Preliminary results year ended 31 December 2008
05 March 2009
M7 – Economic variances on long-term business
Economic variances reflect the impact of actual investment experience differing from the investment returns, (including risk premia) assumed in operating profit, and the impact of changes in economic assumptions.
The pre tax loss of £12,422 million was driven by credit spreads widening significantly, particularly in the final quarter of 2008, equity markets reducing by between 30% and 50% and risk free rates reducing significantly. The poor economic conditions had an adverse impact on net worth, but a greater adverse impact on the value of future profits. The loss includes the impact of the grossing up at the local corporation tax rates.
