressing this initiative (12 months to 31 December 2008: £45m).
Events after the reporting period
On 26 October 2009, the Group announced that it had entered into an agreement with Barclays Bank PLC to sell Standard Life Bank plc. The formal transfer took place on 1 January 2010, with an expected consideration of £245m, which is subject to adjustments resulting from the conclusion of the completion accounts of Standard Life Bank plc for the year ended 31 December 2009. The Group's decision to sell Standard Life Bank plc was primarily driven by the view that the growth of the volume of lending activity is no longer consistent with its long-term financial objectives.
As a result of entering into the disposal agreement, the assets and liabilities of Standard Life Bank plc were measured at fair value less costs to sell, and this has resulted in a loss of £10m being recognised in the year ended 31 December 2009.
Separately, the Group has agreed heads of terms to enter into a strategic agreement with Barclays UK Retail Banking to explore joint opportunities in the UK retail long-term savings and investments sector. The initial focus is expected to be on the development of a simplified pension product and, thereafter, both parties will continue to explore and develop further opportunities in this market.
As a result of a statutory pension fund valuation carried out under Section 75 of the Pensions Act 1995, a payment of £25m was made in January 2010 by Standard Life Bank plc to the Standard Life UK staff pension scheme. As part of the disposal agreement, a corresponding payment of £25m was made by Standard Life Assurance Limited to Standard Life Bank plc in January 2010.
To reflect the sale of Standard Life Bank plc, the banking business, which was previously included within UK non-covered, has now been classified as a discontinued operation. The presentation of the 2008 comparatives has been reclassified accordingly.
In January 2010, the FSA announced that it had fined Standard Life Assurance Limited £2.45m for serious systems and controls failings that resulted in the production of misleading marketing material for the Pension Sterling Fund. This amount has been recognised in the year ended 31 December 2009. A full and thorough review of existing literature has been conducted and a new improved process for new literature has been put in place.
2.2 Segmental analysis - covered business
(a) Segmental EEV income statement
This note provides an analysis of EEV covered business as defined in Note 2.16 - EEV methodology.
|
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
|
Contribution from new business |
2.3 |
139 |
46 |
13 |
15 |
- |
213 |
|
Contribution from in-force business: |
|
|
|
|
|
|
|
|
Expected return on existing business |
|
204 |
132 |
34 |
5 |
- |
375 |
|
Experience variances |
2.4 |
148 |
4 |
(19) |
1 |
143 |
277 |
|
Operating assumption changes |
2.5 |
60 |
11 |
1 |
(4) |
- |
68 |
|
Development expenses |
|
(18) |
(6) |
(9) |
(14) |
- |
(47) |
|
Expected return on free surplus |
|
(27) |
5 |
3 |
3 |
- |
(16) |
|
Operating profit before tax |
|
506 |
192 |
23 |
6 |
143 |
870 |
|
|
|
|
|
|
|
|
|
|
Investment return and tax variances |
|
(8) |
(31) |
35 |
12 |
62 |
70 |
|
Effect of economic assumption changes |
|
(243) |
(292) |
(6) |
(7) |
9 |
(539) |
|
Restructuring costs |
|
(34) |
(1) |
(8) |
- |
- |
(43) |
|
Profit/(loss) before tax |
|
221 |
(132) |
44 |
11 |
214 |
358 |
|
|
|
|
|
|
|
|
|
|
Attributed tax |
|
(62) |
34 |
(15) |
- |
(60) |
(103) |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
|
159 |
(98) |
29 |
11 |
154 |
255 |
|
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2008 |
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
|
Contribution from new business |
2.3 |
199 |
34 |
31 |
- |
- |
264 |
|
Contribution from in-force business: |
|
|
|
|
|
|
|
|
Expected return on existing business |
|
289 |
109 |
33 |
- |
- |
431 |
|
Experience variances |
2.4 |
16 |
47 |
1 |
- |
- |
64 |
|
Operating assumption changes |
2.5 |
151 |
24 |
9 |
- |
11 |
195 |
|
Development expenses |
|
(30) |
(3) |
(9) |
- |
- |
(42) |
|
Expected return on free surplus |
|
33 |
4 |
3 |
(35) |
- |
5 |
|
Operating profit/(loss) before tax |
|
658 |
215 |
68 |
(35) |
11 |
917 |
|
|
|
|
|
|
|
|
|
|
Investment return and tax variances |
|
(484) |
(173) |
(62) |
- |
(130) |
(849) |
|
Effect of economic assumption changes |
|
(69) |
236 |
11 |
- |
(130) |
48 |
|
Restructuring costs |
|
(34) |
(1) |
(3) |
- |
- |
(38) |
|
Profit/(loss) before tax |
|
71 |
277 |
14 |
(35) |
(249) |
78 |
|
|
|
|
|
|
|
|
|
|
Attributed tax |
|
(20) |
(75) |
(5) |
1 |
70 |
(29) |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
|
51 |
202 |
9 |
(34) |
(179) |
49 |
An analysis of profit after tax by territory is provided in Note 2.9 - Analysis of covered business EEV PVIF and net worth movements (net of tax).
2.2 Segmental analysis - covered business continued
(a) Segmental EEV income statement continued
Operating profit before tax for covered business is calculated using the expected long-term investment return which is based on opening economic assumptions. Investment variances, the effect of economic assumption changes and other non-operating items are excluded from the operating profit for the period and are reported as part of the total EEV profit.
The results for the 12 months to 31 December 2009 include Asia on an EEV basis for the first time. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. Refer to Note 2.1 - Basis of preparation.
HWPF TVOG represents the time value of financial options and guarantees (TVOG) arising from the Heritage With Profits Fund (HWPF). Although the HWPF includes business written by the UK, Germany and Ireland, the Group manages the risk at an aggregate level. This is consistent with the Group's IFRS financial statements as disclosed in Note 39 - Risk management to the Group's Annual Report and Accounts 2009. The results for Canada and Asia include the cost of the Canada and Asia TVOG respectively, whilst the results for Europe include the cost of TVOG arising on business written outside of the HWPF in Germany.
The EEV operating profit before tax has been increased by £111m arising from the impact of the removal of the market risk to the tax treatment of future shareholder transfers from the HWPF (refer to Note 2.16 - EEV methodology), calculated on opening economic assumptions.
The reduction in the expected return on existing business in the UK is primarily due to lower opening PVIF and lower opening risk discount rates.
Development costs of £18m in the UK mainly relate to product development on the group pension proposition, and implementing legislative changes. The £14m of development costs in Asia reflect the costs of developing the business to build future growth and are in addition to the full allowance for acquisition costs that are included within the new business contribution (NBC).
The lower expected return on free surplus in the UK reflects lower expected returns on cash assets within free surplus, along with a higher expected increase in the value of subordinated debt liabilities relative to the expected return on the assets backing subordinated debt.
Profits within investment return and tax variances reflect the impact of favourable investment outcomes in the HWPF, which reduces the burnthrough risk, and in Europe. Investment gains in the UK were offset by increases in subordinated debt liabilities, whilst performance in Canada was adversely impacted by losses on property values. In the UK, improved modelling of our index-linked deferred annuities generated a profit of £59m, whilst revised tax modelling of UK tax due on profits from branches resulted in a loss of £47m.
Effect of economic assumption changes includes the effect of changes to risk discount rates of (£214m) (1 January to 31 December 2008: £277m), which are explained in Note 2.12 - Principal economic assumptions - deterministic calculations - covered business. The total UK loss of £243m includes (£76m) from the change in risk discount rates and (£60m) in respect of higher inflation assumptions. The total Canada loss of £292m includes (£116m) from the change in risk discount rates and (£66m) from the change in subordinated debt liability.
HWPF TVOG shows separate movements in investment variances and economic assumptions, whereas in practice, economic assumption changes are highly dependent on the same factors that give rise to investment variances, for example market yields. Therefore, the key consideration is the net effect of the two items rather than the individual items themselves. Further comments on the movement in TVOG are provided in Note 2.4 - Experience variances, and Note 2.10 - Time value of options and guarantees (TVOG).
Restructuring expenses primarily represent the covered business costs associated with the CIP as described in Note 2.1 - Basis of preparation.
(b) Segmental analysis of movements in EEV
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
3,129 |
1,597 |
506 |
120 |
(220) |
5,132 |
|
Opening adjustments |
- |
- |
- |
33 |
- |
33 |
|
Opening adjusted EEV |
3,129 |
1,597 |
506 |
153 |
(220) |
5,165 |
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
159 |
(98) |
29 |
11 |
154 |
255 |
|
Internal capital transfers |
(175) |
(2) |
(27) |
26 |
- |
(178) |
|
Transfer back of surplus to Standard Life Investments |
(19) |
(3) |
(2) |
- |
- |
(24) |
|
Transfer back of mutual funds net worth |
20 |
(1) |
- |
- |
- |
19 |
|
Actuarial (losses)/gains on defined benefit pension schemes |
- |
(16) |
13 |
- |
- |
(3) |
|
Foreign exchange differences |
- |
71 |
(37) |
(14) |
- |
20 |
|
Aggregate tax effect of items not recognised in income statement |
- |
5 |
- |
- |
- |
5 |
|
Other |
6 |
- |
- |
- |
- |
6 |
|
Closing EEV |
3,120 |
1,553 |
482 |
176 |
(66) |
5,265 |
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
3,574 |
1,276 |
349 |
86 |
(41) |
5,244 |
|
Opening adjustments |
32 |
- |
- |
- |
- |
32 |
|
Opening adjusted EEV |
3,606 |
1,276 |
349 |
86 |
(41) |
5,276 |
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
51 |
202 |
9 |
(34) |
(179) |
49 |
|
Internal capital transfers |
(506) |
(40) |
49 |
20 |
- |
(477) |
|
Transfer back of surplus to Standard Life Investments |
(28) |
(3) |
(2) |
- |
- |
(33) |
|
Transfer back of mutual funds net worth |
17 |
(1) |
- |
- |
- |
16 |
|
Actuarial gains/(losses) on defined benefit pension schemes |
- |
12 |
(10) |
- |
- |
2 |
|
Foreign exchange differences |
- |
154 |
110 |
36 |
- |
300 |
|
Aggregate tax effect of items not recognised in income statement |
- |
(3) |
- |
- |
- |
(3) |
|
Other |
(11) |
- |
1 |
12 |
- |
2 |
|
Closing EEV |
3,129 |
1,597 |
506 |
120 |
(220) |
5,132 |
Internal capital transfers mainly reflect dividend transfers to Standard Life plc.
Opening adjustments in Asia for the 12 months to 31 December 2009 reflect the inclusion of Asia on an EEV basis for the first time. This adjustment is explained in more detail in Note 2.1 - Basis of preparation. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis.
Opening adjustments in the UK for the 12 months to 31 December 2008 reflect the inclusion of Sigma mutual funds in covered business for the first time.
2.2 Segmental analysis - covered business continued
(c) Segmental analysis of opening and closing EEV
|
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Analysis of EEV |
|
|
|
|
|
|
|
|
Free surplus |
|
899 |
154 |
62 |
62 |
- |
1,177 |
|
PVIF |
|
2,173 |
939 |
453 |
75 |
(220) |
3,420 |
|
Required capital |
|
95 |
737 |
12 |
17 |
- |
861 |
|
Cost of capital |
|
(38) |
(233) |
(21) |
(1) |
- |
(293) |
|
Opening adjusted EEV |
|
3,129 |
1,597 |
506 |
153 |
(220) |
5,165 |
|
|
|
|
|
|
|
|
|
|
Analysis of EEV |
|
|
|
|
|
|
|
|
Free surplus |
|
673 |
161 |
57 |
34 |
- |
925 |
|
PVIF |
|
2,359 |
937 |
423 |
122 |
(66) |
3,775 |
|
Required capital |
|
139 |
770 |
25 |
22 |
- |
956 |
|
Cost of capital |
|
(51) |
(315) |
(23) |
(2) |
- |
(391) |
|
Closing EEV |
|
3,120 |
1,553 |
482 |
176 |
(66) |
5,265 |
|
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2008 |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Analysis of EEV |
|
|
|
|
|
|
|
|
Free surplus |
|
966 |
168 |
17 |
86 |
- |
1,237 |
|
PVIF |
|
2,611 |
765 |
336 |
- |
(41) |
3,671 |
|
Required capital |
|
63 |
611 |
6 |
- |
- |
680 |
|
Cost of capital |
|
(34) |
(268) |
(10) |
- |
- |
(312) |
|
Opening adjusted EEV |
|
3,606 |
1,276 |
349 |
86 |
(41) |
5,276 |
|
|
|
|
|
|
|
|
|
|
Analysis of EEV |
|
|
|
|
|
|
|
|
Free surplus |
|
899 |
154 |
62 |
120 |
- |
1,235 |
|
PVIF |
|
2,173 |
939 |
453 |
- |
(220) |
3,345 |
|
Required capital |
|
95 |
737 |
12 |
- |
- |
844 |
|
Cost of capital |
|
(38) |
(233) |
(21) |
- |
- |
(292) |
|
Closing EEV |
|
3,129 |
1,597 |
506 |
120 |
(220) |
5,132 |
Opening adjusted EEV in Asia for the 12 months to 31 December 2009 reflects the inclusion of Asia on an EEV basis for the first time. The opening adjustment is explained in more detail in Note 2.1 - Basis of preparation. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis.
