CGNU PLC Q1 2001 Results-Pt 1
CGNU PLC
3 May 2001
CGNU plc Q1 2001 RESULTS
PART 1 OF 5
UNAUDITED RESULTS - 3 MONTHS ENDED 31 MARCH 2001
- Record level of worldwide long-term savings new business sales at
£3.7 billion, 22% up in the UK
- Operating profit before tax from ongoing business* up 12% to
£445 million (2000: £393 million). On a modified statutory basis,
operating profit before tax was £310 million (2000: £298 million)
- New bancassurance ventures contributed to growth in life achieved
operating profit, up 13% to £444 million
- Improving general insurance results, up 38% to £155 million
- Integration on course to complete by end of this year, £172 million of
annualised savings achieved to date
* Including life achieved operating profit and excluding results from US
general insurance operations to be discontinued and the discontinued
London Market operations.
All growth rates quoted are at constant rates of exchange.
Richard Harvey, Group Chief Executive, commented:
'The Group has made a strong start to the year with record long-term savings
new business and operating profits from ongoing business up 12% to
£445 million.
'Our life achieved operating profit is up 13% underpinned by the record level
of worldwide long-term savings new business at £3.7 billion. Record sales in
the UK, up 22% to £2.2 billion, have been achieved with good margins. We are
seeing the benefits of our increasing bancassurance distribution capability in
Italy and Spain and continue to work closely with all our bancassurance
partners to grow our long-term savings business aggressively and profitably.
'We are positioning the Group's general insurance business to deliver
sustainable profitability. We have achieved a 38% increase in operating
profit, and are beginning to see the benefits of the actions we have taken to
improve performance. The sale of our US general business remains on track and
will conclude the major re-positioning of our general business portfolio
announced at the time of the merger.
'Integration progress continues apace and we are on course to complete this
process and realise the cost savings by the end of the year as planned. We are
well placed to build on the progress achieved in the first three months of
this year for further growth and increased shareholder returns.'
Enquiries:
Richard Harvey Group Chief Executive Telephone +44 (0)20 7662 2286
Mike Biggs Group Finance Director Telephone +44 (0)20 7662 2031
Analysts:
Steve Riley Investor Relations Director Telephone +44 (0)20 7662 8115
Media:
Hayley Stimpson Director of External Affairs Telephone +44 (0)20 7662 7544
Alex Child-Villiers Financial Dynamics Telephone +44 (0)20 7269 7107
There will be a conference call today for wire services at 7.45 am on 020 8240
8241. This conference call will be hosted by Richard Harvey, Group Chief
Executive.
A press conference will take place at 10.45 am at St Helen's, 1 Undershaft,
London, EC3P 3DQ.
A presentation to analysts will take place at 12.15 pm at St Helen's, 1
Undershaft, London, EC3P 3DQ. The presentation slides will be available on the
Group's website, www.cgnu-group.com
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FINANCIAL HIGHLIGHTS
3 months 3 months
2001 2000
£m £m
Total premiums written (after reinsurance) and
investment sales - ongoing business 7,356 6,938
Worldwide long-term savings new business sales
Life and pensions 3,296 2,649
Retail investments 412 772
New business contribution
(before effect of solvency margin) 136 111
Achieved operating profit before tax
- ongoing business
Life achieved operating profit 444 385
Health 17 16
Fund management 16 10
General insurance 155 113
Non-insurance operations (4) (4)
Corporate costs (40) (41)
Unallocated interest charges (111) (77)
------- -------
477 402
Wealth management (32) (9)
------- -------
Achieved operating profit before tax
- ongoing business 445 393
======= =======
Modified statutory operating profit
- ongoing business 310 298
Achieved operating earnings per share
- ongoing business 12.6p 12.0p
Modified statutory operating earnings per share
- ongoing business 8.6p 8.8p
Equity shareholders' funds 13,082 13,433*
Total shareholders' funds 13,282 13,633*
Net asset value per ordinary share 591p 606p*
Assets under management 215bn 220bn*
Notes
Definitions of Group key performance indicators are set out on page 6
* Denotes amount at 31 December 2000
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Contents
Page
Group Chief Executive's statement 1
Operating and financial review 2
Achieved profit basis
Summarised consolidated profit and loss account
- achieved profit basis 7
