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Notes 9-16

9. Geographical analysis of general insurance premiums after reinsurance and operating result

1. General insurance premiums after reinsurance:

	2004 £m	2003 £m
United Kingdom	5,434	5,135
Europe (excluding UK)
France	524	515
Ireland	545	611
Netherlands	719	563
Other	230	226
International
Canada	1,202	1,208
Other	161	266
	8,815	8,524

2. Operating result:

	Operating profit*			Underwriting result*
	2004 £m	2003 £m		2004 £m	2003 £m
United Kingdom	832	676		158	50
Europe (excluding UK)
France	32	35		(8)	(9)
Ireland	153	91		79	26
Netherlands	71	35		26	(5)
Other	39	32		2	(6)
International
Canada	152	12		37	(98)
Other	47	30		7	(12)
	1,326	911		301	(54)
* The general insurance operating profit and underwriting result are stated before the change in the equalisation provision of £23 million (2003: £49 million).

3. General business – investment return information

		Actual investment return			Longer-term investment return
		2004 £m	2003 £m		2004 £m	2003 £m
United Kingdom		587	585		674	626
Europe (excluding UK)
France		33	37		40	44
Ireland		61	58		74	65
Netherlands		69	71		45	40
Other		21	20		37	38
International
Canada		98	94		115	110
Other		36	36		40	42
Total longer-term investment return					1,025	965
Total actual investment income		905	901
Realised (losses)/gains		(65)	47
Unrealised gains		287	136
		1,127	1,084		1,025	965

4. Reconciliation between general business investment return information and short-term fluctuation in investment return incorporated in the summarised consolidated profit and loss account – modified statutory basis
   
   For the year to 31 December 2004

	Actual investment return £m	Longer-term investment return £m	Short-term fluctuation in investment return £m
General business	1,127	1,025	102
Health business	22	60	(38)
	1,149	1,085	64
Life business			67
Total short-term fluctuation in investment return			131

5. Longer-term investment return

The longer-term investment return is calculated separately for each principal general insurance business and certain long-term business operations. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the longer-term rate of investment return. The longer-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return. The allocated longer-term return for other investments is the actual income receivable for the year.

The principal assumptions underlying the calculation of the longer-term investment return are:

	Longer-term rates of return
	Equities			Properties
	2004 %	2003 %		2004 %	2003 %
United Kingdom	8.1%	8.1%		6.6%	6.6%
France	7.5%	7.5%		6.5%	6.5%
Ireland	8.7%	8.7%		6.7%	6.7%
Netherlands	8.4%	8.4%		6.5%	6.5%
Canada	9.3%	9.3%		7.3%	7.3%

The table below shows the sensitivity of the full year 2004 operating profit to changes in the longer-term rates of return:

Movement in investment return		By		Change in		By
Equities		1% higher/lower		Group operating profit before tax		£32m
Properties		1% higher/lower		Group operating profit before tax		£12m

For 2005, the Group intends to apply the same economic assumptions for equities and properties as those used under EEV principles to calculate the longer-term investment return for its general insurance and health business for both UK GAAP and IFRS accounts.

10. Fund management operating result

		2004 £m	2003 £m
Morley
- UK business		12	3
- European and International business		8	4
		20	7
Other fund management operations
UK
- Royal Bank of Scotland		(7)	(6)
- Norwich Union Investment funds		5	(3)
France		17	13
Other Europe		1	-
International		7	(1)
		43	10

11. Non-insurance operations

		2004 £m	2003 £m
Hill House Hammond		2	4
Personal finance subsidiaries		(1)	-
Your Move		9	1
Norwich Union Life Services		(76)	(54)
Other		(42)	1
		(108)	(48)

Norwich Union Equity Release has been reclassified as a life company and therefore its operating result of nil (2003: £16 million loss) previously included within non-insurance operating profit on an MSSB basis are included with life MSSB operating profit.

