Preliminary results year ended 31 December 2008
05 March 2009
M2 – Life MCEV operating earnings
In this table the life and pensions MCEV earnings have been broken down into constituent parts. The life and pensions MCEV operating earnings comprise:
- the value of new business written during the year;
- the earnings from existing business; and,
- the expected investment return on the shareholders’ net worth.
These components are calculated using economic assumptions as at the start of the year (in-force business) or start of the quarter (new business) and operating (demographic and expenses) assumptions as at the end of the year.
| Life and pensions MCEV earnings | 2008 £m |
Restated 2007 £m |
|---|---|---|
| Value of new business | 780 | 897 |
| Earnings from existing business | ||
| – expected returns at the reference rate | 992 | 877 |
| – expected returns in excess of the reference rate | 446 | 420 |
| – expected returns | 1,438 | 1,297 |
| – experience variances | (224) | (111) |
| – operating assumption changes | (165) | (25) |
| – other operating variances | 271 | 1 |
| Expected return on shareholders’ net worth | 701 | 485 |
| Life and pensions operating earnings before tax | 2,801 | 2,544 |
| Economic variances | (12,422) | (19) |
| Other non-operating variances | (329) | – |
| Life and pensions (loss)/earnings before tax | (9,950) | 2,525 |
| Tax on operating earnings | (821) | (754) |
| Tax on other activities | 3,779 | 48 |
| Life and pensions (loss)/earnings after tax | (6,992) | 1,819 |
There were no separate development costs reported in these years.
The table on the previous page presents a summarised breakdown of the life and pensions MCEV earnings on a gross of minorities basis and gross of tax with tax shown separately. The group favours the gross presentation for consistency with the IFRS results. The table below compares the key items on the different bases as the subsequent analysis is provided predominantly on a net of tax and minorities basis as preferred by the CFO Forum Principles.
| 2008 | Restated 2007 | |||
|---|---|---|---|---|
| Key indicators | Net of minorities and tax £m |
Gross of minorities and tax £m |
Net of minorities and tax £m |
Gross of minorities and tax £m |
| Value of new business | 409 | 780 | 504 | 897 |
| Life and pensions operating earnings | 1,753 | 2,801 | 1,567 | 2,544 |
| Life and pensions earnings | (6,885) | (9,950) | 1,619 | 2,525 |