Basis of preparation 8
Components of total life achieved profit 8
New business contribution 9
Analysis of life achieved operating profit 10
Embedded value of life business 10
Segmental analysis of embedded value of life business 11
Minority interests in life achieved profit 11
Methodology 12
Principal economic assumptions 13
Other assumptions 14
Modified statutory basis
Summarised consolidated profit and loss account
- modified statutory basis 15
Earnings per share - modified statutory basis 16
Consolidated statement of total recognised gains and losses 16
Reconciliation of movements in consolidated shareholders' funds 16
Summarised consolidated balance sheet 17
Consolidated cash flow statement 18
Basis of preparation 19
Exchange rates 20
Disposals and business to be discontinued 20
Exceptional items 22
Geographical analysis of life and pensions and investment sales
- new business and total income 22
Geographical analysis of modified statutory life profit 23
Geographical analysis of health premiums after reinsurance
and operating result 23
Geographical analysis of general insurance premiums after
reinsurance and operating result 24
Taxation 25
Dividends 25
Earnings per share 26
Longer-term investment return 27
Statistical supplement
Segmental analysis of group operating profit at constant
currency - achieved profit basis 28
Supplementary analyses 29
General insurance - geographical ratio analysis 32
General insurance - class of business analyses 33
Assets under management 35
Shareholder information 36
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Page 1
GROUP CHIEF EXECUTIVE'S STATEMENT
The Group made a strong start to the year with record long-term savings new
business levels and increased operating profits across all of our classes of
business, up 12% to £445 million.
Long-term savings
In the first three months of the year the Group achieved record sales levels,
both in the UK and worldwide. This was despite recent volatility in equity
markets, which created difficult conditions for retail investment sales. Life
achieved operating profit was up 13% with improvements in the majority of our
major businesses.
In the UK, record new business sales, up 22% to £2.2 billion, were achieved
- an exceptional performance following the launch of the merged life business
in October last year. We have seen a reduction in overall margins compared to
the full year 2000 (rebased to 2001 economic assumptions) which is largely
attributable to changes in product mix. We recorded very strong pension sales
in the first quarter, up 43% to £598 million (2000: £419 million) and we
successfully launched our stakeholder pensions products on 6 April. We are
well placed, having the distribution, financial and brand strength, to achieve
a leading position in the new stakeholder market. Our bancassurance
partnership with The Royal Bank of Scotland Group plc (RBSG) contributed to
total sales for the first time, and we are working closely with RBSG to
develop and introduce a new market-leading product range during 2001.
In continental Europe, France remains a key contributor to the Group's sales
volumes at £564 million. We are particularly encouraged by the impressive new
business sales performance achieved in both Italy and Spain, up 269% and
419% respectively, boosted by our new bancassurance agreements, which are
producing good margins. Elsewhere margins are at broadly similar levels
compared to the full year 2000 (rebased to 2001 economic assumptions).
Fund management
Operating profits from our fund management operations grew by 60% to
£16 million (2000: £10 million). In the UK we completed the disposal of
Quilter Holdings Limited, a stockbroking operation, generating a profit on
sale of £70 million. Our French fund management business, Victoire Asset
Management, was declared 'best fund manager' in France by La Tribune and
Standard & Poor's, recognising the excellent fund performance achieved by our
investment managers.
General insurance
Our general business saw a 38% increase in operating profit with notable
improvements in our UK and French general insurance businesses, which
benefited from the steps we are taking to improve profitability. The Group
combined operating ratio from ongoing business was 105% (2000: 108%) and we
remain committed to achieving the target combined operating ratio of 102% by
the end of 2001, through strict underwriting and cost reduction. The worldwide
expense ratio (excluding commission) from ongoing business improved to 12.0%
(2000: 12.3%) and in the UK we continue to be amongst the lowest cost
providers.