12. Corporate costs

		2004 £m	2003 £m
Global finance transformation programme		(85)	(60)
Central costs and sharesave schemes		(93)	(100)
		(178)	(160)

13. Unallocated interest

		2004 £m	2003 £m
External
- subordinated debt		169	101
- other		77	109
Internal		219	196
		465	406

14. Tax

The tax charge in the profit and loss account comprises:

1. Tax on profit/(loss) on ordinary activities:

		2004 £m	2003 £m
Current tax
UK corporation tax	– current year	22	(60)
	– prior year	124	17
Overseas tax	– current year	(84)	(1)
	– prior year	2	3
Tax attributable to balance on technical account		(345)	(310)
		(281)	(351)
Deferred tax
Origination and reversal of timing differences		(27)	(19)
Changes in tax rates or law		2	(11)
(Decrease)/increase in discount		(49)	14
		(74)	(16)
Total tax charged in the profit and loss account		(355)	(367)

2. Tax charge analysed between:

		2004 £m	2003 £m
Operating profit before tax, amortisation of goodwill, amortisation of acquired additional value of in-force long-term business and exceptional items
Continuing operations		(456)	(403)
Profit on other ordinary activities		101	36
		(355)	(367)

3. Factors affecting current tax charge for the year:

Profit on ordinary activities before tax		2004 £m 1,488	2003 £m 1,390
Current tax (charge) at standard UK corporation tax rate of 30% (2003: 30%)		(446)	(417)
Adjustment to tax charge in respect of prior years		87	20
Non-assessable dividends		(48)	5
Non-taxable loss on the sale of subsidiaries and associates		(73)	(10)
Non-taxable amortisation of goodwill		(22)	(5)
Other disallowable expenses		(16)	(33)
Non-utilisation of current year tax losses		6	(10)
Different local basis of tax on overseas profits		87	53
Deferred tax charge arising from movement in unrealised gains and losses		18	20
Other deferred tax movements		38	10
Deferred tax liabilities not recognised		134	38
Other items		(46)	(22)
Current tax charge for the year		(281)	(351)

15. Dividends

1. The preference dividends in the profit and loss account comprise:

		2004 £m	2003 £m
Preference dividends		17	17

The preference dividends are in respect of the cumulative irredeemable preference shares of £1 each in issue.

2. The ordinary dividends in the profit and loss account comprise:

		2004 £m	2003 £m
Ordinary dividends
Interim	9.36 pence (2003: 9 pence)	211	203
Final	16.00 pence (2003: 15.15 pence)	364	342
Total ordinary dividends		575	545

Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 8 March 2005.

3. The direct capital instrument appropriation in the profit and loss account comprise:

		2004 £m	2003 £m
Direct capital instrument		6	-

16. Earnings per share

1. Basic earnings per share

	2004				2003
	Before tax £m	Net of tax, minorities and preference dividend £m	Per share p		Before tax £m	Net of tax, minorities and preference dividend £m	Per share p
Operating profit*	1,861	1,291	57.2		1,490	991	44.0
Adjusted for the following items:
– Amortisation of goodwill	(120)	(120)	(5.3)		(103)	(103)	(4.6)
– Amortisation of acquired additional value of in-force long-term business	(126)	(89)	(3.9)		(135)	(98)	(4.4)
– Financial Services Compensation Scheme and other levies	(49)	(29)	(1.3)		-	-	-
– Exceptional costs for termination of operations	(50)	(40)	(1.8)		(19)	(16)	(0.7)
– Short-term fluctuation in investment return	131	173	7.6		212	198	8.9
– Change in the equalisation provision	(23)	(16)	(0.7)		(49)	(34)	(1.5)
– Loss on the disposal of subsidiary and associated undertakings	(136)	(136)	(6.0)		(6)	(6)	(0.3)
Profit attributable to equity shareholders	1,488	1,034	45.8		1,390	932	41.4

* All operating profit is from continuing activities.

Earnings per share has been calculated based on the operating profit before amortisation of goodwill, amortisation of acquired additional value of in-force long-term business and exceptional items, after tax, attributable to equity shareholders, for continuing and for total operations, as well as on the profit attributable to equity shareholders. The directors believe the former two earnings per share figures provide a better indication of operating performance. The calculation of basic earnings per share uses a weighted average of 2,256 million (2003: 2,251 million) ordinary shares in issue, after deducting shares owned by the employee share trusts as required by FRS 14 "Earnings per share".

The actual number of shares in issue at 31 December 2004 was 2,282 million (31 December 2003: 2,257 million).

2. Diluted earnings per share:

	2004				2003
	Total £m	Weighted average number of shares m	Per share p		Total £m	Weighted average number of shares m	Per share p
Profit attributable to equity shareholders	1,034	2,256	45.8		932	2,251	41.4
Dilutive effect of share awards and options	-	22	(0.4)		-	8	(0.1)
Diluted earnings per share	1,034	2,278	45.4		932	2,259	41.3

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