2.3 Analysis of new business contribution
The following table sets out the premium volumes and contribution from new business written by the life and related businesses, consistent with the definition of new business set out in Note 2.16 - EEV methodology.
New business contribution (NBC) and the present value of new business premium (PVNBP) margins are shown after the effect of required capital.
|
|
NBC |
Single premiums |
Annualised regular premiums |
PVNBP1 |
PVNBP multiplier2 |
PVNBP margin3 |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
% |
|
|
Individual pensions |
7 |
3,074 |
79 |
3,366 |
3.7 |
0.2 |
|
Group pensions |
34 |
930 |
437 |
2,662 |
4.0 |
1.3 |
|
Institutional pensions |
25 |
2,253 |
17 |
2,296 |
2.5 |
1.1 |
|
Savings and investments4 |
(3) |
1,256 |
19 |
1,406 |
7.9 |
(0.2) |
|
Annuities |
76 |
448 |
- |
448 |
- |
17.1 |
|
Protection |
- |
- |
1 |
2 |
2.0 |
11.9 |
|
UK |
139 |
7,961 |
553 |
10,180 |
4.0 |
1.4 |
|
Canada |
46 |
1,232 |
88 |
2,460 |
14.0 |
1.9 |
|
Europe4 |
13 |
875 |
38 |
1,289 |
10.9 |
1.0 |
|
Asia |
15 |
70 |
118 |
617 |
4.6 |
2.5 |
|
Total covered business |
213 |
10,138 |
797 |
14,546 |
5.5 |
1.5 |
|
|
NBC |
Single premiums |
Annualised regular premiums |
PVNBP |
PVNBP multiplier2 |
PVNBP margin3 |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
% |
|
|
Individual pensions |
56 |
3,939 |
103 |
4,334 |
3.8 |
1.3 |
|
Group pensions |
55 |
992 |
437 |
2,600 |
3.7 |
2.1 |
|
Institutional pensions |
20 |
1,667 |
67 |
1,826 |
2.4 |
1.1 |
|
Savings and investments4 |
(7) |
1,958 |
10 |
2,029 |
7.1 |
(0.3) |
|
Annuities |
74 |
471 |
- |
471 |
- |
15.8 |
|
Protection |
1 |
- |
2 |
7 |
3.5 |
8.2 |
|
UK |
199 |
9,027 |
619 |
11,267 |
3.6 |
1.8 |
|
Canada |
34 |
1,154 |
79 |
2,240 |
13.7 |
1.5 |
|
Europe4 |
31 |
1,046 |
67 |
1,677 |
9.4 |
1.9 |
|
Asia5 |
- |
93 |
107 |
495 |
3.8 |
- |
|
Total covered business |
264 |
11,320 |
872 |
15,679 |
5.0 |
1.7 |
1 The PVNBP new business sales are different from those in the full year new business press release issued on 3 February 2010 as they incorporate year end non-economic assumption changes.
2 The PVNBP multiplier is calculated as the total of PVNBP less single premiums, divided by annualised regular premiums.
3 PVNBP margins are calculated as the ratio of the value of new business to the present value of new business premiums and are based on the underlying unrounded numbers.
4 The offshore bonds business, previously included within UK savings and investments, is now included within Europe. Results for the 12 months to 31 December 2008 have been reclassified to reflect this change.
5 Regular premiums in China of £3m for Group protection business have been reclassified to single premiums for the 12 months to 31 December 2008.
The results for the 12 months to 31 December 2009 include Asia on an EEV basis for the first time. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. Refer to Note 2.1 - Basis of preparation.
2.4 Experience variances
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Lapses |
1 |
- |
(3) |
(2) |
- |
(4) |
|
Maintenance expenses |
(8) |
- |
5 |
(1) |
- |
(4) |
|
Mortality and morbidity |
2 |
18 |
(1) |
- |
- |
19 |
|
Tax |
26 |
(5) |
8 |
- |
- |
29 |
|
Other |
127 |
(9) |
(28) |
4 |
143 |
237 |
|
Total |
148 |
4 |
(19) |
1 |
143 |
277 |
Mortality profits in Canada arise from a release of annuity reserves following an exercise to validate the policy data.
Tax variances in the UK reflect favourable experience and increases to deferred tax assets, whilst the £8m profit in Europe mainly reflects the successful agreement of prior year tax affairs in Ireland.
'Other' UK variances include the £111m benefit from reduction in market risk referred to in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement, plus the EEV operating profit benefit from a £63m release of deferred annuity reserves (12 months to 31 December 2008: £98m), offset by £38m of modelling changes for life business. Within Europe, 'other' variances include £15m of modelling changes to expenses.
The £143m of HWPF TVOG 'other' variances primarily reflect the benefits of changes in asset allocations and hedging arrangements which reduced the HWPF burnthrough risk.
'Other' UK variances for the 12 months to 31 December 2008 includes the impact of the cash injection into the Pension Sterling Fund which resulted in a loss of £108m.
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Lapses |
18 |
- |
4 |
- |
- |
22 |
|
Maintenance expenses |
(8) |
3 |
(2) |
- |
- |
(7) |
|
Mortality and morbidity |
2 |
- |
- |
- |
- |
2 |
|
Tax |
40 |
38 |
(4) |
- |
- |
74 |
|
Other |
(36) |
6 |
3 |
- |
- |
(27) |
|
Total |
16 |
47 |
1 |
- |
- |
64 |
The results for the 12 months to 31 December 2009 include Asia on an EEV basis for the first time. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. Refer to Note 2.1 - Basis of preparation.
2.5 Operating assumption changes
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Lapses |
69 |
34 |
(22) |
(4) |
- |
77 |
|
Maintenance expenses |
(18) |
(8) |
16 |
- |
- |
(10) |
|
Mortality and morbidity |
7 |
4 |
1 |
- |
- |
12 |
|
Tax |
1 |
- |
- |
- |
- |
1 |
|
Other |
1 |
(19) |
6 |
- |
- |
(12) |
|
Total |
60 |
11 |
1 |
(4) |
- |
68 |
Positive lapse assumption changes in UK and Canada mainly arise from the improved persistency of pensions business. The £22m loss in Europe reflects higher paid up assumptions in Germany and higher lapse rates for offshore bond business.
The expense assumption loss in the UK predominantly reflects changes in expense allocation for investment related expenses. The gain of £16m in Europe mainly arises within Germany and Ireland.
The 'other' assumption change in Canada mainly relates to reductions in policy charges on existing business.
For the 12 months to 31 December 2008, £119m of 'other' operating assumption changes, consisting of £96m in the UK, £12m in Europe and £11m in HWPF TVOG, arose from the reinsurance of UK immediate annuity liabilities.
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Lapses |
(35) |
(25) |
(1) |
- |
- |
(61) |
|
Maintenance expenses |
45 |
28 |
(2) |
- |
- |
71 |
|
Mortality and morbidity |
46 |
4 |
3 |
- |
- |
53 |
|
Tax |
2 |
- |
- |
- |
- |
2 |
|
Other |
93 |
17 |
9 |
- |
11 |
130 |
|
Total |
151 |
24 |
9 |
- |
11 |
195 |
The results for the 12 months to 31 December 2009 include Asia on an EEV basis for the first time. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. Refer to Note 2.1 - Basis of preparation.
2.6 Non-covered business
Non-covered business EEV operating profit is represented by IFRS normalised underlying profit* as adjusted for Standard Life Investments (global investment management) look through profits and the return on mutual funds which are recognised in covered business.
UK operations comprise primarily life and pensions business and the healthcare business. UK non-covered business is shown within this note and includes healthcare, UK non-covered mutual funds businesses and the non-covered UK pension scheme. The Group's banking business, Standard Life Bank, has been classified as a discontinued operation. Refer to Note 2.1 - Basis of preparation.
(a) Segmental analysis - non-covered business
|
|
Global investment management |
UK |
Discontinued operations |
Other including Group corporate centre |
Total non-covered business |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV net assets |
143 |
129 |
211 |
672 |
1,155 |
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
26 |
(19) |
42 |
(48) |
1 |
|
Transfer back of net worth from covered business |
24 |
(20) |
- |
1 |
5 |
|
Foreign exchange differences |
1 |
- |
- |
5 |
6 |
|
Internal capital transfers |
- |
38 |
(15) |
155 |
178 |
|
Distributions to equity holders |
- |
- |
- |
(260) |
(260) |
|
Other |
1 |
(50) |
8 |
119 |
78 |
|
Closing EEV net assets |
195 |
78 |
246 |
644 |
1,163 |
* The only difference between IFRS normalised underlying profit and IFRS underlying profit arises within global investment management, as described in Note 2.6(b) - Non-covered business - Global investment management EEV profits before tax.
2.6 Non-covered business continued
(a) Segmental analysis - non-covered business continued
On 15 May 2009, the Group's equity holders approved the introduction of the Scrip dividend scheme, effective for the final 2008 dividend payment onwards. Investors taking part in the Scrip scheme receive their dividend entitlement in the form of new shares issued in lieu of cash dividends. For the 12 months ended 31 December 2009, dividends paid comprise £102m (12 months to 31 December 2008: £nil) settled by the issue of shares under the Scrip scheme, and £158m paid in cash (12 months to 31 December 2008: £257m).
'Other' movements in the UK EEV net assets predominantly relate to the UK non-covered pension scheme liability of £56m (12 months to 31 December 2008: £nil) and deferred tax liability of £6m (12 months to 31 December 2008: £23m).
'Other' movements in Other including Group corporate centre predominantly relate to the £102m issue of share capital other than in cash in relation to the Scrip dividend paid by Standard Life plc.
|
|
Global investment management |
UK |
Discontinued operations |
Other including Group corporate centre |
Total non-covered business |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV net assets |
142 |
(8) |
303 |
530 |
967 |
|
|
|
|
|
|
|
|
Loss after tax |
(35) |
(26) |
(49) |
(31) |
(141) |
|
Transfer back of net worth from covered business |
33 |
(17) |
- |
1 |
17 |
|
Foreign exchange differences |
2 |
- |
- |
21 |
23 |
|
Internal capital transfers |
- |
69 |
(15) |
423 |
477 |
|
Distributions to equity holders |
- |
- |
- |
(257) |
(257) |
|
Other |
1 |
111 |
(28) |
(15) |
69 |
|
Closing EEV net assets |
143 |
129 |
211 |
672 |
1,155 |
The presentation of the 2008 comparatives reflects the reclassification of Standard Life Bank as a discontinued operation.