The sale of our US general business remains on track and will conclude the
major re-positioning of our general business portfolio announced at the time
of the merger. The decision to exit the US general insurance market is
consistent with our stated strategy of focusing on personal and small
commercial lines. While this disposal was not without significant cost, we
believe this was the correct action to take and will improve the quality of
our general business future earnings. We also completed the sale of State
Insurance Limited, one of our two general insurance businesses in New Zealand,
which generated a profit on sale of £52 million.
Integration
We continued to make rapid integration progress and are on course to complete
this process and realise the cost savings by the end of the year as planned.
Annualised savings at the end of March totalled £172 million with £32 million
included within the results.
The strong results achieved in the first three months provide an excellent
base for further growth and increased shareholder returns.
Richard Harvey
Group Chief Executive
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Page 2
OPERATING AND FINANCIAL REVIEW
Group operating profit
The Group's achieved operating profit before tax from ongoing business was
£445 million (2000: £393 million), and is after an investment of £32 million
(2000: £9 million) in our on-line UK wealth management proposition. Before
this investment achieved operating profit from ongoing business is 17% higher
than last year. On a modified statutory basis operating profit before tax from
ongoing business was £310 million (2000: £298 million).
In arriving at the Group achieved operating profit from ongoing business, we
have excluded the results from our US general insurance business, the sale of
which was announced in September 2000, and the UK London Market operations
following our withdrawal from this business last year. Our US general
insurance business to be discontinued returned an operating profit of
£27 million (2000: £79 million). Although included in the results, the US
general business has no economic impact on the Group as further explained on
page 5 of this announcement. Other operations sold or announced to be sold in
the year, are included within the results from ongoing business as the results
of these businesses are not considered to be material in the context of the
Group's total result.
Profit before tax on a modified statutory basis, which comprises the operating
result, short-term fluctuations in investment returns and other non-operating
movements, was lower at £155 million (2000: £503 million). The negative
short-term fluctulations in investment returns of £284 million (2000: positive
£135 million) represents a shortfall in the actual return experienced during
the quarter compared to the Group's longer-term assumptions. The shortfall
was primarily due to investment valuation losses on equities held by the
Group's ongoing non-life businesses, reflecting the decline during
the quarter of equity markets worldwide.
Profit before tax on an achieved basis includes an additional adverse
investment return variance in respect of life business, principally reflecting
the impact of the equity market decline on the Group's life embedded value.
This is predominantly attributable to the UK, where the FTSE All-Share index
has fallen from 2,984 to 2,711 in the period.
Long-term savings
Our long-term savings businesses achieved a record level of new business in
the first three months of 2001. This was an excellent performance given the
volatile equity markets around the world that created difficult conditions for
retail investment sales. Total life and pensions new business sales were up by
23% to £3,296 million (2000: £2,649 million) although retail investment sales
were lower at £412 million (2000: £772 million) following a disappointing
performance in the Netherlands, where sales of mutual funds declined along
with the rest of the market.
3 months 3 months Local
2001 2000 currency
growth
£m £m %
Life and pensions sales:
United Kingdom 1,856 1,533 21%
Europe (excluding UK) 1,305 998 26%
International 135 118 14%
------- ------- -------
3,296 2,649 23%
Investment sales 412 772 (47%)
------- ------- -------
Long-term savings total
new business sales 3,708 3,421 7%
======= ======= =======
Life achieved operating profit
3 months 3 months
2001 2000
£m £m
New business contribution
(after the effect of solvency margin) 113 94
Profit from existing business
- expected return 212 214
- experience variances 2 (1)
- operating assumption changes 28 2
Development costs - (7)
Expected return on shareholders' net worth 84 78
------- -------
439 380
Other life and savings activities 5 5
------- -------
Life achieved operating profit before tax 444 385
======= =======
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Page 3
Group life achieved profit increased by 13% to £444 million (2000:
£385 million) reflecting the benefit of higher new business volumes and
operating assumption changes. Expected returns from existing business and on
shareholders' net worth were broadly unchanged at £296 million (2000:
£292 million), which reflects the application of lower economic assumptions on
the start of year life embedded value. Development costs in 2000 represented
investment in our Dublin-based offshore life and investment business, together
with investment in our Polish life business. The 2001 result benefits from an
operating assumption change in Germany following revised terms of business
leading to an increase in the assumed proportion of earnings allocated to
shareholders.
