Preliminary results - 12 months ended 31 December 2005
9. Geographical analysis of general insurance and health
(a) Operating result
| Operating profit | Underwriting result | ||||
|---|---|---|---|---|---|
| 2005 £m |
2004 £m |
2005 £m |
2004 £m |
||
| United Kingdom | 974 | 797 | 303 | 146 | |
| Continental Europe | |||||
| France | 35 | 33 | (21) | (16) | |
| Ireland | 171 | 135 | 116 | 82 | |
| Netherlands | 137 | 88 | 54 | 10 | |
| Other | 47 | 32 | 15 | 6 | |
| International | |||||
| Canada | 147 | 133 | 35 | 37 | |
| Other | 40 | 41 | 3 | 6 | |
| Total | 1,551 | 1,259 | 505 | 271 | |
| Analysed by: | |||||
| General insurance | 1,496 | 1,205 | 507 | 276 | |
| Health | 55 | 54 | (2) | (5) | |
(b) Investment return information
| Actual investment return credited to income |
Longer-term investment return | ||||
|---|---|---|---|---|---|
| 2005 £m |
2004 £m |
2005 £m |
2004 £m |
||
| United Kingdom | 646 | 569 | 671 | 651 | |
| Continental Europe | |||||
| France | 54 | 48 | 56 | 49 | |
| Ireland | 43 | 39 | 55 | 53 | |
| Netherlands | 88 | 83 | 83 | 78 | |
| Other | 17 | 20 | 32 | 26 | |
| International | |||||
| Canada | 95 | 83 | 112 | 96 | |
| Other | 27 | 33 | 37 | 35 | |
| Total longer-term investment return | 1,046 | 988 | |||
| Total actual investment income | 970 | 875 | |||
| Realised gains | 216 | 47 | |||
| Unrealised gains | 377 | 227 | |||
| Total actual investment return | 1,563 | 1,149 | |||
The total short-term fluctuation in investment return of £517 million (2004: £161 million) is the difference between the total actual investment return of £1,563 million (2004: £1,149 million) and the total longer-term investment return of £1,046 million (2004: £988 million).
Actual income and longer-term investment return both contain the amortisation of the discount/premium arising on the acquisition of fixed income securities.
The longer-term investment return is calculated separately for each principal general insurance and health business unit. 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 period, 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 |
Longer-term rates of return Properties |
||||
|---|---|---|---|---|---|
| 2005 % |
2004 % |
2005 % |
2004 % |
||
| United Kingdom | 7.6% | 7.8% | 6.6% | 6.8% | |
| France | 6.7% | 7.3% | 5.7% | 6.3% | |
| Ireland | 6.7% | 7.3% | 5.7% | 6.3% | |
| Netherlands | 6.7% | 7.3% | 5.7% | 6.3% | |
| Canada | 7.4% | 7.7% | 6.4% | 6.7% | |
For 2006, the Group intends to calculate the longer-term investment return for its general insurance and health business using the same start of year economic assumptions for equities and properties as those used for EEV reporting in this announcement.
The table below shows the sensitivity of the Group’s general insurance and health operating profit before tax to changes in the longer-term rates of return:
| 2005 £m |
2004 £m |
|||
|---|---|---|---|---|
| Movement in investment return for | By | Change in | By | By |
| Equities | 1% higher/lower | Group operating profit | 29 | 25 |
| Properties | 1% higher/lower | Group operating profit | 4 | 3 |
