Interim results for 6 months ended 30 June 2006
Operating and financial review
Bancassurance margins – before required capital, tax and minority interests
The weighted average bancassurance new business margins before the effect of required capital in the six months were 4.7% (2005: 4.6%). This increase mainly reflects a change in business mix in our partnerships in France and Spain. After the effect of required capital, the bancassurance margin was 3.9% (2005: 3.7%).
| Total life and pensions | Present value of new business premiums | New business contribution(1) | New business margin(2) | |||||
|---|---|---|---|---|---|---|---|---|
| 6 months 2006 £m |
6 months 2005 £m |
6 months 2006 £m |
6 months 2005 £m |
6 months 2006 % |
6 months 2005 % |
|||
| France | 504 | 411 | 23 | 17 | 4.6% | 4.1% | ||
| Ireland | 223 | - | 4 | - | 1.8% | n/a | ||
| Italy | 1,559 | 1,240 | 37 | 32 | 2.4% | 2.6% | ||
| Netherlands | 258 | 347 | 11 | 9 | 4.3% | 2.6% | ||
| Spain | 812 | 855 | 86 | 76 | 10.6% | 8.9% | ||
| Asia | 101 | 102 | 10 | 8 | 9.9% | 7.8% | ||
| United Kingdom | 501 | 267 | 16 | 7 | 3.2% | 2.6% | ||
| Total bancassurance channels | 3,958 | 3,222 | 187 | 149 | 4.7% | 4.6% | ||
(1) Before effect of required capital which amounted to £32 million (2005: £31 million).
(2) New business margin represents the ratio of new business contribution to present value of new business premiums, expressed as a percentage.
In France, our bancassurance joint venture produced an increased new business margin of 4.6% (2005: 4.1%). In Ireland, Ark Life’s new business margin was 1.8% (first quarter 2006: 1.7%) reflecting competitive pressures. The new business bancassurance margin in Italy was 2.4% (2005: 2.6%), reflecting the increased proportion of lower margin unit-linked business and the lower proportion of traditional business which has a higher margin before the cost of capital. In Spain, our bancassurance partnerships produced an increased margin of 10.6% (2005: 8.9%) benefiting from demand for protection products in the period.
Our bancassurance agreement with ABN AMRO in the Netherlands generated a margin of 4.3% (2005: 2.6%) as the comparative was affected by a special promotion on lower margin annuity business in the first quarter of 2005. The new business bancassurance margin from our partnership with DBS in Singapore and Hong Kong was 9.9% (2005: 7.8%) reflecting the profitable growth of these developing operations. The new business margin generated by our partnership in the UK with the Royal Bank of Scotland Group (RBSG) increased to 3.2% (2005: 2.6%) reflecting the sales momentum in this distribution channel and cost management.