Annual premium New business New business
equivalent * contribution ** margin ****
3 3 3 3 3 3 Full
months months months months months months year
2001 2000 2001 2000*** 2001 2000*** 2000***
£m £m £m £m % % %
Life and pensions
business
United Kingdom 294 228 81 59 27.6% 25.9% 28.6%
Europe
(excluding UK) 214 247 56 51 26.2% 19.4% 20.4%
International 26 22 (1) 1 - 4.5% 6.0%
------ ------ ------ ------ ------ ------ ------
534 497 136 111 25.5% 21.6% 23.9%
====== ====== ====== ====== ====== ====== ======
* Annual premium equivalent represents regular premiums plus 10% of
single premiums.
** Before effect of solvency margin.
*** Restated using 2001 economic assumptions and rates of exchange.
**** New business margin represents the ratio of new business
contribution to annual premium equivalent, expressed as a
percentage.
UK
Our UK life business achieved record new business sales up 22% at
£2,166 million (2000: £1,781 million), an exceptional achievement following
the launch of the merged life businesses under the new Norwich Union brand in
October 2000. Pension sales were particularly strong, up 43%, and position the
UK life business as a leading player ready for the introduction of stakeholder
pensions, launched in early April. We are the leading IFA provider and also
operate through partnerships, a salaried direct salesforce and a telesales
operation. Reporting for the first time, our partnership with The Royal Bank
of Scotland Group plc (RBSG) achieved total sales of £84 million, and in
reporting the Group numbers we have included our 50% share of partnership
results.
New business contribution increased to £81 million (2000: £59 million on 2001
economic assumptions). The overall new business margin has declined relative
to the full year 2000 (rebased to 2001 economic assumptions). This is largely
attributable to changes in product mix, with a higher proportion of pension
sales where margins are lower.
Europe (excluding UK)
France, our second-largest life business, returned exceptional sales at
£564 million (2000: £523 million) against a strong first quarter in 2000, and
margins were held in line with prior year. Sales of AFER 'French Franc'
products of £249 million (2000: £207 million) made a significant contribution
against a backdrop of difficult equity markets. Given these difficulties, the
outlook for the French market in 2001 is a contraction of 5% - 10% compared to
2000. Our business in the Netherlands saw life and pensions sales up 26% to
£161 million (2000: £124 million), although volatile equity markets affected
consumer confidence and held back investment sales at £15 million (2000:
£371 million).
In Italy, new business sales increased significantly to £238 million (2000:
£62 million) following the recently announced agreement with UniCredito
Italiano, which expanded further our distribution network. New business
contribution increased to £9 million (2000: £2 million) and new business
margin was 31.0% (full year 2000: 34.5%, at 2001 economic assumptions and
rates of exchange). In March we agreed to sell our small life business, NU
Vita, to Helvetia, and expect this to complete in the second half of the year
once regulatory approval has been received. In Spain, sales increased to
£133 million (2000: £25 million) benefiting from the bancassurance agreement
with Bancaja, Spain's fourth-largest savings bank, which commenced in the
summer of 2000 and returned improved new business contribution of £12 million
(2000: £nil). Margins improved significantly to 50.0% (full year 2000: 38.6%,
at 2001 economic assumptions and rates of exchange).