(b) Global investment management EEV profits before tax
Global investment management profits are included in EEV on a look through basis. This means that the profits from global investment management generated from the life and pensions business are allocated to covered business. However, the excluded life and pensions profits include £19m (12 months to 31 December 2008: £20m) of profits relating to products which are actively marketed and sold to third parties through global investment management distribution channels. If these profits are added to the third party profits disclosed for non-covered business, there are £61m (12 months to 31 December 2008: £68m) of third party related profits for global investment management.
|
|
12 months to 31 December 2009 |
12 months to 31 December 2008 |
|
|
£m |
£m |
|
Life and pensions look through profits before tax |
33 |
45 |
|
Less: Third party related life and pensions profits before tax |
19 |
20 |
|
Life and pensions look through profits before tax excluding third party profits |
14 |
25 |
|
|
|
|
|
Third party related life and pensions profits before tax |
19 |
20 |
|
Third party related profits before tax |
42 |
48 |
|
Total third party related profits before tax |
61 |
68 |
|
|
|
|
|
Total EEV operating profit before tax |
75 |
93 |
|
|
|
|
|
Non-operating items1 |
(11) |
(93) |
|
Total EEV profit before tax |
64 |
- |
1 The non-operating loss items for the 12 months to 31 December 2009 include £9m net negative fair value movement in respect of the liability remaining following the restructuring of a sub-fund of the Standard Life Investments (Global Liquidity Funds) plc and the 'Contract for Differences' written in September 2008 which limited this liability for Standard Life Investments. The non-operating items for the 12 months to 31 December 2008 include total losses of £90m from the restructuring of the Global Liquidity Funds sub-fund. Of these total restructuring losses, £51m for the 12 months to 31 December 2008 relate to losses arising from the fair value movements of assets brought directly on to the statement of financial position. The losses for all periods relating to the non-life net negative fair value movement and the fair value movement of assets brought directly on to the statement of financial position are included within IFRS underlying profit but excluded from IFRS normalised underlying profit. Also included within non-operating items for the 12 months to 31 December 2009 are £2m of costs relating to the CIP programme and other restructuring costs (12 months to 31 December 2008: £3m).
(c) Other EEV operating profits before tax
|
|
12 months to 31 December 2009 |
12 months to 31 December 2008 |
|
|
£m |
£m |
|
Canada non-life subsidiaries |
(1) |
2 |
|
Mutual funds transferred to covered business |
(2) |
(2) |
|
Canada non-life subsidiaries excluding transfers to covered business |
(3) |
- |
|
|
|
|
|
Standard Life plc (expense)/income |
(2) |
8 |
|
Other |
5 |
5 |
|
Other non-covered business EEV operating profit before tax |
- |
13 |
Canada non-life subsidiaries are included within the Canada segment of the IFRS financial statements.
Included within 'other' are the head office costs relating to the Europe and Asia businesses. These costs are included within the Europe and Asia segments of the IFRS financial statements.
2.7 EEV reconciliation of movements in consolidated statement of financial position
|
|
|
12 months to 31 December 2009 |
12 months to 31 December 2008 |
|
|
|
£m |
£m |
|
Opening EEV |
|
6,245 |
6,211 |
|
Opening adjustments |
|
33 |
32 |
|
Opening adjusted EEV |
|
6,278 |
6,243 |
|
|
|
|
|
|
Total comprehensive income for the period attributable to equity holders |
|
291 |
250 |
|
Distributions to equity holders |
|
(260) |
(257) |
|
Issue of share capital other than in cash |
|
102 |
1 |
|
Reserves credit for employee share-based payment schemes |
|
24 |
10 |
|
Vested employee share-based payment schemes |
|
- |
(2) |
|
Closing EEV |
|
6,435 |
6,245 |
The opening adjustment for the 12 months to 31 December 2009 relates to the inclusion of Asia on an EEV basis for the first time. The EEV results for the 12 months to 31 December 2008 have not been restated.
Opening adjustments in the full year 2008 relate to the transfer of Sigma mutual funds from non-covered to covered business.
2.8 Reconciliation of EEV net assets to IFRS net assets
|
|
31 December 2009 |
31 December 2008 |
|
|
£m |
£m |
|
Net assets on an EEV basis |
6,435 |
6,245 |
|
|
|
|
|
Present value of in-force life and pensions business net of cost of capital |
(3,384) |
(3,053) |
|
EEV net worth |
3,051 |
3,192 |
|
|
|
|
|
Adjustment of long-term debt to market value |
(101) |
(434) |
|
Canada marked to market |
(49) |
58 |
|
Deferred acquisition costs net of deferred income reserve |
358 |
354 |
|
Deferred tax differences |
157 |
180 |
|
Adjustment for share of joint ventures |
35 |
- |
|
Consolidation adjustment for different accounting bases1 |
(7) |
42 |
|
Other |
13 |
15 |
|
Net assets attributable to equity holders on an IFRS basis |
3,457 |
3,407 |
1 This adjustment reflects the removal of accounting differences for the Canada subordinated liability as explained in Note 2.16 - EEV methodology.
Reconciling items are shown net of tax where appropriate.
2.9 Analysis of covered business EEV PVIF and net worth movements (net of tax)
(a) Total
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
1,235 |
844 |
2,079 |
3,053 |
5,132 |
|
Opening adjustments |
(58) |
17 |
(41) |
74 |
33 |
|
Opening adjusted EEV |
1,177 |
861 |
2,038 |
3,127 |
5,165 |
|
|
|
|
|
|
|
|
Contribution from new business |
(252) |
64 |
(188) |
346 |
158 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
(1) |
39 |
38 |
236 |
274 |
|
Expected return transfer to net worth |
579 |
(60) |
519 |
(519) |
- |
|
Experience variances |
32 |
11 |
43 |
156 |
199 |
|
Operating assumption changes |
41 |
(4) |
37 |
7 |
44 |
|
Development expenses |
(36) |
- |
(36) |
- |
(36) |
|
Expected return on free surplus |
(11) |
- |
(11) |
- |
(11) |
|
Operating profit after tax |
352 |
50 |
402 |
226 |
628 |
|
Investment return and tax variances |
(256) |
13 |
(243) |
296 |
53 |
|
Effect of economic assumption changes |
(138) |
(1) |
(139) |
(255) |
(394) |
|
Restructuring expenses |
(32) |
- |
(32) |
- |
(32) |
|
Profit/(loss) after tax |
(74) |
62 |
(12) |
267 |
255 |
|
Internal capital transfers |
(178) |
- |
(178) |
- |
(178) |
|
Transfer back of surplus to Standard Life Investments |
(24) |
- |
(24) |
- |
(24) |
|
Transfer back of mutual funds net worth |
19 |
- |
19 |
- |
19 |
|
Actuarial losses on defined benefit pension schemes |
(3) |
- |
(3) |
- |
(3) |
|
Foreign exchange differences |
(3) |
33 |
30 |
(10) |
20 |
|
Aggregate tax effect of items not recognised in income statement |
5 |
- |
5 |
- |
5 |
|
Other |
6 |
- |
6 |
- |
6 |
|
Closing EEV |
925 |
956 |
1,881 |
3,384 |
5,265 |
For the 12 months to 31 December 2009, Asia is included within the covered business results for the first time on an EEV basis. This is reflected in the opening adjustment of £33m.
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
1,237 |
680 |
1,917 |
3,327 |
5,244 |
|
Opening adjustments |
- |
- |
- |
32 |
32 |
|
Opening adjusted EEV |
1,237 |
680 |
1,917 |
3,359 |
5,276 |
|
|
|
|
|
|
|
|
Contribution from new business |
(266) |
42 |
(224) |
413 |
189 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
(1) |
33 |
32 |
280 |
312 |
|
Expected return transfer to net worth |
552 |
(33) |
519 |
(519) |
- |
|
Experience variances |
28 |
(11) |
17 |
30 |
47 |
|
Operating assumption changes |
102 |
15 |
117 |
22 |
139 |
|
Development expenses |
(30) |
- |
(30) |
- |
(30) |
|
Expected return on free surplus |
(5) |
- |
(5) |
- |
(5) |
|
Operating profit after tax |
380 |
46 |
426 |
226 |
652 |
|
Investment return and tax variances |
22 |
74 |
96 |
(708) |
(612) |
|
Effect of economic assumption changes |
54 |
(30) |
24 |
12 |
36 |
|
Restructuring expenses |
(27) |
- |
(27) |
- |
(27) |
|
Profit/(loss) after tax |
429 |
90 |
519 |
(470) |
49 |
|
Internal capital transfers |
(477) |
- |
(477) |
- |
(477) |
|
Transfer back of surplus to Standard Life Investments |
(33) |
- |
(33) |
- |
(33) |
|
Transfer back of mutual funds net worth |
16 |
- |
16 |
- |
16 |
|
Actuarial gains on defined benefit pension schemes |
2 |
- |
2 |
- |
2 |
|
Foreign exchange differences |
62 |
74 |
136 |
164 |
300 |
|
Aggregate tax effect of items not recognised in income statement |
(3) |
- |
(3) |
- |
(3) |
|
Other |
2 |
- |
2 |
- |
2 |
|
Closing EEV |
1,235 |
844 |
2,079 |
3,053 |
5,132 |
The EEV results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. The IFRS opening and closing net assets for this business were included within the opening and closing free surplus, and the IFRS underlying loss after tax included within Expected return on free surplus.
