Preliminary results year ended 31 December 2008
05 March 2009
M15 – Analysis of life and pensions earnings
The following table provides an analysis of the movement in embedded value for covered business. The analysis is shown separately for free surplus, required capital and the value of in-force covered business, and includes amounts transferred between these categories. Included within capital and dividend flows is the transfer to life and related businesses from other segments consisting of service company profits and losses during the reported period that have emerged from the value of in-force. Since the "look through" into service companies includes only future profits and losses, these amounts must be eliminated from the closing embedded value. All figures are shown net of tax and minority interests.
| 2008 £m |
Restated 2007 £m |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Earnings on MCEV analysis | Earnings on MCEV analysis | ||||||||
| Free surplus | Required capital1 | VIF | Total MCEV | Free surplus | Required capital1 | VIF | Total MCEV | ||
| Opening MCEV | 3,204 | 6,240 | 8,804 | 18,248 | 3,066 | 5,287 | 8,153 | 16,506 | |
| New business value | (1,867) | 1,109 | 1,167 | 409 | (1,432) | 808 | 1,128 | 504 | |
| Expected existing business contribution (reference rate) | – | – | 654 | 654 | – | – | 573 | 573 | |
| Expected existing business contribution (in excess of reference rate) | – | – | 303 | 303 | – | – | 284 | 284 | |
| Transfers from VIF and required capital to the free surplus | 1,926 | (637) | (1,289) | – | 1,683 | (439) | (1,244) | – | |
| Experience variances | 154 | 3 | (284) | (127) | 271 | (13) | (336) | (78) | |
| Assumption changes | 563 | (114) | (584) | (135) | 18 | (8) | (40) | (30) | |
| Expected return on shareholders’ net worth | 270 | 182 | – | 452 | 172 | 136 | – | 308 | |
| Other operating variance | 44 | (29) | 182 | 197 | 2 | 12 | (8) | 6 | |
| Operating MCEV earnings | 1,090 | 514 | 149 | 1,753 | 714 | 496 | 357 | 1,567 | |
| Economic variances | (3,140) | (433) | (4,833) | (8,406) | 37 | 112 | (97) | 52 | |
| Other non-operating variances | (104) | 19 | (147) | (232) | – | – | – | – | |
| Total MCEV (loss)/ earnings | (2,154) | 100 | (4,831) | (6,885) | 751 | 608 | 260 | 1,619 | |
| Capital and dividend flows | (63) | - | - | (63) | (829) | – | – | (829) | |
| Foreign exchange variance | 459 | 1,597 | 646 | 2,702 | 172 | 308 | 371 | 851 | |
| Acquired/divested business | (98) | 211 | (26) | 87 | 44 | 37 | 20 | 101 | |
| Closing MCEV | 1,348 | 8,148 | 4,593 | 14,089 | 3,204 | 6,240 | 8,804 | 18,248 | |
- Required capital is shown net of implicit items permitted by local regulators to cover minimum solvency margins.