International
Our international businesses grew life and pensions new business sales by 14%
to £135 million (2000: £118 million) and in the United States single premium
business was up 44% to £64 million (2000: £40 million), with good progress in
annuity sales. Achieved operating profits were lower at £8 million (2000:
£12 million) and reflected adverse experience variances in both our United
States and Australian businesses.
Health
Health premiums increased by 9% with double-digit growth in the UK and France.
Operating profit was higher at £17 million (2000: £16 million) with increased
profits from our business in the Netherlands, which returned £17 million
(2000: £13 million).
Fund management
Operating profit from our fund management operations increased by 60% to
£16 million (2000: £10 million), reflecting improved profits in the UK, the
Netherlands and Australia. In the UK, increased profits of £4 million (2000:
£1 million) benefited from merger savings and were after continuing investment
of £9 million (2000: £6 million) in our UK retail investment business. In the
Netherlands increased profits of £3 million (2000: £1 million) were achieved
following the significant volume of external retail funds procured during
2000.
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Page 4
Our business in France, Victoire Asset Management, was declared 'best fund
manager' in France by La Tribune and Standard & Poor's for performance over a
one-year period, out of 76 organisations offering more than 10 funds. In
addition, Victoire also came third in the 10-year performance category. These
awards testify to the strength of Victoire's business underpinned by excellent
long-term investment performance.
Sales from the Navigator product in Australia, which are not included in Group
new business figures, increased by 30% to £200 million (2000: £166 million),
continuing the excellent growth record achieved in this business. The
operating results of the Navigator business are included within the Group's
operating profit calculated on a statutory basis. Calculated on an achieved
profit basis new business contribution would be £3 million (2000: £3 million)
and operating profit would be £4 million (2000: £4 million), after the
impact of development spend on the next generation of information technology.
Navigator funds under administration amount to A$6.8 billion (31 December
2000: A$6.4 billion).
Total assets under management decreased by £5 billion to £215 billion
(31 December 2000: £220 billion), principally as a result of the disposal of
Quilter Holdings Limited (Quilter), which held some £5 billion of third party
mandates, and difficult equity markets. The sale of Quilter was completed in
March and generated a profit of £70 million.
General insurance
The Group general insurance operating profit increased 38% to £155 million
(2000: £113 million), with exceptional weather costs broadly neutral at
£7 million (2000: £9 million). The underwriting result improved £62 million to
a loss of £129 million (2000: £191 million) with particular improvements in
our UK and French businesses.
The Group's worldwide combined operating ratio from ongoing business was
105% (2000: 108%) and the Group continues to target a combined operating ratio
of 102% by the end of 2001, through strict underwriting and reducing costs.
The worldwide expense ratio (excluding commission) from ongoing business
improved to 12.0% (2000: 12.3%).
Underwriting Operating
result* profit*
3 3 3 3
months months months months
2001 2000 2001 2000
£m £m £m £m
United Kingdom (57) (77) 100 79
Europe (excluding UK) (43) (75) 22 (8)
International (29) (39) 33 42
------- ------- ------- -------
Ongoing business (129) (191) 155 113
======= ======= ======= =======
Businesses discontinued and to be
discontinued
United States (to be discontinued) (66) (26) 27 79
London Market (discontinued) - (11) - 7
* Excludes the change in the equalisation provision of £13 million (2000:
£6 million).
UK
Our UK business returned a stronger underwriting result and operating profit
grew 27% to £100 million (2000: £79 million) benefiting from targeted rating
actions and our continuing rigorous approach to risk selection. Improvements
at the underwriting level were achieved in commercial property and also the
commercial motor class. We are continuing to seek further rating increases
across all classes as we re-shape our book, and in commercial property and
liability we are prepared to lose business unless adequate rates are obtained.
Commercial motor premiums have increased on average by 20% over the prior
year, while commercial liability and personal motor premiums are 15% higher.