2.9 Analysis of covered business EEV PVIF and net worth movements (net of tax) continued
(b) UK and HWPF TVOG
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
899 |
95 |
994 |
1,915 |
2,909 |
|
Opening adjustments |
- |
- |
- |
- |
- |
|
Opening adjusted EEV |
899 |
95 |
994 |
1,915 |
2,909 |
|
|
|
|
|
|
|
|
Contribution from new business |
(109) |
21 |
(88) |
188 |
100 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
(1) |
4 |
3 |
144 |
147 |
|
Expected return transfer to net worth |
342 |
(3) |
339 |
(339) |
- |
|
Experience variances |
32 |
19 |
51 |
158 |
209 |
|
Operating assumption changes |
19 |
(1) |
18 |
24 |
42 |
|
Development expenses |
(13) |
- |
(13) |
- |
(13) |
|
Expected return on free surplus |
(19) |
- |
(19) |
- |
(19) |
|
Operating profit after tax |
251 |
40 |
291 |
175 |
466 |
|
Investment return and tax variances |
(213) |
1 |
(212) |
251 |
39 |
|
Effect of economic assumption changes |
(71) |
3 |
(68) |
(99) |
(167) |
|
Restructuring expenses |
(25) |
- |
(25) |
- |
(25) |
|
Profit/(loss) after tax |
(58) |
44 |
(14) |
327 |
313 |
|
Internal capital transfers |
(175) |
- |
(175) |
- |
(175) |
|
Transfer back of surplus to Standard Life Investments |
(19) |
- |
(19) |
- |
(19) |
|
Transfer back of mutual funds net worth |
20 |
- |
20 |
- |
20 |
|
Actuarial gains on defined benefit pension schemes |
- |
- |
- |
- |
- |
|
Foreign exchange differences |
- |
- |
- |
- |
- |
|
Aggregate tax effect of items not recognised in income statement |
- |
- |
- |
- |
- |
|
Other |
6 |
- |
6 |
- |
6 |
|
Closing EEV |
673 |
139 |
812 |
2,242 |
3,054 |
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
966 |
63 |
1,029 |
2,504 |
3,533 |
|
Opening adjustments |
- |
- |
- |
32 |
32 |
|
Opening adjusted EEV |
966 |
63 |
1,029 |
2,536 |
3,565 |
|
|
|
|
|
|
|
|
Contribution from new business |
(171) |
23 |
(148) |
291 |
143 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
(1) |
3 |
2 |
206 |
208 |
|
Expected return transfer to net worth |
381 |
(1) |
380 |
(380) |
- |
|
Experience variances |
(2) |
(5) |
(7) |
19 |
12 |
|
Operating assumption changes |
97 |
16 |
113 |
4 |
117 |
|
Development expenses |
(21) |
- |
(21) |
- |
(21) |
|
Expected return on free surplus |
24 |
- |
24 |
- |
24 |
|
Operating profit after tax |
307 |
36 |
343 |
140 |
483 |
|
Investment return and tax variances |
179 |
(4) |
175 |
(618) |
(443) |
|
Effect of economic assumption changes |
- |
- |
- |
(143) |
(143) |
|
Restructuring expenses |
(25) |
- |
(25) |
- |
(25) |
|
(Loss)/profit after tax |
461 |
32 |
493 |
(621) |
(128) |
|
Internal capital transfers |
(506) |
- |
(506) |
- |
(506) |
|
Transfer back of surplus to Standard Life Investments |
(28) |
- |
(28) |
- |
(28) |
|
Transfer back of mutual funds net worth |
17 |
- |
17 |
- |
17 |
|
Actuarial gains on defined benefit pension schemes |
- |
- |
- |
- |
- |
|
Foreign exchange differences |
- |
- |
- |
- |
- |
|
Aggregate tax effect of items not recognised in income statement |
- |
- |
- |
- |
- |
|
Other |
(11) |
- |
(11) |
- |
(11) |
|
Closing EEV |
899 |
95 |
994 |
1,915 |
2,909 |
2.9 Analysis of covered business EEV PVIF and net worth movements (net of tax) continued
(c) Canada
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
154 |
737 |
891 |
706 |
1,597 |
|
Opening adjustments |
- |
- |
- |
- |
- |
|
Opening adjusted EEV |
154 |
737 |
891 |
706 |
1,597 |
|
|
|
|
|
|
|
|
Contribution from new business |
(38) |
35 |
(3) |
37 |
34 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
- |
34 |
34 |
64 |
98 |
|
Expected return transfer to net worth |
132 |
(60) |
72 |
(72) |
- |
|
Experience variances |
14 |
(14) |
- |
3 |
3 |
|
Operating assumption changes |
15 |
(3) |
12 |
(5) |
7 |
|
Development expenses |
(4) |
- |
(4) |
- |
(4) |
|
Expected return on free surplus |
3 |
- |
3 |
- |
3 |
|
Operating profit/(loss) after tax |
122 |
(8) |
114 |
27 |
141 |
|
Investment return and tax variances |
(43) |
9 |
(34) |
12 |
(22) |
|
Effect of economic assumption changes |
(60) |
(4) |
(64) |
(152) |
(216) |
|
Restructuring expenses |
(1) |
- |
(1) |
- |
(1) |
|
(Loss)/profit after tax |
18 |
(3) |
15 |
(113) |
(98) |
|
Internal capital transfers |
(2) |
- |
(2) |
- |
(2) |
|
Transfer back of surplus to Standard Life Investments |
(3) |
- |
(3) |
- |
(3) |
|
Transfer back of mutual funds net worth |
(1) |
- |
(1) |
- |
(1) |
|
Actuarial losses on defined benefit pension schemes |
(16) |
- |
(16) |
- |
(16) |
|
Foreign exchange differences |
6 |
36 |
42 |
29 |
71 |
|
Aggregate tax effect of items not recognised in income statement |
5 |
- |
5 |
- |
5 |
|
Other |
- |
- |
- |
- |
- |
|
Closing EEV |
161 |
770 |
931 |
622 |
1,553 |
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
168 |
611 |
779 |
497 |
1,276 |
|
Opening adjustments |
- |
- |
- |
- |
- |
|
Opening adjusted EEV |
168 |
611 |
779 |
497 |
1,276 |
|
|
|
|
|
|
|
|
Contribution from new business |
(20) |
16 |
(4) |
28 |
24 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
- |
30 |
30 |
50 |
80 |
|
Expected return transfer to net worth |
98 |
(33) |
65 |
(65) |
- |
|
Experience variances |
36 |
(6) |
30 |
5 |
35 |
|
Operating assumption changes |
(5) |
(1) |
(6) |
23 |
17 |
|
Development expenses |
(2) |
- |
(2) |
- |
(2) |
|
Expected return on free surplus |
3 |
- |
3 |
- |
3 |
|
Operating profit after tax |
110 |
6 |
116 |
41 |
157 |
|
Investment return and tax variances |
(156) |
79 |
(77) |
(49) |
(126) |
|
Effect of economic assumption changes |
52 |
(30) |
22 |
150 |
172 |
|
Restructuring expenses |
(1) |
- |
(1) |
- |
(1) |
|
Profit after tax |
5 |
55 |
60 |
142 |
202 |
|
Internal capital transfers |
(40) |
- |
(40) |
- |
(40) |
|
Transfer back of surplus to Standard Life Investments |
(3) |
- |
(3) |
- |
(3) |
|
Transfer back of mutual funds net worth |
(1) |
- |
(1) |
- |
(1) |
|
Actuarial gains on defined benefit pension schemes |
12 |
- |
12 |
- |
12 |
|
Foreign exchange differences |
16 |
71 |
87 |
67 |
154 |
|
Aggregate tax effect of items not recognised in income statement |
(3) |
- |
(3) |
- |
(3) |
|
Other |
- |
- |
- |
- |
- |
|
Closing EEV |
154 |
737 |
891 |
706 |
1,597 |
2.9 Analysis of covered business EEV PVIF and net worth movements (net of tax) continued
(d) Europe and Asia
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
182 |
12 |
194 |
432 |
626 |
|
Opening adjustments |
(58) |
17 |
(41) |
74 |
33 |
|
Opening adjusted EEV |
124 |
29 |
153 |
506 |
659 |
|
|
|
|
|
|
|
|
Contribution from new business |
(105) |
8 |
(97) |
121 |
24 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
- |
1 |
1 |
28 |
29 |
|
Expected return transfer to net worth |
105 |
3 |
108 |
(108) |
- |
|
Experience variances |
(14) |
6 |
(8) |
(5) |
(13) |
|
Operating assumption changes |
7 |
- |
7 |
(12) |
(5) |
|
Development expenses |
(19) |
- |
(19) |
- |
(19) |
|
Expected return on free surplus |
5 |
- |
5 |
- |
5 |
|
Operating profit/(loss) after tax |
(21) |
18 |
(3) |
24 |
21 |
|
Investment return and tax variances |
- |
3 |
3 |
33 |
36 |
|
Effect of economic assumption changes |
(7) |
- |
(7) |
(4) |
(11) |
|
Restructuring expenses |
(6) |
- |
(6) |
- |
(6) |
|
Profit/(loss) after tax |
(34) |
21 |
(13) |
53 |
40 |
|
Internal capital transfers |
(1) |
- |
(1) |
- |
(1) |
|
Transfer back of surplus to Standard Life Investments |
(2) |
- |
(2) |
- |
(2) |
|
Transfer back of mutual funds net worth |
- |
- |
- |
- |
- |
|
Actuarial gains on defined benefit pension schemes |
13 |
- |
13 |
- |
13 |
|
Foreign exchange differences |
(9) |
(3) |
(12) |
(39) |
(51) |
|
Aggregate tax effect of items not recognised in income statement |
- |
- |
- |
- |
- |
|
Other |
- |
- |
- |
- |
- |
|
Closing EEV |
91 |
47 |
138 |
520 |
658 |
For the 12 months to 31 December 2009, Asia is included within the covered business results for the first time on an EEV basis. This is reflected in the opening adjustment of £33m.
|
|
Free surplus |
Required capital |
Net worth |
PVIF net of cost of capital |
Total |
|
12 months to 31 December 2008 |
£m |
£m |
£m |
£m |
£m |
|
Opening EEV |
103 |
6 |
109 |
326 |
435 |
|
Opening adjustments |
- |
- |
- |
- |
- |
|
Opening adjusted EEV |
103 |
6 |
109 |
326 |
435 |
|
|
|
|
|
|
|
|
Contribution from new business |
(75) |
3 |
(72) |
94 |
22 |
|
Contribution from in-force business: |
|
|
|
|
|
|
Expected return on existing business |
- |
- |
- |
24 |
24 |
|
Expected return transfer to net worth |
73 |
1 |
74 |
(74) |
- |
|
Experience variances |
(6) |
- |
(6) |
6 |
- |
|
Operating assumption changes |
10 |
- |
10 |
(5) |
5 |
|
Development expenses |
(7) |
- |
(7) |
- |
(7) |
|
Expected return on free surplus |
(32) |
- |
(32) |
- |
(32) |
|
Operating profit/(loss) after tax |
(37) |
4 |
(33) |
45 |
12 |
|
Investment return and tax variances |
(1) |
(1) |
(2) |
(41) |
(43) |
|
Effect of economic assumption changes |
2 |
- |
2 |
5 |
7 |
|
Restructuring expenses |
(1) |
- |
(1) |
- |
(1) |
|
(Loss)/profit after tax |
(37) |
3 |
(34) |
9 |
(25) |
|
Internal capital transfers |
69 |
- |
69 |
- |
69 |
|
Transfer back of surplus to Standard Life Investments |
(2) |
- |
(2) |
- |
(2) |
|
Transfer back of mutual funds net worth |
- |
- |
- |
- |
- |
|
Actuarial losses on defined benefit pension schemes |
(10) |
- |
(10) |
- |
(10) |
|
Foreign exchange differences |
46 |
3 |
49 |
97 |
146 |
|
Aggregate tax effect of items not recognised in income statement |
- |
- |
- |
- |
- |
|
Other |
13 |
- |
13 |
- |
13 |
|
Closing EEV |
182 |
12 |
194 |
432 |
626 |
The EEV results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis. The IFRS opening and closing net assets for this business were included within the opening and closing free surplus, and the IFRS underlying loss after tax included within Expected return on free surplus.
2.10 Time value of options and guarantees (TVOG)
|
|
31 December 2009 |
31 December 2008 |
|
|
£m |
£m |
|
UK and Europe HWPF |
(66) |
(220) |
|
Canada |
(23) |
(30) |
|
Europe other |
(4) |
(7) |
|
Asia |
(13) |
- |
|
Total |
(106) |
(257) |
The results for the 12 months to 31 December 2009 include Asia on an EEV basis for the first time. The results for the 12 months to 31 December 2008 have not been restated and include Asia on an IFRS basis, therefore no TVOG is shown.
The UK and Europe HWPF TVOG reflects the value of shareholder exposure to the policyholder guarantees within the HWPF. This has reduced significantly during 2009 due to the impact of changes in asset allocations, as described in Note 2.4 - Experience variances, and the overall favourable non-operating profit of £71m as shown in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement. The Asia TVOG is reported for the first time and reflects the value of guarantees and options within participating funds.
2.11 Market value of subordinated liabilities within covered business
|
|
31 December 2009 |
31 December 2008 |
|
|
£m |
£m |
|
UK |
(1,682) |
(1,375) |
|
Canada |
(244) |
(183) |
|
Total |
(1,926) |
(1,558) |
Subordinated liabilities within EEV covered business are based on the market value of the debt. The free surplus shown in Note 2.2(c) - Segmental analysis - covered business - Segmental analysis of opening and closing EEV is net of these liabilities.
The increase in the value of the UK and Canada subordinated debt liabilities reflects the reduction in credit spreads during 2009. The impact of this movement has been to reduce non-operating profit in UK and Canada as shown in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement. For Canada, however, this has been offset by the Group EEV consolidation adjustment in respect of the Canada subordinated liability, as shown in the EEV consolidated income statement.
2.12 Principal economic assumptions - deterministic calculations - covered business
(a) Gross investment returns and expense inflation
|
|
UK |
Canada |
Europe |
|
At 31 December 2009 |
% |
% |
% |
|
Gross investment returns |
|
|
|
|
Risk free |
4.11 |
3.85 |
3.39 |
|
Corporate bonds |
4.71* |
** |
n/a |
|
Equities |
7.11 |
8.60 |
6.39 |
|
Property |
6.11 |
8.60 |
5.39 |
|
|
|
|
|
|
Other |
|
|
|
|
Expense inflation: |
3.97 |
*** |
|
|
Germany |
|
|
2.62 |
|
Ireland |
|
|
3.34 |
* Excludes corporate bond returns on annuities. For annuities in UK equity holder funds, the overall investment return, after allowing for assumed defaults, is 5.36% for annuities that are level or subject to fixed escalations and 4.11% for annuities where escalations are linked to a price index.
** Current holdings are assumed to yield in future years the earned rate for the year preceding the valuation. Future reinvestments are assumed to be in government bonds.
