CGNU Interim Results 2001-Pt4
CGNU PLC
2 August 2001
PART 4 OF 6
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Page 16
Summarised consolidated profit and loss account - modified statutory basis
For the six months to 30 June 2001
6 6 6 Full
months months months year
2001 2001 2000 2000
Em Premium income (after reinsurance) £m £m £m
and investment sales
Ongoing business
13,254 Life premiums 8,218 7,130 14,848
1,231 Investment sales 763 1,392 2,501
821 Health premiums 509 428 687
------ ------ ------ -------
15,306 9,490 8,950 18,036
7,020 General insurance premiums 4,352 4,596 8,990
------ ------ ------ ------
22,326 Total ongoing business 13,842 13,546 27,026
Businesses discontinued - general
1,779 insurance premiums 1,103 1,587 3,213
------ ------ ------ ------
24,105 Total 14,945 15,133 30,239
====== ====== ====== ======
Operating profit
980 Modified statutory life profit 608 606 1,190
52 Health 32 34 68
39 Fund management 24 22 61
689 General insurance 427 193 412
(11) Non-insurance operations (7) (19) (24)
(131) Corporate costs (81) (97) (185)
(347) Unallocated interest charges (215) (167) (361)
------ ------ ------ ------
1,271 788 572 1,161
(97) Wealth management (60) (41) (133)
------ ------ ------ ------
Operating profit - ongoing
business before tax, amortisation
of goodwill, amortisation
of acquired additional
value of in-force
long-term business
1,174 and exceptional items 728 531 1,028
(34) Businesses discontinued (21) 121 (554)
------ ------ ------ ------
1,140 707 652 474
(48) Amortisation of goodwill (30) (18) (92)
Amortisation of acquired
additional value of in-force
(27) long-term business (17) (10) (29)
Policyholders' Protection
(23) Board levy (14) - -
- Exceptional items - - (425)
------ ------ ------ ------
Operating profit/
1,042 (loss) before tax 646 624 (72)
Short-term fluctuation
(719) in investment returns (446) 123 258
Change in the
(36) equalisation provision (22) (12) (27)
Profit/(loss) arising
on the sale of
398 subsidiary undertakings 247 - (1,058)
Loss on withdrawal
- from London Market operations - - (448)
- Merger transaction costs - (57) (59)
------ ------ ------ ------
Profit/(loss) on
685 ordinary activities before tax 425 678 (1,406)
Tax on profit on
(435) ordinary activities (270) (251) (255)
------ ------ ------ ------
Profit/(loss) on
250 ordinary activities after tax 155 427 (1,661)
(40) Minority interests (25) (21) (52)
------ ------ ------ ------
Profit/(loss) for
210 the financial period 130 406 (1,713)
(15) Preference dividends (9) (9) (17)
------ ------ ------ ------
Profit/(loss) for
the financial period
attributable to
195 equity shareholders 121 397 (1,730)
(517) Ordinary dividends (321) (320) (855)
------ ------ ------ ------
Retained (loss)/profit
(322) transferred to reserves (200) 77 (2,585)
====== ====== ====== ======
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Page 17
Earnings per share - modified statutory basis
For the six months to 30 June 2001
6 months 6 months Full year
2001 2000 2000
Operating profit before
amortisation of goodwill,
amortisation of acquired
additional value of in-force
long-term business and
exceptional items,
after taxation, attributable
to equity shareholders
in respect of ongoing business 20.6p 16.3p 28.3p
Profit/(loss) attributable
to equity shareholders 5.4p 17.7p (77.0)p
Profit/(loss) attributable
to equity shareholders - diluted 5.4p 17.6p (76.9)p
Dividends per share 14.25p 14.25p 38.0p
Consolidated statement of total recognised gains and losses
For the six months to 30 June 2001
6 months 6 months Full year
2001 2000 2000
£m £m £m
Profit/(loss) for the financial period 130 406 (1,713)
Movement in internally-generated
additional value of in-force
long-term business * (228) 66 73
Foreign exchange gains 35 359 303
------ ------ ------
Total recognised gains and
losses arising in the period (63) 831 (1,337)
====== ====== ======
* Stated before the effect of foreign exchange movements which are
reported within the foreign exchange gains line.