There is no increase in severe weather costs following the autumn storms
charged in the fourth quarter of last year and we are on target to close the
majority of claims by the end of May.
The combined operating ratio was 105% (2000: 107%), in line with our
expectations as we move to deliver the combined operating ratio target of
102% by the end of 2001. The expense ratio at 10.7% (2000: 10.8%) maintains
our position as one of the lowest cost producers in the UK insurance market.
We are progressing a number of key initiatives, including the extension of our
leading Total Incident Management service across our portfolio and the Partner
Self Service Programme, which connects us directly with intermediaries and
corporate partners through the deployment of web-based technology. These
developments are integral to achieving and sustaining our target combined
operating ratio.
Europe (excluding UK)
Our business in France achieved improved underwriting and operating profits,
the latter up £23 million (2000: loss of £13 million, including £9 million for
exceptional weather related claims). This improvement is the result of rate
increases in 2000 and a continued focus on sound underwriting. Our business in
the Netherlands reported a broadly unchanged operating and underwriting
result. Our other European businesses reported increased operating profits of
£12 million (2000: £6 million) driven by improvements in a number of countries
as underwriting actions take effect.
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Page 5
International
Our international businesses returned an operating profit of £33 million
(2000: £42 million). The reduction in operating profit reflected a
deterioration in the Australia and New Zealand result to £11 million (2000:
£20 million) primarily attributable to adverse weather and the disposal of one
of our two businesses in New Zealand, State Insurance Limited, the sale of
which was completed in February and resulted in a profit on disposal of
£52 million. The Group will continue to develop its remaining business in New
Zealand.
The sale of our US general insurance business remains on track to complete by
the end of June this year. In accordance with the sale agreement the Group
does not bear any continuing operating risk from 31 August 2000, nor provide
any guarantees in respect of its claims reserves or balance sheet beyond that
date, except for the pre-closing adjustments announced in February 2001 and
charged in the year ended 31 December 2000. Despite the Group retaining no
economic interest beyond this date, accounting standards require that we
consolidate the results up to the date of completion of the transaction. In
the first three months of the year the US reported a pre-tax operating profit
of £27 million (2000: £79 million) and post-tax loss, including short-term
fluctuations, of £13 million. The post-tax loss was offset by a compensating
reduction in the provision for loss on sale of £13 million, resulting in no
net profit or loss to the Group.
Non-insurance operations
The overall non-insurance loss was in line with the equivalent period of 2000
at £4 million. Reduced profits from Hill House Hammond, our UK general
insurance broking business, were offset by a reduced loss in Your Move, our UK
estate agency business. Non-insurance profits from our European businesses
fell from £12 million in 2000 to £2 million, reflecting lower levels of
commission in our banking operations in the Netherlands.
Corporate costs
Corporate costs for the first three months of the year were £40 million,
(2000: £41 million), beginning to benefit from merger savings.
Unallocated interest charges
Unallocated interest charges include interest on intra-group loans with the
central group function, and external borrowings not allocated to local
business operations. The increase in unallocated interest costs at
£111 million (2000: £77 million) reflected the corporate activity over the
course of 2000, and includes the cost of funding the RBSG venture for the
first time this quarter.
Shareholders' funds
Equity shareholders' funds reduced in value to £13.1 billion (2000: £13.4
billion) adversely impacted by the fall in the value of equity markets during
the quarter and a negative foreign exchange movement of £48 million. As a
consequence, net assets per ordinary share, based on equity shareholders'
funds, also fell to 591 pence per share (31 December 2000: 606 pence per
share) after adding back the equalisation provision of £229 million
(31 December 2000: £216 million).
Integration update
The integration process continued rapidly as planned in each of our businesses
around the world. Building upon our achievements of last year, which saw the
rationalisation of our portfolio of businesses and the implementation of
integrated product offerings, the focus in 2001 is on the delivery of
operational cost savings. Activity is concentrated on three main areas -
conversion of business administration to common operational platforms,
rationalisation of IT and business support infrastructures and restructuring
of back office support operations. We are making excellent progress in each of
these three main areas and are realising the benefits as planned. Annualised
cost savings of £172 million had been achieved by 31 March 2001 resulting in a
£32 million benefit to the profit and loss account.
