News

Unaudited results - 6 months ended 30 June 2001

02 August, 2001

Strong set of results

• Operating profit before tax from ongoing business* up 42% to £977 million (2000: £679 million).
  On a modified statutory basis, operating profit before tax was £728 million (2000: £531 million)
• Worldwide life achieved operating profit up 12% to £857 million
• Record half-year worldwide long-term savings new business sales at £7.1 billion
• New business contribution up to £272 million (2000: £236 million)
• General insurance operating profit up 124% to £427 million, benefiting from the actions to improve performance and lower weather related claims
• Interim dividend of 14.25 pence net per share (2000: 14.25 pence net per share)

Executing strategy to create value

• Leveraging multi-distribution capability worldwide
• Bancassurance agreements contributing to total sales in continental Europe of £2.6 billion, 36% of our total long-term savings sales
• Assets under management down to £204 billion, reflecting lower equity markets and disposals
• Group combined operating ratio improved to 103%, on track for our target of 102% by the end of 2001
• Exited value destroying businesses, including the sale of the US general insurance business
• Integration on track for completion by the end of 2001, and we are confident that we will exceed our merger savings target of £275 million a year

* Including life achieved operating profit and excluding results from the discontinued US general insurance and London Market operations.
All growth rates quoted are at constant rates of exchange.

Richard Harvey, Group Chief Executive, commented:

"These are a strong set of results with operating profit up 42% to £977 million. The results included a 12% increase in life achieved operating profit and a significant improvement in the performance of the Group's general insurance businesses.

"We continue to capitalise on the substantial long-term savings opportunities in Europe. We are using strong market positions to grow our business organically and are extending our distribution capabilities, in particular by entering into new bancassurance agreements.

"We have taken our first significant step into long-term savings in South East Asia through our bancassurance partnership with the Development Bank of Singapore. We are confident of using our expertise in bancassurance to deliver value from this agreement.

"As the sixth-largest insurance group in the world, and the largest in the UK, we have the size, expertise, financial strength and brands to succeed."

There will be a conference call today for wire services at 8.15 am on 020 8240 8240. This conference call will be hosted by Richard Harvey, Group Chief Executive.
A press conference will take place at 10.30 am at St Helen's, 1 Undershaft, London, EC3P 3DQ.
A presentation to analysts will take place at 12.30 pm at St Helen's, 1 Undershaft, London, EC3P 3DQ. The presentation slides will be available on this site.
Photographs are available from www.newscast.co.uk

Financial Highlights

Notes
Definitions of Group key performance indicators are set out on page 7 of the full release here (PDF 211KB).
† Figures provided as at 31 December 2000

GROUP CHIEF EXECUTIVE'S STATEMENT

As the UK's leading insurance company and one of the top-five life companies in Europe, we are pleased to report that the Group has produced a strong set of results. We have achieved record half-year long-term savings new business sales at £7.1 billion and increased operating profit before tax from ongoing business, including life achieved profit, up 42% to £977 million (2000: £679 million).

Long-term savings
Our life and pension sales grew strongly, up 19% to £6.3 billion, whilst retail investment sales were lower at £0.8 billion reflecting the effect of the weak equity markets. In the UK, we continue to see excellent growth in new business sales, up 12% to £4.1 billion, building on the outstanding results produced in 2000. Total pension sales grew by 38% to £1.3 billion and early indications are that stakeholder sales are performing well in this new and developing segment of the pensions market. We are continuing to develop our multi-distribution capability through both our partnership with The Royal Bank of Scotland Group, which has produced total sales of £178 million, and through the launch of norwichunion.com, our wealth management initiative.

We are developing strong businesses in continental Europe with top-five positions in the Netherlands, Ireland, Poland, Spain and Turkey. Our continental European businesses have produced life and pension sales up 29% to £2.4 billion, representing 39% of the total group life and pension sales. Our larger businesses in France and the Netherlands contributed £203 million of life achieved operating profit and the overall continental European margin improved benefiting from our bancassurance arrangements in Spain and Italy. Our bancassurance agreements in Spain with Unicaja and Caixa Galicia geographically complement our existing bancassurance arrangement with Bancaja giving us the second-largest savings bank distribution network and making us one of the top-five life companies in Spain.

We also recently announced an agreement with the Development Bank of Singapore (DBS), the number one bank in Singapore and largest in South East Asia, which is our first significant step into the Asian long-term savings market. DBS has access to just over 90% of the population in Singapore through its network of 100 branches. We will be using our expertise in bancassurance to deliver the benefits from this partnership in this new and exciting market for us, with significant growth potential.

Fund management
Morley, our UK fund management operation and a leading UK based fund manager, is the number one CAT-standard ISA provider and a top-five ISA provider based on funds under management. Our investment sales in the UK have continued to perform well against the backdrop of a weak equity market. Our business continues to improve its standing with the external consultant market, securing £1.3 billion of mandates in 2001.

In continental Europe, our Dutch fund management operations, Delta Lloyd Nuts Ohra, secured £238 million of investment mandates, despite weak investment markets. In Australia, our sales of Navigator were up 25% to £437 million reflecting a continued market trend towards multi-manager products, with Navigator maintaining a leading position in this market.

General insurance
Our general insurance business is seeing improvements in operating profit, up 124% to £427 million, benefiting from the steps we have taken to improve risk selection and rates, and lower weather-related claims. The combined operating ratio for both the UK and the Group is now at 103%. We remain fully committed to our target of a combined operating ratio of 102% by the end of this year.

We completed the sale of our US general insurance business on 1 June 2001, which concludes our involvement in this general insurance market. We further consolidated our top-five position in the Australian market with the acquisition of the Fortis general insurance business. We have continued to realign our smaller non-core overseas general insurance businesses and announced the sale of our operations in Belgium, Brazil and Pakistan and the sale of our non-core Australian mortgage indemnity business.

Integration
Integration continues rapidly and to date we have achieved £233 million of annualised cost savings. This represents 85% of our targeted cost savings and £89 million is included in the results for the first half of 2001. We will complete the integration by the end of 2001 and are confident that our annualised cost savings will exceed the £275 million target. We currently estimate that approximately £300 million of annualised cost savings will be achieved by the end of 2001 with no additional integration spend.

Dividend
At the time of the merger, the Group indicated that it expected to at least maintain its dividend whilst building its cover to a level appropriate for an international group focused on the long-term savings sector. Consistent with this aim, and whilst investing for the future growth of the business, the Board has decided to maintain the interim dividend paid in 2000 and has declared an interim dividend of 14.25 net pence per ordinary share payable on 15 November 2001 to shareholders on the register at 28 September 2001.

Over the last twelve months since completion of the merger, the Group has undergone significant transformation as we refocused the business in line with our strategy. With excellent integration progress we have delivered a strong set of first half results and are well placed to deliver further growth and shareholder value.

Richard Harvey
Group Chief Executive

6 months results 2001 (detail) (PDF 211KB)