Reconciliation of movements in consolidated shareholders' funds
For the six months to 30 June 2001
6 months 6 months Full year
2001 2000 2000
£m £m £m
Shareholders' funds
at the beginning of the period 13,633 15,673 15,673
Total recognised gains and
losses arising in the period (63) 831 (1,337)
Dividends (330) (329) (872)
Increase in capital 16 21 54
Merger reserve arising during the period - 5 5
Other movements 5 (8) 110
------ ------ ------
Shareholders' funds at the end of the
period 13,261 16,193 13,633
====== ====== ======
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Page 18
Summarised consolidated balance sheet
30 30 31
June June December
2001 2000 2000
£m £m £m
Assets
Goodwill 750 544 747
------ ------ ------
Investments
Land and buildings 768 805 820
Investments in Group
undertakings and
participating interests 284 231 264
Variable yield securities 5,016 7,416 5,868
Fixed interest securities 8,300 13,531 13,813
Mortgages and loans,
net of non-recourse funding 1,139 1,305 1,233
Deposits 1,839 1,077 1,112
Additional value of
in-force long-term business 6,321 6,554 6,605
------ ------ ------
23,667 30,919 29,715
Reinsurers' share of
technical provisions 2,924 2,684 3,709
Assets of the long-term business 144,399 144,894 148,551
Other assets 9,241 9,897 10,596
------ ------ ------
Total assets 180,981 188,938 193,318
====== ====== ======
Liabilities
Shareholders' funds
Equity 13,061 15,993 13,433
Non-equity 200 200 200
Minority interests 560 588 584
------ ------ ------
Total capital and reserves 13,821 16,781 14,217
Liabilities of
the long-term business 139,951 140,447 144,301
General insurance liabilities 18,014 23,206 23,786
Borrowings 2,686 2,834 2,592
Other creditors and provisions 6,509 5,670 8,422
------ ------ ------
Total liabilities 180,981 188,938 193,318
====== ====== ======
Approved by the Board on 1 August 2001
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Page 19
Consolidated cash flow statement
For the six months to 30 June 2001
Full
6 months 6 months year
2001 2000 2000
£m £m £m
Net cash inflow from
operating activities excluding
exceptional items and
merger transaction costs (17) 215 738
Exceptional items and
merger transaction costs paid (97) (83) (251)
Net cash outflow
from servicing of finance (82) (119) (257)
Corporation tax paid
(including advance corporation tax) (77) (92) (210)
Net purchases of tangible fixed assets (76) (39) (119)
Acquisitions and disposals
of subsidiary and associated undertakings 1,261 (235) (277)
Equity dividends paid (535) (496) (816)
Net cash inflow from financing activities 84 691 493
------ ------ ------
Net cash flows 461 (158) (699)
====== ====== ======
Cash flows were invested as follows:
(Decrease)/increase in cash holdings (114) (146) 119
Net portfolio investment
Net purchases/(sales) of investments 481 52 (1,541)
Non-trading cash outflow to/
(inflow from) long-term
business operations 94 (64) 723
------ ------ ------
Net investment of cash flows 461 (158) (699)
====== ====== ======
The cash flows presented in this statement relate to non-life transactions
only.
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Page 20
1. Basis of preparation
(a) On 21 February 2000, CGU plc and Norwich Union plc announced plans to
merge their respective businesses to form CGNU plc. The merger was
effected by way of a scheme of arrangement of Norwich Union plc under
section 425 of the Companies Act 1985. Under the terms of the scheme,
Norwich Union shareholders had their existing shares replaced by new
shares in CGNU plc. CGU shareholders' rights were unaffected. The
merger became effective on 30 May 2000 and on that date 931 million
new shares in CGNU plc, with a total market value of £9,528 million,
were issued to Norwich Union plc shareholders in return for Norwich
Union plc shares in a ratio of 48 CGNU plc shares for every 100
Norwich Union plc shares.
The merger has been accounted for using the merger accounting
principles set out in Financial Reporting Standard 6 'Acquisitions and
Mergers'. Accordingly, the financial information for 2000 has been
presented as if CGU plc and Norwich Union plc had been combined
throughout the year. Merger accounting principles have given rise to a
merger reserve.
