Analysis of assets
Total assets - Shareholder/policyholder exposure to risk
| Policyholder assets £m |
Participating fund assets £m |
Shareholder assets £m |
Total assets analysed £m |
Less assets of operations classified as held for sale £m |
Balance sheet total £m |
|
|---|---|---|---|---|---|---|
| Assets | ||||||
| Goodwill and acquired value of in-force business and intangible assets |
- | - | 6,631 | 6,631 | (1) | 6,630 |
| Interests in joint ventures and associates | 8 | 569 | 1,916 | 2,493 | (33) | 2,460 |
| Property and equipment | - | 74 | 841 | 915 | (110) | 805 |
| Investment Property | 3,413 | 6,517 | 2,288 | 12,218 | - | 12,218 |
| Loans | 1,621 | 8,760 | 29,353 | 39,734 | (16) | 39,718 |
| Financial investments | ||||||
| Debt securities | 18,533 | 79,802 | 48,511 | 146,846 | (878) | 145,968 |
| Equity securities | 23,481 | 7,701 | 5,322 | 36,504 | (379) | 36,125 |
| Other investments | 20,843 | 6,661 | 2,179 | 29,683 | (748) | 28,935 |
| Reinsurance assets | 1,524 | 1,046 | 4,446 | 7,016 | (11) | 7,005 |
| Deferred tax assets | - | - | 2,533 | 2,533 | (31) | 2,502 |
| Current tax assets | - | - | 444 | 444 | - | 444 |
| Receivables and other financial assets | 660 | 2,471 | 7,658 | 10,789 | (24) | 10,765 |
| Deferred acquisition costs and other assets | 198 | 781 | 5,283 | 6,262 | (18) | 6,244 |
| Prepayments and accrued income | 130 | 1,371 | 2,183 | 3,684 | (10) | 3,674 |
| Cash and cash equivalents | 4,076 | 11,927 | 9,737 | 25,740 | (192) | 25,548 |
| Assets of operations classified as held for sale | - | - | - | - | 2,451 | 2,451 |
| Total | 74,487 | 127,680 | 129,325 | 331,492 | - | 331,492 |
| Total % | 22.5% | 38.5% | 39.0% | |||
| FY 2008 | 79,893 | 134,665 | 140,004 | 354,562 | - | 354,562 |
| FY 2008 % | 22.5% | 38.0% | 39.5% | |||
The quality of our asset base continues to be strong and shows no material deterioration since the end of 2008 in either its credit quality or the proportion of assets which are valued based on either quoted prices in an active market or using models with significant observable market parameters.
82% of assets (including 100% of financial investments) are measured at fair value of which the principle asset classes are loans, debt securities, equity securities and other financial investments. Of total debt securities, 94.8% are investment grade with 1.6% below investment grade and 3.6% not rated.
The group has very limited exposure to RMBS (Sub prime, Alt A), ABS, Wrapped Credit, CDOs and CLOs; these investments represent less than 1.0% of total balance sheet assets.
As at 30 June 2009, shareholder exposure to total loans and financial investments represented £85,365 million. The fall when compared to 31 December 2008 is predominantly driven by the movement in the Euro and the US dollar.
We report all of our financial investments, including our £147 billion debt securities portfolio, at market value. The unrealised losses of the debt securities portfolio on our balance sheet equate to 6% as at 30 June 2009, a significant reduction over the period (31 December 2008: 8%). Actual defaults in the period were minimal at £15 million (31 December 2008: £140 million). The total loss over the last 18 months represents just 0.2% of our total corporate debt portfolio. In addition, we have made impairment charges of £50 million (31 December 2008: £260 million).
Our UK Life commercial mortgage portfolio remains strong with no defaults recorded in the period. The portfolio is well diversified by sector and location with over 20% of the portfolio related to healthcare businesses which are effectively government backed. Interest service cover remains strong and unchanged at 1.3 times and over 96% of mortgages are neither past due nor impaired.
The provision we made of £550 million for short term default provisions in the UK for corporate bonds and commercial mortgages remain unutilised. Together with our long-term default assumptions, this equates to a provision of £1.1 billion for the life of the corporate bond and commercial mortgage portfolio and creates a strong buffer against potential future losses.
We have made further provisions of £42 million (31 December 2008: £26 million) on the UK General Insurance mortgage portfolio, bringing the total to £68m, of which £16m (31 December 2008: £nil) is against specific mortgage loans.
Within the disclosure, the group's total assets have been segmented based on where the market and credit risks are held, according to the following guidelines.
Policyholder assets
We write unit-linked business in a number of long-term business operations. In unit-linked business, the policyholder bears the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the value of the assets in the funds. These assets are managed according to the investment mandates of the funds which are consistent with the expectations of the policyholders. By definition, there is a precise match between the investment assets and the policyholder liabilities, and so the market risk and credit risk lie with policyholders. The shareholders' exposure on this business is limited to the extent that income arising from asset management charges is based on the value of assets in the funds.
Participating fund assets
Some insurance and investment contracts in our long-term businesses contain a discretionary participating feature, which is a contractual right to receive additional benefits as a supplement to guaranteed benefits. These are referred to as participating contracts. The market risk and credit risk in relation to assets held within Participating Funds (including 'with-profit' funds) are shared between policyholders and shareholders in differing proportions. In general, the risks and rewards of participating funds rest primarily with the policyholders.
The assets within participating funds cover liabilities for participating insurance contracts and participating investment contracts in addition to other liabilities within the participating funds.
Shareholder assets
Assets held within long-term businesses that are not backing unit-linked liabilities or participating funds, directly expose the shareholders to market and credit risks. Likewise, assets held within general insurance and health, fund management and non-insurance businesses also expose our shareholders to market and credit risks. We have established comprehensive risk management policies to monitor and mitigate these risks.
