IFRS condensed financial statements
A20 - Margin on assets
This disclosure presents the operating profit from the long-term business as if generated by a margin on the income-bearing assets supporting that business, expressed in basis points (bps).
| 30 June 2009 | 30 June 2008 | 31 December 2008 | ||||
|---|---|---|---|---|---|---|
|
Average assets £bn |
Operating profit bps |
Average assets £bn |
Operating profit bps |
Average assets £bn |
Operating profit bps |
|
| UK | 111.3 | 33 | 124.2 | 35 | 119.4 | 63 |
| France | 62.5 | 20 | 53.2 | 27 | 58.4 | 47 |
| Ireland | 9.2 | 32 | 9.6 | 29 | 9.8 | 63 |
| Italy | 16.7 | 22 | 14.1 | 26 | 15.1 | 31 |
| Netherlands (including Belgium and Germany) | 38.7 | 39 | 33.0 | 41 | 35.9 | 55 |
| Poland | 10.5 | 69 | 11.1 | 68 | 10.9 | 148 |
| Spain | 12.1 | 58 | 10.5 | 70 | 11.5 | 135 |
| Other Europe | 0.6 | (16) | 0.6 | (130) | 0.7 | (267) |
| Europe | 150.3 | 32 | 132.1 | 36 | 142.3 | 62 |
| North America | 26.6 | 9 | 17.9 | 17 | 22.1 | 7 |
| Asia | 2.3 | 214 | 1.9 | (37) | 2.4 | 8 |
| Australia | 2.2 | 99 | 2.6 | 83 | 2.5 | 185 |
| Asia Pacific | 4.5 | 157 | 4.5 | 31 | 4.9 | 94 |
| Total | 292.7 | 32 | 278.7 | 34 | 288.7 | 59 |
The above tables are based on the IFRS income statement and statement of financial position for the long-term business segment: average assets is the arithmetic average of the opening and closing value of assets, together with non-consolidated funds under management and excluding certain non-financial assets; excluded assets are goodwill, acquired value of in-force business (AVIF) and other intangibles, reinsurance assets, deferred acquisition costs and other assets, and prepayments and accrued income.
The total operating profit margin on assets for the 2009 half year was 32 bps (six months to 30 June 2008: 34 bps). The slight reduction in margin reflects the lower operating profit and higher average assets under management. On an annualised basis this equates to 64 bps, an increase of 5 bps on the 2008 full year margin of 59 bps. The margin fell in all regions except for Asia Pacific, which benefited from the effect of reserving changes in Singapore.
For the United Kingdom business, the operating profit margin reduced to 33 bps from 35 bps in the prior period. The United Kingdom margin on assets is a blended figure combining our participating (with-profits) and non-profit business. The reduced overall margin reflects the lower with-profits result due to lower special distribution bonus and other shareholder transfers, while the non-profit result improved.
The operating profit margin for the Europe region was 32 bps compared to 36 bps for the prior period.
The margin in France was adversely affected by a lower result from distribution companies due to reduced activity. In Italy, new business strain increased from changes in business mix. High margins on protection business portfolios were maintained in Poland and Spain, with lower investment margins in Spain. There was an improvement in margins for the newer smaller operations in Europe.
In the Netherlands, improved new business strain on lower volumes was offset by a lower expected return on shareholders' funds.
The North America operating margin reduced to 9 bps from 17 bps in the prior period, with adverse economic conditions leading to investment margin compression and associated higher DAC amortisation.