Costs of integrating and reorganising the business are included within
operating profit. Merger transaction costs of £59 million were
incurred in 2000 and are shown after operating profit within the
profit on ordinary activities before taxation.
(b) The results for the six months to 30 June 2001 have been prepared on
the basis of the accounting policies set out in CGNU plc's 2000 Annual
Report and Accounts.
(c) The results for the six months to 30 June 2001 and 30 June 2000 are
unaudited but have been reviewed by the auditors. The interim accounts
do not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The results for the full year 2000 have been taken
from the Group's 2000 Report and Accounts. The auditors have reported
on the 2000 accounts and their reports were unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act
1985. The CGNU plc 2000 Report and Accounts have been filed with the
Registrar of Companies.
(d) 'Business discontinued' disclosures relate to the exit from London
Market business in 2000 and the sale of the general insurance business
in the United States which completed on 1 June 2001. The results of
all other operations are entitled 'Ongoing business'.
(e) The contribution from the Group's share of the alliance with The Royal
Bank of Scotland Group plc (RBSG) is incorporated within modified
statutory life profit. Goodwill amortised in the period in respect of
the Group's holding in the associated company, RBS Life Investments
Limited, is included within the 'Amortisation of goodwill' on page 16.
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Page 21
2. Exchange rates
The principal rates of exchange used for translation are:
Average rates
6 months 6 months Full year
2001 2000 2000
Canada - dollars 2.20 2.30 2.25
United States - dollars 1.43 1.57 1.51
Closing rates
30 June 30 June 31 December
2001 2000 2000
Canada - dollars 2.13 2.24 2.24
United States - dollars 1.41 1.51 1.49
The euro rates employed in this announcement are an average rate of 1 euro =
£0.62 (six months to 30 June 2000: 1 euro = £0.61, full year 2000: 1 euro =
£0.61) and a closing rate of 1 euro = £0.60 (30 June 2000: 1 euro = £0.64,
31 December 2000: 1 euro = £0.63).
3. Acquisitions
On 28 June 2001, the Group completed the acquisition of ABN AMRO Magyar Elet
es Nyugdijbiztosito Reszvenytarsasag (Mebit), the sixth-largest life insurance
business in Hungary, from ABN AMRO Bank N.V. for a cash consideration of
£63 million. The embedded value amounted to £11 million, giving rise to
goodwill of £51 million after transaction costs. The transaction has been
accounted for as an acquisition.
4. Disposals
The net profit/(loss) on the disposal of subsidiary undertakings comprises:
6 months 6 months Full year
2001 2000 2000
£m £m £m
Long-term savings businesses
Poland - - 65
Canada (a) (5) - -
General insurance businesses
Germany - - (43)
South Africa - - (11)
New Zealand (b) 52 - -
United States (d) 125 - (1,070)
Other businesses
Australia - - 4
UK (c) 70 - -
Other small operations 5 - (3)
------ ------ ------
247 - (1,058)
====== ====== ======
(a) In the first six months of 2001, the Group completed the disposal of its
wholly-owned Canadian subsidiaries, Commercial Union Life Holdings Limited and
Norwich Union Holdings (Canada) Limited, for a combined consideration of
£120 million. The embedded value of both businesses at disposal amounted to
£118 million and the loss on disposal, after transaction costs, was
£5 million.
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Page 22
(b) In February 2001, the Group completed the disposal of its wholly-owned
New Zealand subsidiary, State Insurance Limited, for a cash consideration of
£125 million. The net assets disposed of amounted to £69 million and the
profit on disposal, after transaction costs, was £52 million.
(c) In March 2001, the Group completed the disposal of its holding in Quilter
Holdings Limited for a cash consideration of £102 million. The cash
consideration reflected the value of the Group's 56.7% interest in Quilter
Holdings Limited following the exercise of management options immediately
before the change of ownership. The Group's share of the net assets disposed
of amounted to £24 million and the profit on disposal, after transaction costs
and writing back £6 million of goodwill previously charged to reserves, was
£70 million.