***1.367% in 2009. The rate in subsequent years is based on a moving 30-year bond yield less a variable deduction.
|
|
UK |
Canada |
Europe |
|
At 31 December 2008 |
% |
% |
% |
|
Gross investment returns |
|
|
|
|
Risk free |
3.42 |
3.07 |
2.95 |
|
Corporate bonds |
5.09* |
** |
n/a |
|
Equities |
6.42 |
8.60 |
5.95 |
|
Property |
5.42 |
8.60 |
4.95 |
|
|
|
|
|
|
Other |
|
|
|
|
Expense inflation: |
2.57 |
*** |
|
|
Germany |
|
|
1.27 |
|
Ireland |
|
|
2.18 |
* Excludes corporate bond returns on annuities. For annuities in UK equity holder funds, the overall investment return, after allowing for assumed defaults, is 6.44% for annuities that are level or subject to fixed escalations and 3.42% for annuities where escalations are linked to a price index.
** Current holdings are assumed to yield in future years the earned rate for the year preceding the valuation. Future reinvestments are assumed to be in government bonds.
***0.94% in 2008. The rate in subsequent years is based on a moving 30-year bond yield less a variable deduction.
2.12 Principal economic assumptions - deterministic calculations - covered business continued
(b) Risk discount rates - in-force business
|
|
UK HWPF |
UK equity holder owned funds |
Canada |
Europe HWPF |
Europe equity holder owned funds |
|
At 31 December 2009 |
% |
% |
% |
% |
% |
|
Risk margin - in-force business |
|
|
|
|
|
|
Risk margin before cost of capital adjustment: |
|
|
|
|
|
|
Market risk |
1.80 |
1.50 |
2.50 |
1.80 |
1.50 |
|
Non-market risk |
1.70 |
1.80 |
2.80 |
1.70 |
1.80 |
|
Total |
3.50 |
3.30 |
5.30 |
3.50 |
3.30 |
|
Cost of capital adjustment |
- |
(0.50) |
(2.00) |
- |
(0.50) |
|
Risk margin after cost of capital adjustment |
3.50 |
2.80 |
3.30 |
3.50 |
2.80 |
|
|
|
|
|
|
|
|
Risk discount rates - in-force business |
|
|
|
|
|
|
Risk free |
4.11 |
4.11 |
3.85 |
3.39 |
3.39 |
|
Risk margin |
3.50 |
2.80 |
3.30 |
3.50 |
2.80 |
|
Risk discount rate1 |
7.61 |
6.91 |
7.15 |
6.89 |
6.19 |
1 Using the value of in-force business as weights, the average risk discount rates for UK and Europe were 7.38% and 6.56% respectively. The weighted average for Europe includes an allowance for SLIL which uses the same risk discount rate assumptions as UK business.
|
|
UK HWPF |
UK equity holder owned funds |
Canada |
Europe HWPF |
Europe equity holder owned funds |
|
At 31 December 2008 |
% |
% |
% |
% |
% |
|
Risk margin - in-force business |
|
|
|
|
|
|
Risk margin before cost of capital adjustment: |
|
|
|
|
|
|
Market risk |
2.00 |
1.70 |
2.80 |
2.00 |
1.70 |
|
Non-market risk |
1.60 |
1.50 |
2.40 |
1.60 |
1.50 |
|
Total |
3.60 |
3.20 |
5.20 |
3.60 |
3.20 |
|
Cost of capital adjustment |
- |
(0.30) |
(1.70) |
- |
(0.30) |
|
Risk margin after cost of capital adjustment |
3.60 |
2.90 |
3.50 |
3.60 |
2.90 |
|
|
|
|
|
|
|
|
Risk discount rates - in-force business |
|
|
|
|
|
|
Risk free |
3.42 |
3.42 |
3.07 |
2.95 |
2.95 |
|
Risk margin |
3.60 |
2.90 |
3.50 |
3.60 |
2.90 |
|
Risk discount rate1 |
7.02 |
6.32 |
6.57 |
6.55 |
5.85 |
1 Using the value of in-force business as weights, the average risk discount rates for UK and Europe were 6.78% and 6.20% respectively. The weighted average for Europe includes an allowance for SLIL which uses the same risk discount rate assumptions as UK business.
Changes in market risk margins generally arise from changes in the mix of business and asset allocations. The increases in non-market risk margins primarily arise from changes in the mix of business.
The impact of the changes in risk discount rates has been included in the effect of economic assumption changes shown in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement. The amounts within these totals that relate to changes in the risk discount rate are: for UK: loss £76m; for Europe: loss £15m; for Canada: loss £116m; and for Asia: loss £7m.
(c) Risk discount rates - new business
|
|
UK HWPF |
UK equity holder owned funds |
Canada |
Europe HWPF |
Europe equity holder owned funds |
|
12 months to 31 December 2009 |
% |
% |
% |
% |
% |
|
Risk margin - new business |
|
|
|
|
|
|
Risk margin before cost of capital adjustment: |
|
|
|
|
|
|
Market risk |
1.70 |
1.40 |
1.50 |
1.70 |
1.40 |
|
Non-market risk |
0.50 |
1.80 |
1.90 |
0.50 |
1.80 |
|
Total |
2.20 |
3.20 |
3.40 |
2.20 |
3.20 |
|
Cost of capital adjustment |
- |
(0.40) |
(0.20) |
- |
(0.40) |
|
Risk margin after cost of capital adjustment |
2.20 |
2.80 |
3.20 |
2.20 |
2.80 |
|
|
|
|
|
|
|
|
Risk discount rates - new business |
|
|
|
|
|
|
Risk free1 |
3.42 |
3.42 |
3.07 |
2.95 |
2.95 |
|
Risk margin |
2.20 |
2.80 |
3.20 |
2.20 |
2.80 |
|
Risk discount rate2 |
5.62 |
6.22 |
6.27 |
5.15 |
5.75 |
1 As the new business contribution is calculated using start of period economic assumptions, the risk free rates shown here represent market yields at 31 December 2008.
2 Using the value of in-force business as weights, the average risk discount rates for UK and Europe were 6.11% and 5.83% respectively. The weighted average for Europe includes an allowance for SLIL which uses the same risk discount rate assumptions as UK business.
|
|
UK HWPF |
UK equity holder owned funds |
Canada |
Europe HWPF |
Europe equity holder owned funds |
|
12 months to 31 December 2008 |
% |
% |
% |
% |
% |
|
Risk margin - new business |
|
|
|
|
|
|
Risk margin before cost of capital adjustment: |
|
|
|
|
|
|
Market risk |
2.10 |
1.80 |
1.50 |
2.10 |
1.80 |
|
Non-market risk |
0.40 |
1.50 |
1.90 |
0.40 |
1.50 |
|
Total |
2.50 |
3.30 |
3.40 |
2.50 |
3.30 |
|
Cost of capital adjustment |
- |
(0.40) |
(0.50) |
- |
(0.40) |
|
Risk margin after cost of capital adjustment |
2.50 |
2.90 |
2.90 |
2.50 |
2.90 |
|
|
|
|
|
|
|
|
Risk discount rates - new business |
|
|
|
|
|
|
Risk free1 |
4.58 |
4.58 |
4.04 |
4.33 |
4.33 |
|
Risk margin |
2.50 |
2.90 |
2.90 |
2.50 |
2.90 |
|
Risk discount rate2 |
7.08 |
7.48 |
6.94 |
6.83 |
7.23 |
1 As the new business contribution is calculated using start of period economic assumptions, the risk free rates shown here represent market yields at 31 December 2007.
2 Using the value of in-force business as weights, the average risk discount rates for UK and Europe were 7.41% and 7.29% respectively. The weighted average for Europe includes an allowance for SLIL which uses the same risk discount rate assumptions as UK business.
2.12 Principal economic assumptions - deterministic calculations - covered business continued
(d) Asia
The Asia PVIF and cost of required capital is calculated using a 'risk neutral' approach whereby projected investment returns and discount rates are based on risk free rates. The risk free rates used were:
|
|
31 December 2009 % |
31 December 2008 % |
|
India |
7.50 |
6.00 |
|
China |
3.66 |
3.00 |
|
Hong Kong |
2.45 |
1.97 |
As a result of this risk neutral approach there is no requirement to hold a market risk margin within the risk discount rate.
Non-market risk has been allowed for via a specific deduction to the PVIF, based on a non-market risk 'cost of capital' approach. This has reduced the PVIF at 31 December 2009 by £21m (31 December 2008: £15m). Similarly, the 2009 pre-tax NBC of £16m has been reduced by £12m as an allowance for non-market risk.
2.13 Principal economic assumptions - stochastic calculations
The level of the TVOG is generally calculated using a stochastic projection. This requires an economic scenario generator (ESG) which projects the relevant fund under a large number of different future economic scenarios. A detailed description of the methodology applied in the relevant funds is provided in Note 2.16 - EEV methodology.
Characteristics of ESG used for HWPF TVOG calculations - UK and Europe
The ESG simulates future economic environments in a market consistent manner. The outputs of the ESG include:
· Cash account index
· Gross redemption yield term structure
· Equity total return index
· Property total return index
· Gilt total return index
· Corporate bond total return index
· Equity dividend yields
· Property rental yields
· Price inflation
· Earnings inflation
The ESG allows option-pricing techniques to be used to value the TVOG.
Parameters used in ESG
Cash and bond returns
These variables are calibrated using the following instruments:
· Conventional government bond yields adjusted to allow for any 'convenience premium' associated with government bond
prices
· A range of swaption prices
Inflation
This variable is calibrated using the yields obtained on inflation swaps.
Equity returns
The volatility of equity returns is calibrated to the market prices of a range of FTSE 100 and Dow Jones Euro Stoxx options.
Property returns
As there is no liquid property option market, a best estimate of property return volatility is used. The property volatility is estimated from adjusted Investment Property Databank UK data.
Dividend and rental yields
Dividend yields are derived from current market observable yields (FTSE All Stocks for UK and Euro Stoxx 50 for Europe) and a long-term best estimate.
Rental yields are derived from rental income on our actual portfolio of Property (with three month lag) and a long-term best estimate.
Correlations
The principal correlations in the ESG are between equity, bond and property returns.
The average simulated internal economy correlations between the major asset classes are:
· Equity/property = 0.14
· Equity/bonds = 0.18
· Property/bonds = 0.1
The average simulated cross economy correlations between the major asset classes are:
· UK Equity/EU Equity = 0.82
· UK Equities/EU Bonds = 0.14
· UK Bonds/EU Equities = 0.17
Note 2.10 - Time value of options and guarantees (TVOG) also shows the value of TVOG in Canada, Europe and Asia, which are in addition to the HWPF TVOG. Where material, these values are also calculated using ESG similar to that used for the HWPF TVOG calculation.
2.14 Foreign exchange
A description of the approach to the currency translation for foreign entities is provided in Note 2.16 - EEV methodology.
The principal exchange rates applied are:
|
Local currency: £ |
Closing 31 December 2009 |
Average to 31 December 2009 |
Closing 31 December 2008 |
Average to 31 December 2008 |
|
Canada |
1.693 |
1.778 |
1.775 |
1.957 |
|
Ireland |
1.126 |
1.118 |
1.034 |
1.259 |
|
Germany |
1.126 |
1.118 |
1.034 |
1.259 |
|
India |
75.148 |
75.388 |
70.049 |
80.063 |
|
China |
11.025 |
10.649 |
9.810 |
12.896 |
|
Hong Kong |
12.522 |
12.086 |
11.143 |
14.418 |
2.15 Sensitivity analysis - economic and non-economic assumptions
The tables below show the sensitivity of the embedded value and the new business contribution (NBC) to different scenarios.
The sensitivities tested were:
· 1% increase and decrease in the risk discount rates
· Interest rates 1% higher and lower than base case, with consequential changes in fixed interest asset values, reserving assumptions, risk discount rates and investment returns on equities and properties
· 10% fall in market value of equity and property assets (not applicable for NBC)
· 10% decrease in maintenance expenses (a 10% sensitivity on a base expense assumption of £10 p.a. would represent an expense assumption of £9 p.a.). Where there is a look through into service company expenses, the fee charged by the service company is unchanged while the underlying expense decreases
· 10% decrease in lapse rates (a 10% sensitivity on a base assumption of 5% p.a. would represent a lapse rate of 4.5% p.a.)
