Preliminary results year ended 31 December 2008
05 March 2009
Appendix C – Operational cost base and cost savings
C2 – Cost savings commitments for targets announced since October 2007
This note provides details of the group's published commitments to deliver cost savings, and represents an update on the information provided at full year 2007.
| Movement in Cost Savings target (recurring, annualised savings) | Cost Savings targets b/fwd £m |
New targets announced in year £m |
Less: Cost savings achieved £m |
Changes to the phasing of saving £m |
Savings over/ (under) delivered £m |
Impact of economic changes on targets c/fwd £m |
Cost Savings targets c/fwd £m |
|---|---|---|---|---|---|---|---|
| Savings expected to be achieved in: | |||||||
| Year ended 31 December 2008 | 290 | 11 | (340) | 22 | 13 | 4 | – |
| Year ended 31 December 2009 | 60 | 78 | – | (11) | 20 | 5 | 152 |
| Year ended 31 December 2010 | – | 61 | – | (11) | 5 | – | 55 |
| Savings to be achieved | 350 | 150 | (340) | – | 38 | 9 | 207 |
| Savings achieved in prior years: | – | 340 | |||||
| Total savings | 350 | 547 |
Targets brought forward include £200m for Norwich Union Insurance, £100m for Norwich Union Life and £50 million for Europe. The new target announced in the current year reflects £150m for Norwich Union Insurance.
| Movement in initial costs to deliver Cost Savings targets (total expenses incurred) | Costs to deliver b/fwd £m |
Cost of delivery of new targets in year £m |
Less: Costs incurred in year £m |
Changes to the phasing of costs £m |
Decrease in costs of delivery £m |
Impact of economic changes on targets c/fwd £m |
Costs to deliver c/fwd £m |
|---|---|---|---|---|---|---|---|
| Savings expected to be achieved in: | |||||||
| Year ended 31 December 2008 | 178 | 195 | (287) | (79) | (6) | 7 | 8 |
| Year ended 31 December 2009 | 70 | 85 | – | 53 | – | 3 | 211 |
| Year ended 31 December 2010 | – | 10 | – | 26 | (3) | – | 33 |
| Costs to be incurred | 248 | 290 | (287) | – | (9) | 10 | 252 |
| Costs incurred in prior years: | 82 | 369 | |||||
| Total costs | 330 | 621 |
All £287 million of costs incurred in the year were classified as restructuring costs in the Income Statement.
- Cost savings initiatives included in this note are supported by detailed operational implementation plans, which identify the activities, timeframe and expected costs of delivering the planned initiatives.
- Cost Savings targets brought forward represent commitments made in prior years that are due to be delivered in 2008 or future years. Cost Savings targets brought forward and announced in the year were measured at the value of the relevant recurring costs in the year ended 31 December 2007. All cost saving targets carried forward have been restated to the value of the relevant recurring costs in the year ended 31 December 2008. For 2008 this reflects the effect of exchange rates on European targets.
- Cost savings "achieved" are the annualised, recurring costs eliminated in the year ended 31 December 2008.
- "Initial costs to deliver Cost Savings targets" are the total one-off, initial costs that will be required to complete and deliver announced cost savings programmes. They are measured at the real value of the initial costs expected to be incurred.