(d) On 1 June, the Group completed the sale of the US general insurance
operations for US$2,023 million (net of transaction costs of US$40 million),
and settlement of an inter-company loan of US$1,100 million, in total being
US$3,123 (£2,200 million at 1 June 2001 exchange rates). The settlement
comprised cash, the transfer of businesses and subordinated loan notes of
US$260 million. The total proceeds for the sale of the US general business
were fixed by reference to the operation's net assets as at 31 August 2000 and
were not adjusted to reflect the business' results in the period from
1 September 2000 to completion. In addition the Group did not bear any
continuing operating risk from 31 August 2000 nor provide any guarantees in
respect of its claims reserves or balance sheet beyond this date. Prior to
completion US$200 million (£141 million) was injected into the business as a
pre-closing adjustment.
Financial Reporting Standard 2 'Accounting for subsidiary undertakings'
required the results of the US general business to be consolidated with those
of the Group's ongoing operations until completion on 1 June. However, given
that the Group retained no economic interest in the operations of this
business beyond 31 August 2000, the US general business' post-tax operating
loss and investment gains incorporated in the Group's consolidated profit and
loss account from 1 September 2000 to completion on 1 June has been offset by
a corresponding change to the loss on sale calculated at 31 August 2000. The
loss on sale also reflects goodwill previously written off against reserves
but which needs to be reinstated and charged to the profit and loss account.
The pre-tax loss on sale recorded in the Group's consolidated profit and loss
account reserves at 30 June 2001 is £996 million retranslated at the exchange
rate prevailing at 1 June 2001.
Impact of disposal of United States general insurance business
The impact of the disposal of the United States general insurance business and
how this has been reported in the accounts of the Group is as follows:
Reported within
statement
Reported of total
in profit recognised Total
and loss gains loss on
account and losses disposal
---------- ----------- ----------
Full 6 Exchange
year months rate
2000* 2001 movements Total
£m £m £m £m
Proceeds, net of
transaction costs 2,092 - 108 2,200
====== ====== ====== ======
Net assets to which
proceeds apply,
including capital
injection 3,092 (125) 159 3,126
Goodwill write back 70 - - 70
------ ------ ------ ------
3,162 (125) 159 3,196
------ ------ ------ ------
(Loss)/profit on
sale after tax and
goodwill write back * (989) 125 (47) (911)
Tax attributed to
loss on sale (81) - (4) (85)
------ ------ ------ ------
Pre-tax (loss)/
profit on sale (1,070) 125 (51) (996)
====== ====== ====== ======
* In the Group accounts for the full year 2000, the loss on sale was
disclosed under 'provision for loss on sale of US general business'
reflecting the fact that the transaction had not completed in that
period.
The Group hedged an element of its exposure to the sale proceeds, which
reduced the exchange gain from £108 million disclosed above by £24 million to
£84 million.
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Page 23
(i) Abridged statement of operating and investment gains
The Group's consolidated profit and loss account incorporates the
following financial information in respect of the US general insurance
business:
6 months 6 months Full
2001 2000 year
2000
£m £m £m
Underwriting result (173) (96) (967)
Longer-term investment return 152 211 417
------ ------ ------
General insurance
operating (loss)/profit (21) 115 (550)
Unallocated interest charges * (21) (23) (42)
------ ------ ------
Operating (loss)/profit (42) 92 (592)
Amortisation of goodwill (1) (1) (3)
Short-term fluctuation
in investment returns 13 (64) 66
------ ------ ------
(Loss)/profit on ordinary
activities before tax (30) 27 (529)
Tax on (loss)/ profit
on ordinary activities (93) (15) 110
------ ------ ------
(Loss)/profit for
the financial period (123) 12 (419)
Retranslation to closing rate (2) - (4)
------ ------ ------
Retained (loss)/profit (125) 12 (423)
====== ====== ======
* Unallocated interest charges are eliminated at Group level.
(ii) Analysis of sale proceeds
An analysis of the sale proceeds is as follows:
US$m £m
Proceeds, net of transaction costs,
including repayment of inter-company loan 3,123 2,200
====== ======
Comprising:
Loan notes 260 183
Value of businesses and investments retained 630 443
Cash proceeds 2,233 1,574
------ ------
3,123 2,200
====== ======
The net cash received on completion by the Group was US$2,033 million
(£1,433 million) comprising the cash proceeds identified above less the
pre-closing adjustment (capital injection) of US$200 million (£141 million).