· 5% decrease in both mortality and morbidity rates for annuitant and non-annuitant policies
· EEV results assuming only prescribed minimum capital (where economic capital has been used in the EEV calculations)
Embedded value:
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
31 December 2009 |
£m |
£m |
£m |
£m |
£m |
£m |
|
Embedded value |
3,120 |
1,553 |
482 |
176 |
(66) |
5,265 |
|
Risk discount rate +1% |
(156) |
(130) |
(27) |
(8) |
- |
(321) |
|
Risk discount rate -1% |
180 |
160 |
31 |
9 |
- |
380 |
|
Interest returns +1% |
(34) |
22 |
- |
4 |
2 |
(6) |
|
Interest returns -1% |
47 |
(47) |
(2) |
(3) |
(45) |
(50) |
|
Fall in equity/property market values by 10% |
(165) |
(94) |
(13) |
(2) |
(12) |
(286) |
|
Maintenance expenses -10% |
113 |
84 |
11 |
4 |
- |
212 |
|
Lapse rates -10% |
101 |
76 |
7 |
3 |
(3) |
184 |
|
Annuitant mortality -5% |
(50) |
(41) |
(4) |
- |
- |
(95) |
|
Non-annuitant mortality -5% |
8 |
83 |
- |
1 |
(1) |
91 |
|
Prescribed minimum capital |
- |
64 |
- |
- |
- |
64 |
The sensitivity of the Canada embedded value as shown above includes the effect of changes in the market value of the subordinated liability. Whilst Group EEV is adjusted for the different subordinated debt valuation bases used for covered and non-covered business as explained in Note 2.16 - EEV methodology, the impact of these sensitivities on the Group EEV consolidation adjustment is not included in this sensitivity analysis.
New business contribution:
|
|
UK |
Canada |
Europe |
Asia |
HWPF TVOG |
Total |
|
12 months to 31 December 2009 |
£m |
£m |
£m |
£m |
£m |
£m |
|
New business contribution |
139 |
46 |
13 |
15 |
- |
213 |
|
Risk discount rate +1% |
(21) |
(9) |
(4) |
(3) |
- |
(37) |
|
Risk discount rate -1% |
24 |
11 |
5 |
4 |
- |
44 |
|
Interest returns +1% |
34 |
(5) |
1 |
- |
- |
30 |
|
Interest returns -1% |
(42) |
6 |
(1) |
- |
- |
(37) |
|
Maintenance expenses -10% |
16 |
13 |
2 |
1 |
- |
32 |
|
Lapse rates -10% |
10 |
9 |
2 |
2 |
- |
23 |
|
Annuitant mortality -5% |
(2) |
(1) |
- |
- |
- |
(3) |
|
Non-annuitant mortality -5% |
- |
3 |
- |
- |
- |
3 |
|
Prescribed minimum capital |
- |
2 |
- |
- |
- |
2 |
Sensitivities to higher and lower assumed equity and property risk premiums in future investment earnings have not been calculated, as the effect of the risk premium is removed in setting the market risk margin in the risk discount rate.
The demographics sensitivities shown above represent a standard change to the assumptions for all products. Different products will be more or less sensitive to the change, and impacts may partially offset one another.
2.16 EEV methodology
Covered business
For the purposes of EEV reporting, a distinction is drawn between covered business to which EEV methodology is applied and non-covered business where results and balances are based on those determined under IFRS and included in the IFRS financial statements, unless otherwise stated.
The Group's covered business is its life assurance and pensions businesses in the UK, Canada, Europe (Germany including Austria, and Ireland) and Asia, as well as the current and future profits and losses from Standard Life Investments arising on its management of funds relating to the life and pensions businesses.
UK covered business also includes:
· Non-insured self invested personal pension (SIPP) business
· Those elements of Wrap business that are contained within a long-term product wrapper i.e. bonds, SIPPs and mutual funds
· Mutual funds sold by the UK business
Canada covered business also includes mutual funds.
Europe covered business consists of:
· The Group's Germany branch of Standard Life Assurance Limited (SLAL)
· The Group's Ireland branch of SLAL
· The Group's offshore business, which is sold by Standard Life International Limited (SLIL)
Asia covered business consists of:
· The Group's share of results in the joint venture in India, HDFC Standard Life Insurance Company Limited, at 26% for the 12 months to 31 December 2009 (during the 12 months to 31 December 2008: 26%)
· The Group's share of results in the joint venture in China, Heng An Standard Life Insurance Company Limited, at 50% for the 12 months to 31 December 2009 (during the 12 months to 31 December 2008: 50%)
· The results of the Group's business in Hong Kong (Standard Life Asia Limited)
Cash flows emerging in the period on covered business that do not reside within a life and pensions company on a statutory basis are transferred back to the relevant non-covered entity for disclosure within their closing net assets. This treatment is applied to both the return from global investment management and the return on certain mutual funds included in covered business.
The Group's non-covered business mainly includes the business of Standard Life Bank, Standard Life Healthcare, Standard Life plc, the third party global investment management business of Standard Life Investments, the non-covered business of Standard Life Savings and other non-life and pensions entities.
Non-covered business EEV operating profit is represented by IFRS normalised underlying profit as adjusted for Standard Life Investments (global investment management) look through profits and the return on mutual funds which are recognised in covered business. The only difference between IFRS normalised underlying profit and IFRS underlying profit arises within global investment management as described in Note 2.6(b) - Non-covered business - Global investment management EEV profits before tax.
2.16 EEV methodology continued
Value of in-force covered business
The value of future equity holders' cash flows is calculated for each material business unit on an after-tax basis, projected using best estimate future assumptions as described below.
Allowance is made for external reinsurance and reinsurance within the Group. The cash flows include the profits and losses arising in Group companies providing global investment management and other services where these relate to covered business. This is referred to as the 'look through' into service company expenses.
The projected cash flows are discounted to the valuation date using a risk discount rate which is intended to make sufficient allowance for the risks associated with the emergence of these cash flows, other than those risks allowed for elsewhere in the EEV calculations. In particular, a deduction is made from the present value of the best estimate cash flows to reflect the risks associated with the existence of financial options and guarantees, this deduction being assessed using stochastic techniques as described below.
Free surplus
The free surplus is the market value of any assets allocated to, but not required to support, the in-force covered business at the valuation date. In the UK, this comprises the market value of the assets in the equity holders' fund, plus the value of the equity holders' interests in the surplus of the long-term fund, after appropriate allowance for tax, less the required capital supporting the covered business.
For some assets and liabilities where market value is not the normal basis for accounting, as in Canada, the free surplus is restated to market value, adjusted as required to allow for the present value of any tax which would become payable if the assets were realised.
Allowance for risk
Under the EEV Principles and Guidance, risks within the covered business are allowed for in the following ways:
• Application of risk discount rates to projected cash flows, which are derived by adding a risk margin to a risk free rate
• Holding of required capital for the covered business, determined by reference to both regulatory requirements and internal economic capital assessments
• Allowing for TVOG
Risk discount rates
Under the EEV methodology, a risk discount rate is required to calculate the present value of expected future distributable profits as a single value at a particular date. The risk discount rate comprises a risk free rate which reflects the time value of money and a risk margin allowing for the risk that experience in future years may differ from that assumed. In particular, a risk margin is added to allow for the risk that expected additional returns on certain asset classes are not achieved.
Risk discount rates have been determined as the risk free government bond yield plus a risk margin. The risk margins have been determined for market risk and non-market risk separately. For market risk, we have opted for an approach whereby the risk margin is determined such that the PVIF (excluding the allowance for the TVOG) calculated using expected 'real world' asset returns equates with the PVIF calculated using 'risk neutral' investment returns and discount rates. In this way, the benefits of assuming higher than risk free returns on future cash flows are offset by using a higher discount rate. However, when returns above the risk free rate arise from the additional returns available from investing in illiquid assets, namely corporate bonds and mortgages, where they are matched to appropriate liabilities, these are not offset in determining the discount rate. Allowance has then been made for non-market risk by applying stress tests to the PVIF using our internal capital model, and quantifying an additional risk margin based on the results of the stress tests.
The main elements of non-market risk which are stress tested are lapse, mortality, expense and credit risk assumptions. Benefits of diversification between risk types are allowed for in deriving the risk margins in line with our internal capital model.
Separate risk discount rates have been calculated for in-force and new business and for the principal geographic segments (UK, Europe and Canada). Within the UK and Europe, separate risk margins are calculated for profits emerging on policies inside the HWPF (regardless of whether these profits emerge directly from the HWPF or by reassurance into other Group entities) and on policies that are in equity holder owned funds. For HWPF policies, there is a significant inter-Group reassurance agreement in respect of mortality surpluses on annuities, which are reassured out of the HWPF. The HWPF risk margin anticipates diversification benefits including the annuity mortality risk, since the overall capital structure also benefits from this diversification.
The risk margins are also reduced to allow for any cost of required capital (excluding double taxation cost) which is already reflected within the EEV.
Market risk margins are reviewed at each valuation date, allowing for changes in risk profile arising from movements in asset mix. Non-market risk margins are reviewed in detail once a year.
The values of the risk discount rates used for this reporting period are provided in Note 2.12 - Principal economic assumptions - deterministic calculations - covered business.
In Asia, the PVIF and cost of required capital is calculated using a 'risk neutral' approach whereby projected investment returns and discount rates are based on risk free rates. As a result, there is no need for an additional market risk margin in the discount rate. Non-market risk is deducted directly from the PVIF using a 'cost of capital' approach on the risk capital arising from the key sources of non-market risk. For the Asia business, this methodology would give a similar result to the methodology used in the UK, Europe and Canada since the calibration of a risk discount rate would have allowed for the market and non-market risks.
Required capital
Required capital represents the amount of assets over and above those required to back the liabilities in respect of the covered business whose distribution to equity holders is restricted. As a minimum, this will represent the capital requirement of the local regulator.
The levels of required capital are reviewed in detail once a year.
We have set required capital to be the higher of regulatory capital and our own internally assessed risk-based capital requirement. In determining the required capital for the purposes of assessing EEV, the Group excludes any capital which is provided by the existing surplus in the HWPF, as this capital is provided by policyholders. Any required capital in excess of that provided by the existing surplus in the HWPF would need to be provided by assets in the equity holders' funds. As part of the annual assessment, projections of the expected surplus in the HWPF, on best estimate assumptions, are carried out to assess whether this is sufficient to cover the level of required capital in respect of the HWPF.
The levels of required capital in the current EEV calculations are therefore as follows:
· UK and Europe (business in HWPF) - no capital requirement in excess of statutory reserves or asset shares is valued in the
EEV
· UK and Europe (business in equity holder owned funds) - 100% of EU minimum regulatory capital, which is higher in aggregate than Standard Life's internal risk-based capital requirement
· Canada - the level of required capital is taken as 150% of minimum continuing capital and surplus requirements (MCCSR)
· Asia - required capital is based on the local statutory capital requirements
The cost of required capital has been calculated using assumptions consistent with those used in the value of in-force (VIF) calculations.
Time value of financial options and guarantees (TVOG)
The TVOG represents the potential additional cost to equity holders where a financial option exists which affects policyholder benefits and is exercisable at the option of the policyholder.
UK and Europe - HWPF
The main source of TVOG in the Group EEV arises from the HWPF. Under the terms of the Scheme, equity holder cash flows from the HWPF are held back if required to cover HWPF liabilities on the Financial Services Authority realistic or regulatory basis. This option for the UK, Germany and Ireland results in the loss of cash flows when the HWPF has insufficient assets to pay guaranteed policy benefits. The main options and guarantees within the HWPF in respect of UK and Europe business relate to with profits business and include minimum guaranteed rates of return.
