TIDM41BM TIDM60KE
RNS Number : 6058T
Royal London
31 March 2016
Press Release
31 March 2016
Royal London reports strong trading performance and operating
profits
Royal London, the UK's largest mutual life, pensions and
investment company, presents its results for the year ended 31
December 2015.
Trading Highlights (figures in brackets show movement compared
to 2014)
-- New life and pensions business (on a PVNBP basis)(2) GBP6,774m (+40%).
Excellent growth in new business sales reflects the strength of
Royal London's pensions and insurance propositions.
-- Improved overall margin of 2% (+43%) on new life and pensions
business has been achieved as operating efficiency initiatives are
embedded across the business.
-- EEV Operating profit before tax and exceptional items GBP244m (+11%).
This increase is driven by the success of our pension and
insurance businesses and the record new business figures. New
business profits rose to GBP137m (2014: GBP85m).
-- Embedded value has exceeded the GBP3bn mark for the first
time - GBP3.2bn (+6%) following good total profit performance.
-- IFRS transfer to unallocated divisible surplus GBP218m (+63%)
Our IFRS results also benefit from Royal London's strong trading
performance and improved margins.
-- Group funds under management GBP84.5bn (+3%).
Increase due to net inflows and good underlying investment
performance in difficult markets.
-- Surplus regulatory (Insurance Groups Directive) capital GBP3,535m (+4%).
Stronger capital position is a consequence of improved new
business results and the GBP350m raised by a subordinated debt
issue in November 2015.
-- ProfitShare GBP70m (+17%)
ProfitShare paid to eligible Policyholders increased by 17% in
2015 as a result of the improved new business results and strong
capital position. This brings the cumulative ProfitShare paid to
members to GBP536m since 2007.
Phil Loney, Group Chief Executive of Royal London, said:
"Our strategy of focusing on creating the best outcomes and the
best experience for our customers reflects our position as the
largest customer-owned company across our chosen markets. Our
strategy continues to produce pleasing results and over the last
four years Royal London has doubled its life and pension sales and
has nearly doubled assets under management.
The last year saw a record breaking trading performance which
brought with it a healthy increase in operating profit. New
business growth was particularly strong, with sales of group
pensions and income drawdown products going from strength to
strength. The fourth quarter of the year saw pension sales reach
new highs, which is particularly satisfying as it follows on from
the announcement that we will in future be sharing part of our
profits with pension customers through our unique ProfitShare
arrangement.
It is also pleasing that following considerable investment in
our protection proposition, sales of protection products through
intermediaries are now surging ahead. Our direct-to-consumer
division is now making significant headway in the market segments
where it operates by providing better value for money and fairer
products than the market incumbents. The strong growth in revenues
has allowed a substantial increase in investment in the business at
the same time as growing profits and strengthening the capital
position of Royal London.
The main Royal London With-Profits fund again benefited from a
positive investment return in 2015 and is ahead of its benchmark
over one, three and five years. The total bonuses paid to
policyholders have increased by 144% from those in 2014. In
addition, the asset shares of qualifying With-Profits policyholders
benefit from a ProfitShare; the asset shares have been uplifted by
1.4% (up from 1.15% in 2014) this year. Over the last decade our
profit sharing approach has boosted the value of policies held by
qualifying customers to the tune of GBP536m.
Royal London remains well capitalised, with surplus regulatory
capital increasing to GBP3,535m (GBP3,390m in 2014)."
For further information please contact:
Gareth Evans
Head of Corporate Affairs 0207 506 6715
Gareth.evans@royallondon.com 07919 170069
Editor's notes:
1) Royal London is the largest mutual life, pensions and
investment company in the UK, with Group funds under management of
GBP84.5 billion. Group businesses serve around 9.1 million policies
and employ 2,988 people. (Figures quoted are as at 31 December
2015).
2) Present value of new business premiums (PVNBP) is the total
of new single premium sales received in the year plus the
discounted value, at the point of sale, of the regular premiums the
Group expects to receive over the term of the new contracts sold in
the year.