Integration savings Profit and Annualised Total
loss account cost savings projected
impact achieved integration
3 months to date savings
2001
£m £m £m
Life insurance 8 41 91
General insurance 11 65 116
Other operations 13 66 68
------- ------- -------
32 172 275
======= ======= =======
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Page 6
On-line developments and wealth management
We continue to invest in developing a leading UK Wealth Management business.
The public introduction of our on-line service norwichunion.com will take
place during May. The first phase will be a virtual advisory service, offering
individuals access to a wealth of planning tools and impartial information on
personal finance matters.
This is a brand new venture for Norwich Union, giving customers the ability to
manage their money and assets more effectively on-line. The virtual advisory
service has been designed to attract customers who will then be able to buy a
growing range of financial products from the summer of this year. Costs
incurred on norwichunion.com in the first three months of the year amounted to
£28 million (2000: £4 million).
In May 2000, we launched assertahome. Within a year assertahome has become the
UK's leading on-line property portal. In the first quarter of this year, five
independent surveys (including the Financial Times and The Net magazine)
placed assertahome as the best UK property site, confirming its position as
market leader. Investment in our assertahome business in the quarter amounted
to £4 million (2000: £5 million).
Notes to editors
- CGU plc and Norwich Union plc merged on 30 May 2000 to create CGNU
plc, the UK's largest insurance group and one of the top-five insurers
in Europe with substantial positions in other markets around the
world, making it the world's sixth-largest insurer based on gross
worldwide premiums.
- CGNU's principal business activities are long-term savings, fund
management and general insurance, with worldwide premium income and
retail investment sales from ongoing business of over £27 billion and
assets under management of more than £210 billion.
- From October 2000, the combined life and pensions, general insurance
and retail fund management businesses in the UK operate under the
Norwich Union brand, while the institutional investment business
operates under the Morley Fund Management brand.
- Overseas currency results are translated at average exchange rates.
- All growth rates are quoted in local currency.
- CGNU's corporate press releases and results presentations are
available on the internet: www.cgnu-group.com
- The 2000 new business contribution quoted in the financial highlights
and the operating and financial review has been shown using the
application of 2001 economic assumptions and foreign exchange rates.
Life profits reporting
In reporting the headline operating profit, life profits have been included
using the achieved profit basis. This is used throughout the CGNU Group and by
many in the investment community to assess performance. We have focused on the
achieved profit basis, as we believe life achieved operating profit is a more
realistic measure of the performance of life businesses than the modified
statutory basis. The modified statutory basis is used in our financial
statements and, on this basis, the life operating profit before tax amounted
to £309 million. The basis used for reporting achieved profit is consistent
with the draft guidance set out by the Association of British Insurers.
Definitions of Group key performance indicators
Achieved operating earnings per share
- operating profit on an achieved profit basis before amortisation of
goodwill and exceptional items, after taxation, attributable to
equity shareholders in respect of ongoing business.
Achieved operating profit
- excludes the operating result of businesses discontinued and to be
discontinued, and is stated before amortisation of goodwill and
exceptional items.
Modified statutory operating profit
- excludes the operating result of businesses discontinued and to be
discontinued, and is stated before amortisation of goodwill,
amortisation of acquired additional value of in-force long-term
business and exceptional items.
Ongoing business
- total business operations excluding the discontinued London Market
operations and US general insurance operations to be discontinued.
Net asset value per ordinary share
- is calculated based on equity shareholders' funds, adding back the
equalisation provision of £229 million (31 December 2000:
£216 million).
Assets under management
- represents all assets managed by the Group including funds held on
behalf of third parties.
END OF PART 1 OF 5
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