Interim results - 6 months ended 30 June 2007
Operating and financial review
Group debt costs and other interest
Group debt costs and other interest of £190 million (2006: £177 million) comprise internal and external interest on borrowings, subordinated debt and intra-group loans not allocated to local business operations. Also included is net pension income which represents the expected return on pension scheme assets less the interest charge on pension scheme liabilities. Interest costs in the period were higher at £222 million (2006: £215 million). Within this, external interest costs increased to £129 million (2006: £109 million) reflecting interest on subordinated debt raised in December 2006 to repay locally held AmerUs debt and on commercial paper raised to help fund the AmerUs acquisition. Internal interest costs reduced to £93 million (2006: £106 million) following the restructuring of internal loan agreements. Net pension income fell to £32 million (2006: £38 million).
Interest on the £990 million direct capital instrument issued in 2004 is not included within unallocated interest as it is instead treated as an appropriation of profits retained in the period. This appropriation will be charged when declared and settled in accordance with IFRS and will be reflected in the second half of the year.
