Analysis of movement in life and related businesses embedded value
The following tables provide an analysis of the movement in embedded value for the life and related businesses for 2004 and 2003. The analysis is shown separately for net worth and the value of in-force covered business, and includes amounts transferred between these categories. The transfer from life and related businesses to other segments consists of service company profits and losses during the reported period that have emerged from the value of in-force. Since the “look through” into service companies includes only future profits and losses, these amounts must be eliminated from the closing embedded value.
All figures are shown net of tax.
| 2004 | |||||
|---|---|---|---|---|---|
| Net worth £m |
Value of in-force £m |
Total £m |
|||
| Embedded value at the beginning of the period | - Free surplus | 1,721 | |||
| - Required capital1 | 4,114 | ||||
| Total | 5,835 | 5,916 | 11,751 | ||
| New business contribution (after the effect of required capital) | (520) | 875 | 355 | ||
| Expected return on existing business – return on VIF | - | 576 | 576 | ||
| Expected return on existing business – transfer to net worth | 738 | (738) | - | ||
| Experience variances and operating assumption changes | (98) | 79 | (19) | ||
| Expected return on shareholders’ net worth | 208 | - | 208 | ||
| Investment return variances and economic assumption changes | 167 | (41) | 126 | ||
| Life EEV return after tax | 495 | 751 | 1,246 | ||
| Exchange rate movements | 51 | 68 | 119 | ||
| Embedded value of businesses acquired | 79 | 23 | 102 | ||
| Amounts injected into life and related businesses | 324 | - | 324 | ||
| Amounts released from life and related businesses | (576) | - | (576) | ||
| Transfer to life and related businesses from other segments | 48 | - | 48 | ||
| Embedded value at the end of the period | - Free surplus | 1,894 | |||
| - Required capital1 | 4,362 | ||||
| Total | 6,256 | 6,758 | 13,014 | ||
The embedded value of business acquired in 2004 of £102 million represents the total embedded value of Antarius, the bancassurance joint venture with Crédit du Nord in France.
| 2003 | ||||
|---|---|---|---|---|
| Net worth £m |
Value of in-force £m |
Total £m |
||
| Embedded value at the beginning of the year | 4,616 | 5,169 | 9,785 | |
| New business contribution (after the effect of required capital) | (581) | 908 | 327 | |
| Expected return on existing business – return on VIF | - | 533 | 533 | |
| Expected return on existing business – transfer to net worth | 774 | (774) | - | |
| Experience variances and operating assumption changes | 147 | (157) | (10) | |
| Expected return on shareholders’ net worth | 190 | - | 190 | |
| Investment return variances and economic assumption changes | 395 | 70 | 465 | |
| Life EEV return after tax | 925 | 580 | 1,505 | |
| Exchange rate movements | 222 | 120 | 342 | |
| Embedded value of businesses acquired | 17 | 47 | 64 | |
| Amounts injected into life and related businesses | 231 | - | 231 | |
| Amounts released from life and related businesses | (205) | - | (205) | |
| Transfer to life and related businesses from other segments | 29 | - | 29 | |
| Embedded value at the end of the year | - Free surplus | 1,721 | ||
| - Required capital1 | 4,114 | |||
| Total | 5,835 | 5,916 | 11,751 | |
| 1 Required capital is shown net of implicit items permitted by local regulators to cover minimum solvency margins. | ||||
The embedded value of businesses acquired in 2003 of £64 million represents the embedded value of Delta Lloyd ABN AMRO Verzekeringen Holding BV, the insurance company acquired as part of the bancassurance agreement entered into with ABN AMRO NV in the Netherlands.
The embedded value at the end of the 2004 includes minority interests of £796 million (2003: £568 million). This comprises minority interests in France of £120 million (2003: £51 million), Italy £276 million (2003: £222 million), Netherlands £59 million (2003: £44 million), Poland £90 million (2003: £72 million), Spain £244 million (2003: £176 million) and Other Europe £7 million (2003: £3 million).
