New business contribution
New business contribution
The following tables set 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 on Basis of preparation – EEV basis.
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. New business contribution before tax is calculated by grossing up the contribution after tax at the full corporation tax rate for UK business and at appropriate rates of tax for other countries. New business contribution has been calculated using the same economic assumptions as those used to determine the embedded value as at the start of the year and operating assumptions used to determine the embedded value as at the end of the year, and is rolled forward to the end of the financial period.
New business sales are expressed on two bases: annual premium equivalent (APE), the UK life industry’s standard measure, and the present value of future new business premiums (PVNBP). The PVNBP calculation is equal to total single premium sales received in the year 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 new business contribution, so the components of the new business margin are on a consistent basis.
New business contribution is shown before and after the effect of required capital, calculated on the same basis as for in-force covered business.
| Annual premium equivalent1 | Present value of new business premiums | New business contribution before the effect of required capital | New business contribution after the effect of required capital | |||||
|---|---|---|---|---|---|---|---|---|
| 2004 £m |
2003 £m |
2004 £m |
2003 £m |
2004 £m |
Restated* 2003 £m |
2004 £m |
Restated* 2003 £m |
|
| Life and pensions business | ||||||||
| United Kingdom | 1,166 | 1,118 | 9,172 | 8,516 | 269 | 250 | 215 | 212 |
| Europe (excluding UK) | ||||||||
| France | 307 | 241 | 2,782 | 2,224 | 95 | 72 | 54 | 39 |
| Ireland | 86 | 81 | 561 | 529 | 19 | 28 | 16 | 26 |
| Italy | 198 | 194 | 1,799 | 1,752 | 48 | 45 | 34 | 27 |
| Netherlands (including Belgium and Luxembourg) | 261 | 224 | 2,168 | 1,821 | 80 | 69 | 43 | 29 |
| Poland | 37 | 35 | 241 | 226 | 11 | 5 | 9 | 3 |
| Spain | 248 | 246 | 2,110 | 1,964 | 143 | 141 | 121 | 122 |
| Other Europe | 124 | 101 | 804 | 587 | 5 | (1) | - | (6) |
| International | 171 | 187 | 1,050 | 1,190 | 36 | 37 | 24 | 22 |
| Total (before the effect of required capital) | 2,598 | 2,427 | 20,687 | 18,809 | 706 | 646 | ||
| Effect of required capital | (190) | (172) | ||||||
| Total (after the effect of required capital) | 516 | 474 | 516 | 474 | ||||
| 1 APE has been restated to include NUER volumes of £478 million (2003: £501 million). | ||||||||
| * Restated for the effect of implementing European Embedded Value principles. | ||||||||
New business contribution before the effect of required capital includes minority interests in 2004 of £121 million (2003: £109 million). This comprises minority interests in France of £7 million (2003: £3 million), Italy £27 million (2003: £25 million), Netherlands £10 million (2003: £8 million), Poland £2 million (2003: £1 million) and Spain £75 million (2003: £72 million).
New business contribution after the effect of required capital includes minority interests in 2004 of £94 million (2003: £86 million). This comprises minority interests in France of £1 million (2003: nil), Italy £19 million (2003: £15 million), Netherlands £8 million (2003: £7 million), Poland £2 million (2003: £1 million) and Spain £64 million (2003: £63 million).