The value of the TVOG arising from the HWPF at any point in time will be sensitive to:
· The level of the residual estate (working capital in the HWPF)
· Investment conditions in terms of bond yields, equity and property values, and implied market volatility
· The investment profile of the assets backing the applicable policies, the residual estate and non profit business in the fund at the time the TVOG is calculated
2.16 EEV methodology continued
The level of the TVOG has been calculated by a model which projects the HWPF under a large number of different future economic scenarios. Particular features of this calculation are:
· The projected economic scenarios and the methodology used to discount equity holder cash flows are based on market consistent assumptions
· The total cost includes an allowance for non-market risk
· Changes in policyholder behaviour are allowed for according to the particular economic scenario
· Changes in management actions, including the dynamic guarantee deductions, are allowed for according to the particular economic scenario, such actions being expected to be consistent with the way that the HWPF will be managed in future as described in the Scheme and in the Principles and Practices of Financial Management (PPFM)
· Each projection allows for the gradual release of the residual estate over time to policyholders where there are sufficient funds to do so
UK and Europe
Most with profits business written post demutualisation is managed in a number of new with profits funds. For the present reporting period, the only significant volumes of this type of new business have arisen in Germany. These policies have guarantees relating to benefits available on the policy maturity date. These guarantees increase each year with the addition of bonuses.
Equity holder assets are at risk if the resources of these with profits funds are insufficient to pay the guaranteed benefits. The level of the TVOG has been calculated using stochastic techniques. The TVOG has reduced both the NBC as well as the closing PVIF for Europe.
Canada
The main options and guarantees within the Canada business are in respect of minimum investment returns, guaranteed maturity and death benefits, and vested bonuses, which apply to certain investment and insurance contracts.
Asia
The TVOG in Asia arises from guarantees and options given to with profits business written in India and China.
Other economic assumptions
The assumed investment returns reflect our estimates of expected returns on principal asset classes, and are, in general, based on market conditions at the date of calculation of the EEV.
The inflation rates assumed are, in general, based on the market implied long-term price inflation plus a margin to allow for salary inflation.
The Group's offshore business, which is sold by SLIL, is included within Europe results but has the same economic assumptions as UK covered business.
Details of the assumptions used for this reporting period are provided in Note 2.12 - Principal economic assumptions - deterministic calculations - covered business.
Non-economic assumption changes
Non-economic assumptions for the main classes of business, including most expense assumptions, are reviewed on an annual basis.
Expense assumptions
Expense assumptions on a per policy basis have been derived based on an analysis of management expenses performed by each business, and are split between acquisition and maintenance assumptions.
In determining future expenses in relation to covered business, no allowance has been made in the EEV or the NBC for any allocation of Group corporate centre costs.
Development expenses represent specific expenses incurred which are considered temporary in nature and are not expected to occur again.
Costs related to restructuring have been excluded from the EEV results where it has been agreed that these costs are to be met by the HWPF and therefore would not form part of the surplus cash flows.
Global investment management expenses are also allowed for, and the assumptions for these reflect the actual investment expenses of Standard Life Investments in providing global investment management services to the life and pensions business rather than the investment fees actually charged.
Restructuring expenses for covered and non-covered business include the current year cost of the Continuous Improvement Programme (CIP) and any additional restructuring expenses consistent with those identified in the IFRS underlying profit adjustments. The total restructuring expenses are included together with the cost of any corporate activity in restructuring and corporate transaction expenses.
Acquisition costs used within the calculation of the NBC reflect the full acquisition expenses incurred in writing new business in the period.
Expenses - pension scheme deficits
Pension scheme deficits have been included in accordance with International Accounting Standard (IAS) 19 Employee Benefits. IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction was adopted by the Group from 1 January 2008. The interpretation provides guidance on assessing the limit in IAS 19 Employee Benefits on the amount of any surplus that can be recognised as an asset and explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. The interpretation has been taken into consideration in determining the treatment of the surplus arising in respect of the UK defined benefit plan as at 31 December 2008.
Other non-economic experience assumptions
Assumptions are made in respect of future levels of mortality, morbidity, premium terminations, option take-up, surrenders and withdrawals. The assumptions reflect our best estimates of the likely future experience, and are based on recent experience and relevant industry data, where available.
Annuitant mortality assumptions use a combination of base mortality rates, which are generally set by reference to recent experience, and expected future changes in mortality. The latter uses data provided by the Continuous Mortality Investigation Bureau in the UK and the Canadian Institute of Actuaries in Canada along with other company specific considerations.
Assumptions regarding option take-up, surrenders and withdrawals are assumed to vary, where appropriate, according to the investment scenario under consideration when deriving the TVOG, to reflect our best estimate of how policyholder behaviour may vary in such circumstances.
New business
Definition of new business
New business includes new policies written during the period and some increments to existing policies.
For the UK, classification as new or existing business is determined as follows (using the approach used for the published new business figures):
· New recurrent single premium business is classified as new regular premium business to the extent that it is deemed likely to renew
· Department of Work and Pensions (DWP) rebates are deemed to be new single premiums
· Pensions vesting into annuity contracts under existing group defined benefits contracts are not included as new business
· Pensions vesting under other group contracts and individual pensions are included as new business
· Products substituted due to the exercise of standard contract terms are not deemed to be new business
· All increments and indexations to existing policies, including new members, and increments and indexations paid by existing members of group schemes, are deemed to be new business
2.16 EEV methodology continued
For Germany, new business comprises new contracts written into the equity holder owned funds during the period.
The new business contribution for Germany is calculated assuming a specific level of future premium indexation. Similarly, it is assumed that premiums on 'Low Start' policies increase at the end of the low start period.
For Ireland, new business is determined as follows:
· New contracts written during the period are included as new business
· New premiums on recurrent single premium contracts are included as new business
· Pensions vesting into annuity contracts under existing group defined benefits contracts are not included as new business
· Pensions vesting under other group contracts and individual pensions are included as new business
· All increments and indexations to existing policies, including new members, and increments and indexations paid by existing members of group schemes, are deemed to be new business
For Canada, business is deemed to be 'new business' if a contract has been issued during the reporting period. The new business contribution also includes the value of renewal premiums for a new contract, where the renewal premiums are (i) contractual, (ii) non-contractual but reasonably predictable, or (iii) recurrent single premiums that are pre-defined and reasonably predictable. The present value of future net income attributable to renewal premiums on existing group pension and savings contracts, including those from new members, is not included as new business. Since all deposits (new and renewal) in individual segregated funds business attract a new business/first year commission, this business is treated as new business for EEV purposes.
For Asia, the new business is defined as that arising from the sale of new contracts during the reporting period. The value of new business includes the value of expected renewals on those new contracts.
New business contribution (NBC)
The contribution generated by new business written during the period is the present value of the projected stream of after-tax distributable profit from that business. NBC before tax is calculated by grossing up the contribution after tax at the full corporation tax rate for UK business and at other equivalent rates of tax for other countries. NBC is calculated as at the end of the reporting period.
The economic assumptions used are those at the start of the reporting period, and the non-economic assumptions are those at the end of the reporting period. An exception to this policy is annuity business in the UK and Ireland where, to ensure consistency between the economic assumptions used in the NBC and those used in pricing the business and in the calculation of mathematical reserves, the economic assumptions used are the average rates for each quarter during the reporting period, and the asset allocations are those used in the pricing basis.
Present value of new business premiums (PVNBP)
New business sales are expressed as the PVNBP. The PVNBP calculation is equal to total single premium sales received in the period plus the discounted value of regular premiums expected to be received over the term of the new contracts, and is expressed at the point of sale. The premium volumes and projection assumptions used to calculate the present value of regular premiums for each product are the same as those used to calculate NBC, except that the PVNBP is discounted using the relevant opening risk free rate rather than the risk discount rate.
Tax
The opening and closing EEV numbers for the covered business are determined on an after-tax basis. The tax assumptions used are based upon the best estimate of the actual tax expected to arise. Attributable tax and profit before tax are derived by grossing up profit after tax at the long-term rate of corporation tax appropriate to each territory. While for some territories this rate does not equate to the actual effective rate of tax used in the calculation of after-tax profits, it provides a consistent grossing up basis upon which to compare results from one year to another and is in line with the Group's expectation of the rate of tax applicable to new business.
During the year, a loan was made to the HWPF by Standard Life plc, repayment of which is contingent on the emergence of recourse cash flows and surplus in the HWPF ('contingent loan agreement'). A transfer to equity holders was then made to transfer the remaining unallocated surplus to equity holders without equity holder tax arising. As a result of this the market risk associated with unallocated surplus was reduced. Future transfers to equity holders from the HWPF will, in the first instance, take the form of repayments under the contingent loan agreement. Such transfers can be made without equity holder tax arising for a number of years. Over time the actual effective tax rate on these transfers to equity holders will move toward the standard rate of corporation tax. The impact of this on current year results is provided in Note 2.2(a) - Segmental analysis - covered business - Segmental EEV income statement.
For non-covered business, attributed tax is consistent with the IFRS financial statements, unless otherwise stated.
Subordinated liabilities
The liabilities in respect of the UK subordinated guaranteed bonds and Mutual Assurance Capital Securities plus the subordinated debt issued by Canada form part of covered business and have been deducted at market value within the EEV. The Canada subordinated liability is owned by a non-covered subsidiary of the Group, where the asset is valued on an amortised cost basis. Total Group EEV has been adjusted to exclude the difference between the market value and the amortised cost value of the Canada subordinated liability.
For non-covered business, no adjustment is made to the IFRS valuation of debt.
Foreign exchange
Embedded value and other items within the statement of financial position denominated in foreign currencies have been translated to Sterling using the appropriate closing exchange rates. NBC and other items within the income statement have been translated using the appropriate average exchange rates. Gains and losses arising from foreign exchange differences on consolidation are presented separately within the EEV consolidated statement of comprehensive income.
Details of the exchange rates applied are provided in Note 2.14 - Foreign exchange.
3 International Financial Reporting Standards (IFRS)
Summary IFRS consolidated income statement
For the year ended 31 December 2009
|
|
|
2009 |
Restated* 2008 |
|
|
Notes |
£m |
£m |
|
Revenue |
|
|
|
|
Gross earned premium |
|
3,562 |
3,564 |
|
Premium ceded to reinsurers |
|
(95) |
(6,338) |
|
Net earned premium |
|
3,467 |
(2,774) |
|
Net investment return |
|
13,174 |
(14,162) |
|
Fee and commission income |
|
666 |
617 |
|
Other income |
|
128 |
93 |
|
Total net revenue |
|
17,435 |
(16,226) |
|
|
|
|
|
|
Expenses |
|
|
|
|
Claims and benefits paid |
|
6,011 |
7,142 |
|
Claim recoveries from reinsurers |
|
(623) |
(571) |
|
Net insurance benefits and claims |
|
5,388 |
6,571 |
|
Change in reinsurance assets |
|
(942) |
(5,559) |
|
Change in policyholder liabilities |
|
9,978 |
(18,112) |
|
Expenses under arrangements with reinsurers |
|
563 |
92 |
|
Administrative expenses |
3.3 |
1,562 |
1,778 |
|
Change in liability for third party interest in consolidated funds |
|
323 |
(598) |
|
Finance costs |
|
115 |
109 |
|
Total expenses |
|
16,987 |
(15,719) |
|
|
|
|
|
|
Share of (losses)/profits from associates and joint ventures |
|
(29) |
101 |
|
|
|
|
|
|
Profit/(loss) before tax |
|
419 |
(406) |
|
|
|
|
|
|
Tax expense/(credit) attributable to policyholders' returns |
3.4 |
299 |
(334) |
|
|
|
|
|
|
Profit/(loss) before tax attributable to equity holders' profits |
|
120 |
(72) |
|
|
|
|
|
|
Total tax expense/(credit) |
3.4 |
281 |
(472) |
|
Less: Tax attributable to policyholders' returns |
3.4 |
(299) |
334 |
|
Tax credit attributable to equity holders' profits |
3.4 |
(18) |
(138) |
|
|
|
|
|
|
Profit for the year from continuing operations |
|
138 |
66 |
|
|
|
|
|
|
Profit/(loss) for the year from discontinued operations |
3.5 |
42 |
(49) |
|
Profit for the year |
|
180 |
17 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of Standard Life plc |
|
213 |
100 |
|
Non-controlling interests |
|
(33) |
(83) |
|
|
|
180 |
17 |
|
Earnings per share from continuing operations |
|
|
|
|
Basic (pence per share) |
3.7 |
7.8 |
6.9 |
|
Diluted (pence per share) |
3.7 |
7.8 |
6.9 |
* The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010 and has therefore been classified as a discontinued operation. Refer to Note 3.18 - Events after the reporting period. The presentation of the 2008 comparatives in certain primary statements and in the corresponding notes has been reclassified accordingly, as indicated.