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Page 24
5. Exceptional items
Exceptional items in 2000 comprise merger integration costs and reflect the
costs of integrating and reorganising the businesses of the former CGU plc and
Norwich Union plc.
6. Geographical analysis of life and pensions and investment sales - new
business and total income
New business sales Premium income
New New (after reinsurance)
single regular and
premiums premiums investment sales
6 6 6 6 6 6 Full
months months months months months months year
2001 2000 2001 2000 2001 2000 2000
£m £m £m £m £m £m £m
Life and
pensions sales
United Kingdom 3,286 2,966 277 182 4,370 4,138 8,548
Europe
(excluding UK)
France 1,015 968 20 21 1,127 1,100 2,124
Ireland 229 198 28 25 321 279 539
Italy 369 119 18 6 440 204 378
Netherlands
(including
Belgium and
Luxembourg) 277 214 47 36 670 536 1,078
Poland
- Life 3 5 17 22 145 120 247
- Pensions - - 13 109 231 182 371
Spain 271 37 23 5 351 66 428
Other 80 53 31 32 218 181 464
International 254 228 32 23 345 324 671
------ ------ ------ ------ ------ ------ ------
Total life
and pensions 5,784 4,788 506 461 8,218 7,130 14,848
Investment sales
United Kingdom 550 510 7 11 557 521 897
Netherlands 40 584 - - 40 584 1,025
Europe
(excluding UK) 82 121 - - 82 121 284
International 84 166 - - 84 166 295
------ ------ ------ ------ ------ ------ ------
Total long-term
savings 6,540 6,169 513 472 8,981 8,522 17,349
====== ====== ====== ====== ====== ====== ======
Single premiums are those relating to products issued by the Group, which
provide for the payment of one premium only.
Regular premiums are those where there is a contractual obligation to pay on
an ongoing basis.
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Page 25
7. Geographical analysis of modified statutory life profit
Full
6 months 6 months year
2001 2000 2000
£m £m £m
United Kingdom
With-profit 146 127 275
Non-profit 256 286 497
Europe (excluding UK)
France 75 69 143
Ireland 15 19 45
Italy 5 9 21
Netherlands
(including Belgium and Luxembourg) 68 73 162
Poland - Life 19 13 31
- Pensions 7 (5) (9)
Spain 12 5 14
Other * (9) (10) (25)
International * 14 20 36
------ ------ ------
Total modified statutory life profit 608 606 1,190
====== ====== ======
* The modified statutory life profit for Turkey of £3 million in the six
months to 30 June 2000 has been re-classified from International to
Other Europe, consistent with current and full year disclosure.
8. Geographical analysis of health premiums after reinsurance and
operating result
a) Premiums after reinsurance:
Full
6 months 6 months year
2001 2000 2000
£m £m £m
United Kingdom 128 103 204
France 53 47 92
Netherlands 328 278 391
------ ------ ------
509 428 687
====== ====== ======
b) Operating result:
Operating profit Underwriting result
6 6 Full 6 6 Full
months months year months months year
2001 2000 2000 2001 2000 2000
£m £m £m £m £m £m
United Kingdom 4 2 6 2 - 2
France 4 6 12 (1) - -
Netherlands * 24 26 50 (11) (10) (22)
------ ------ ------ ------ ------ ------
32 34 68 (10) (10) (20)
====== ====== ====== ====== ====== ======
* The basis for allocating the longer-term investment return between
general business and health business was refined at the end of 2000
and is based on underlying technical and associated solvency assets.
The effect of this refinement on the six months to 30 June 2000 was
to re-classify £13 million of longer-term investment return from
general insurance into health.