Summary IFRS consolidated statement of comprehensive income
For the year ended 31 December 2009
|
|
|
2009 |
Restated 2008 |
|
|
Notes |
£m |
£m |
|
Profit for the year |
|
180 |
17 |
|
Less: (Profit)/loss from discontinued operations |
3.5 |
(42) |
49 |
|
Profit from continuing operations |
|
138 |
66 |
|
Fair value gains on cash flow hedges |
|
1 |
- |
|
Actuarial (losses)/gains on defined benefit pension schemes |
|
(77) |
161 |
|
Revaluation of land and buildings |
|
(16) |
(58) |
|
Net investment hedge |
|
(12) |
(17) |
|
Exchange differences on translating foreign operations |
|
(65) |
479 |
|
Equity movements transferred to unallocated divisible surplus |
|
104 |
(236) |
|
Equity movements attributable to third party interest in consolidated funds |
|
- |
22 |
|
Share of other recognised income from associates and joint ventures |
|
- |
2 |
|
Aggregate equity holder tax effect of items not recognised in income statement |
|
28 |
(53) |
|
Other comprehensive (expense)/income for the year from continuing operations |
|
(37) |
300 |
|
Total comprehensive income for the year from continuing operations |
|
101 |
366 |
|
|
|
|
|
|
Profit/(loss) from discontinued operations |
3.5 |
42 |
(49) |
|
Other comprehensive income/(expense) from discontinued operations |
3.5 |
8 |
(27) |
|
Total comprehensive income/(expense) for the year from discontinued operations |
|
50 |
(76) |
|
|
|
|
|
|
Total comprehensive income for the year |
|
151 |
290 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of Standard Life plc |
|
|
|
|
From continuing operations |
|
134 |
449 |
|
From discontinued operations |
|
50 |
(76) |
|
Non-controlling interests |
|
|
|
|
From continuing operations |
|
(33) |
(83) |
|
|
|
151 |
290 |
IFRS pro forma reconciliation of Group underlying profit to profit for the year
For the year ended 31 December 2009
|
|
|
Continuing operations |
Discontinued operations |
Total |
Continuing operations |
Discontinued operations |
Total |
|
|
|
2009 |
2009 |
2009 |
2008 |
2008 |
2008 |
|
|
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
Underlying profit before tax attributable to equity holders of Standard Life plc |
|
|
|
|
|
|
|
|
UK |
|
199 |
60 |
259 |
212 |
26 |
238 |
|
Canada |
|
(7) |
- |
(7) |
(102) |
- |
(102) |
|
Europe |
|
45 |
- |
45 |
48 |
- |
48 |
|
Asia |
|
(27) |
- |
(27) |
(35) |
- |
(35) |
|
Global investment management |
|
66 |
- |
66 |
42 |
- |
42 |
|
Other |
|
(45) |
- |
(45) |
(37) |
- |
(37) |
|
Underlying profit before tax attributable to equity holders of Standard Life plc and adjusted items |
|
231 |
60 |
291 |
128 |
26 |
154 |
|
Loss attributable to non-controlling interests |
|
(33) |
- |
(33) |
(83) |
- |
(83) |
|
Underlying profit before tax attributable to equity holders and adjusted items |
|
198 |
60 |
258 |
45 |
26 |
71 |
|
Adjusted for the following items: |
|
|
|
|
|
|
|
|
Volatility arising on different asset and liability valuation bases |
3.6 |
(18) |
40 |
22 |
(47) |
(94) |
(141) |
|
Impairment of intangible assets |
|
(2) |
(5) |
(7) |
- |
- |
- |
|
Restructuring and corporate transaction expenses |
3.3 |
(58) |
(1) |
(59) |
(70) |
(2) |
(72) |
|
Impairment loss on discontinued banking operations |
3.5 |
- |
(10) |
(10) |
- |
- |
- |
Profit/(loss) before tax attributable to equity holders' profits |
|
120 |
84 |
204 |
(72) |
(70) |
(142) |
|
Tax (expense)/credit attributable to: |
|
|
|
|
|
|
|
|
Underlying profit |
|
2 |
(28) |
(26) |
106 |
(6) |
100 |
|
Adjusted items |
|
16 |
(14) |
2 |
32 |
27 |
59 |
|
Total tax (expense)/credit attributable to equity holders' profits |
|
18 |
(42) |
(24) |
138 |
21 |
159 |
|
Profit/(loss) for the year |
|
138 |
42 |
180 |
66 |
(49) |
17 |
Underlying profit is calculated by adjusting the profit for the period for volatility that arises from different International Financial Reporting Standards (IFRS) measurement bases for liabilities and backing assets, volatility arising from derivatives that are part of economic hedges but do not qualify as hedge relationships under IFRS, restructuring costs, significant corporate transaction expenses, impairment of intangible assets and profit or loss arising on the disposal of a subsidiary, joint venture or associate. The Directors believe that, by eliminating this volatility from equity holder profits, they are presenting a more meaningful indication of the underlying business performance of the Group.
Summary IFRS consolidated statement of financial position
As at 31 December 2009
|
|
|
2009 |
2008 |
|
|
Notes |
£m |
£m |
|
Assets |
|
|
|
|
Intangible assets |
|
106 |
112 |
|
Deferred acquisition costs |
|
872 |
892 |
|
Investments in associates and joint ventures |
|
2,169 |
3,098 |
|
Investment property |
|
7,111 |
7,738 |
|
Property, plant and equipment |
|
161 |
740 |
|
Reinsurance assets |
|
7,032 |
6,076 |
|
Loans and receivables |
|
2,769 |
12,069 |
|
Derivative financial assets |
|
1,229 |
2,800 |
|
Investment securities |
|
106,181 |
90,716 |
|
Other assets |
|
2,152 |
2,687 |
|
Cash and cash equivalents |
|
7,436 |
10,052 |
|
Assets of operations classified as held for sale |
3.17 |
9,395 |
- |
|
Total assets |
|
146,613 |
136,980 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
3.9 |
224 |
218 |
|
Share premium reserve |
|
888 |
792 |
|
Retained earnings |
|
685 |
774 |
|
Other reserves |
|
1,660 |
1,623 |
|
Equity attributable to equity holders of Standard Life plc |
|
3,457 |
3,407 |
|
Non-controlling interests |
|
296 |
334 |
Total equity |
|
3,753 |
3,741 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Non-participating contract liabilities |
3.10 |
85,892 |
71,908 |
|
Participating contract liabilities |
3.10 |
32,352 |
34,163 |
|
Deposits received from reinsurers |
|
6,104 |
5,968 |
|
Third party interest in consolidated funds |
|
3,004 |
1,603 |
|
Borrowings |
3.11 |
227 |
3,227 |
|
Subordinated liabilities |
|
1,832 |
2,204 |
|
Deferred income |
|
371 |
382 |
|
Income tax liabilities |
|
214 |
267 |
|
Customer accounts related to banking activities and deposits by banks |
|
- |
6,991 |
|
Derivative financial liabilities |
|
797 |
1,348 |
|
Other liabilities |
|
2,924 |
5,178 |
|
Liabilities of operations classified as held for sale |
3.17 |
9,143 |
- |
|
Total liabilities |
|
142,860 |
133,239 |
|
|
|
|
|
|
Total equity and liabilities |
|
146,613 |
136,980 |
Summary IFRS consolidated statement of changes in equity
For the year ended 31 December 2009
|
|
Share capital |
Share premium reserve |
Retained earnings |
Other reserves |
Total equity attributable to equity holders of Standard Life plc |
Non-controlling interests |
Total equity |
|
2009 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
1 January |
218 |
792 |
774 |
1,623 |
3,407 |
334 |
3,741 |
|
Profit/(loss) for the year |
- |
- |
213 |
- |
213 |
(33) |
180 |
|
Other comprehensive expense for the year |
- |
- |
(50) |
21 |
(29) |
- |
(29) |
|
Total comprehensive income/(expense) for the year |
- |
- |
163 |
21 |
184 |
(33) |
151 |
|
Distributions to equity holders |
- |
- |
(260) |
- |
(260) |
- |
(260) |
|
Issue of share capital other than in cash |
6 |
96 |
- |
- |
102 |
- |
102 |
|
Reserves credit for employee share-based payment schemes |
- |
- |
- |
24 |
24 |
- |
24 |
|
Transfer to retained earnings for vested employee share-based payment schemes |
- |
- |
8 |
(8) |
- |
- |
- |
|
Other movements in non-controlling interests in the year |
- |
- |
- |
- |
- |
(5) |
(5) |
|
31 December |
224 |
888 |
685 |
1,660 |
3,457 |
296 |
3,753 |
|
|
Share capital |
Share premium reserve |
Retained earnings |
Other reserves |
Total equity attributable to equity holders of Standard Life plc |
Non-controlling interests |
Total equity |
|
2008 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
1 January |
217 |
792 |
776 |
1,497 |
3,282 |
391 |
3,673 |
|
Profit/(loss) for the year |
- |
- |
100 |
- |
100 |
(83) |
17 |
|
Other comprehensive income for the year |
- |
- |
110 |
163 |
273 |
- |
273 |
|
Total comprehensive income/(expense) for the year |
- |
- |
210 |
163 |
373 |
(83) |
290 |
|
Distributions to equity holders |
- |
- |
(220) |
(37) |
(257) |
- |
(257) |
|
Issue of share capital other than in cash |
1 |
- |
- |
- |
1 |
- |
1 |
|
Reserves credit for employee share-based payment schemes |
- |
- |
- |
10 |
10 |
- |
10 |
|
Vested employee share-based payment schemes |
- |
- |
- |
(2) |
(2) |
- |
(2) |
|
Transfer to retained earnings for vested employee share-based payment schemes |
- |
- |
8 |
(8) |
- |
- |
- |
|
Other movements in non-controlling interests in the year |
- |
- |
- |
- |
- |
26 |
26 |
|
31 December |
218 |
792 |
774 |
1,623 |
3,407 |
334 |
3,741 |
Summary IFRS consolidated statement of cash flows
For the year ended 31 December 2009
|
|
|
2009 |
2008 |
|
|
|
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
Profit/(loss) before tax from continuing operations |
|
419 |
(406) |
|
Profit/(loss) before tax from discontinued operations |
|
84 |
(70) |
|
|
|
503 |
(476) |
|
Non-cash movements from operating activities |
|
256 |
377 |
|
Net (increase)/decrease in operational assets |
|
(11,074) |
14,386 |
|
Net increase/(decrease) in operational liabilities |
|
8,838 |
(11,604) |
|
Taxation paid |
|
(239) |
(379) |
|
Net cash flows from operating activities |
|
(1,716) |
2,304 |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Net disposal/(acquisition) of property, plant and equipment |
|
41 |
(138) |
|
Acquisition of subsidiaries, net of cash acquired |
|
- |
(24) |
|
Investments in associates and joint ventures |
|
(6) |
(16) |
|
Other |
|
(16) |
(23) |
|
Net cash flows from investing activities |
|
19 |
(201) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from other borrowings |
|
11 |
64 |
|
Repayment of other borrowings |
|
(19) |
(6) |
|
Capital flows from/(to) non-controlling interests and third party interest in consolidated funds |
|
960 |
(1,047) |
|
Distributions paid to non-controlling interests |
|
(35) |
(33) |
|
Interest paid |
|
(131) |
(138) |
|
Ordinary dividends paid |
|
(158) |
(257) |
|
Net cash flows from financing activities |
|
628 |
(1,417) |
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
(1,069) |
686 |
|
Cash and cash equivalents at the beginning of the year |
|
9,951 |
9,120 |
|
Effects of exchange rate changes on cash and cash equivalents |
|
(42) |
145 |
|
Cash and cash equivalents at the end of the year |
|
8,840 |
9,951 |
|
|
|
|
|
|
Supplemental disclosures on cash flow from operating activities |
|
|
|
|
Interest paid |
|
275 |
628 |
|
Interest received |
|
3,003 |
3,666 |
|
Dividends received |
|
1,266 |
1,649 |
|
Rental income received on investment properties |
|
599 |
625 |
This information is provided by RNS
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