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Page 26
9. Geographical analysis of general insurance premiums after reinsurance
and operating result
a) General insurance premiums after reinsurance:
6 months 6 months Full
2001 2000 year
2000
£m £m £m
United Kingdom 2,454 2,488 4,937
Europe (excluding UK)
France 389 353 640
Ireland 236 184 382
Netherlands 227 226 465
Other *** 301 343 625
International
Australia and New Zealand 256 313 634
Canada 436 454 940
Other *** 53 235 367
------ ------ ------
Ongoing business 4,352 4,596 8,990
------ ------ ------
United States 1,103 1,425 3,021
London Market - 162 192
------ ----- ------
Businesses discontinued 1,103 1,587 3,213
------ ------ ------
5,455 6,183 12,203
====== ====== ======
b) Operating result:
Operating profit * Underwriting result *
6 6 Full 6 6 Full
months months year months months year
2001 2000 2000 2001 2000 2000
£m £m £m £m £m £m
United Kingdom 254 196 296 (69) (126) (387)
Europe
(excluding UK)
France 34 (120) (115) (15) (167) (208)
Ireland 17 11 21 (10) (13) (30)
Netherlands ** 5 (3) (4) (12) (21) (40)
Other *** 15 8 20 (20) (33) (55)
International
Australia and
New Zealand 26 33 82 (8) (12) (7)
Canada 50 44 78 (16) (18) (53)
Other *** 26 24 34 (2) (17) (41)
------ ------ ------ ------ ------ ------
Ongoing
business 427 193 412 (152) (407) (821)
------ ------ ------ ------ ------ ------
United States (21) 115 (550) (173) (96) (967)
London Market - 6 (4) - (31) (59)
------ ------ ------ ------ ------ ------
Businesses
discontinued (21) 121 (554) (173) (127) (1,026)
------ ------ ------ ------ ------ ------
406 314 (142) (325) (534) (1,847)
====== ====== ====== ====== ====== ======
* The general insurance operating profit and underwriting result are
stated before the change in the equalisation provision of £22 million
(six months to 30 June 2000: £12 million, full year 2000: £27 million)
and the Policyholders' Protection Board levy of £14 million
(six months to 30 June 2000 and full year 2000: £nil).
** The basis for allocating the longer-term investment return between
general business and health business was refined in 2000 and is based
on underlying technical and associated solvency assets. The effect of
this refinement on the six months to 30 June 2000 was to re-classify
£13 million of longer-term investment return from general insurance
into health.
*** The premium, operating profit and underwriting result for Turkey of
£14 million, £7 million and £1 million respectively in the six months
to 30 June 2000 has been re-classified from International to Other Europe,
consistent with current and full year disclosure.
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Page 27
10. Taxation
The tax charge in the profit and loss account comprises:
6 months 6 months Full year
2001 2000 2000
£m £m £m
UK corporation tax (18) 16 (65)
Overseas tax 90 134 49
Other 16 (85) (103)
------ ------ ------
Total taxation charge for the period 88 65 (119)
Tax attributable to the
long-term business technical result 182 186 374
------ ------ ------
Charge to profit and loss account 270 251 255
====== ====== ======
Tax charge analysed between:
Operating profit before tax,
amortisation of goodwill,
amortisation of acquired
additional value of in-force
long-term business and exceptional items
- ongoing business 231 140 326
- businesses discontinued (7) 36 (130)
Profit on other ordinary activities 46 75 59
------ ------ ------
270 251 255
====== ====== ======
11. Dividends
a) The preference dividends in the profit and loss account comprise:
Full
6 months 6 months year
2001 2000 2000
£m £m £m
Preference dividends 9 9 17
====== ====== ======
The preference dividends are in respect of the cumulative irredeemable
preference shares of £1 each in issue, payable on 31 March and 30 June 2001.
b) The ordinary dividends in the profit and loss account comprise:
Full
6 months 6 months year
2001 2000 2000
£m £m £m
Ordinary dividends
Interim - 14.25 pence (2000: 14.25 pence) 321 320 320
Final - (2000: 23.75 pence) - - 535
------ ------ ------
Total ordinary dividends 321 320 855
====== ====== ======
The directors declare an interim dividend for the period of £321 million,
representing 14.25 pence net per share of the company, payable on
15 November 2001 to members on the register at 28 September 2001. Irish
shareholders who are due to be paid a dividend denominated in Irish punts will
receive a payment at the exchange rate prevailing on 1 August 2001.
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