3) Financial calendar
31 March 2016 Financial results for 2015 and conference call
12 May 2016 Interim management statement and first quarter new business results
9 June 2016 Annual General Meeting
18 August 2016 Interim financial results and second quarter new business results
4 November 2016 Interim management statement and third quarter new business results
13 November 2016 RL Finance Bonds No 3 plc Subordinated debt interest payment date
30 November 2016 RL Finance Bonds No 2 plc Subordinated debt interest payment date
3) Forward-looking statements
This document may contain forward-looking statements with
respect to certain of Royal London's plans, its current goals and
expectations relating to its future financial position. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances which are
beyond Royal London's control. These include, among others, UK
economic and business conditions, market-related risks such as
fluctuations in interest rates, the policies and actions of
governmental and regulatory authorities, the impact of competition,
the timing, impact and other uncertainties of future mergers or
combinations within relevant industries.
As a result, Royal London's actual future financial condition,
performance and results may differ materially from the plans, goals
and expectations set forth in Royal London's forward-looking
statements. Royal London undertakes no obligation to update the
forward-looking statements.
Contents
Financial Review Performance Overview 5
Contribution from new business 6
EEV Operating profit before expectional items 7
Embedded Value 7
ProfitShare 7
IFRS Results 8
IFRS Balance Sheet 8
Investment Performance 8
Movement in staff pension scheme surplus 8
Capital Strength 10
Other Matters
ProfitShare and Mutuality 11
Ratings agencies 12
Appendix 1 - EEV Consolidated income statement, consolidated
balance
sheet and basis for preparation 13
Appendix 2 - IFRS Consolidated statement of comprehensive
income,
consolidated balance sheet and consolidated statement of cash
flows and
basis for preparation 16
Appendix 3 - Reconciliations of IFRS to EEV 23
1. Financial Review
Performance Overview
We have delivered a strong operating performance in 2015, with
strong new business results, particularly in our pensions business,
and an increase in underlying operating profits.
On the EEV basis, our continuing operating profit before
exceptional items for 2015 increased by 11% to GBP244m (2014:
GBP220m). This was driven by strong new business profits that
exceeded 2014 by 61% and good existing business profits that were
broadly in line with 2014, offset by a number of one off costs from
investment into the business, which we believe are important for
our future competitiveness and we expect will deliver good
returns.
Our total EEV profit was GBP181m which increased our Embedded
Value to GBP3.2bn. This is the first time our Group Embedded Value
has exceeded GBP3bn and is due to the strong operating performance
and favourable economic variances, albeit lower than the variances
seen in 2014 mainly due to the low gilt yield environment. The
result also reflects a ProfitShare allocation of GBP70m (after
tax), which is up 17% on 2014 ProfitShare of GBP60m.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 02:00 ET (06:00 GMT)
Our Asset Management and Administration businesses have
continued to grow, with total Group funds under management
increasing from GBP82.3bn as at 31 December 2014 to GBP84.5bn at 31
December 2015. Ascentric, our wrap platform administrator saw gross
sales increase to GBP2.5bn (2014: GBP2.2bn) and has increased its
assets under administration by 13% during 2015 to GBP10.1bn (31
December 2014: GBP8.9bn).
2015 was a busy year for Royal London not only in terms of
attracting new business, but also in preparing for the new Solvency
II regime that came into effect on 1 January 2016. Our Solvency II
projects made tremendous progress in 2015 to ensure we had
everything in place to report under Solvency II. For the last time,
capital reporting for the period covered in this report comes under
the Solvency I regime.
Planning for financial security in the future is an issue that's
important to all of us, and at Royal London we're determined to
play our full part in enabling new and existing members and
customers to realise their savings goals and protection needs. In
doing so, we must also generate a positive financial return to
secure our own position as a stable and successful organisation
with a long-term future. With this in mind, we completed a GBP350m
subordinated debt issue in 2015, enabling us to maintain and
enhance our strong capital position.
Contribution from new business
New business profits are up 61% on 2014 at GBP137m which was
driven by a strong performance across all of our propositions but
in particular our Pensions products.
Intermediary Pension volumes are up 37% on 2014 due to our
success in the group pensions market following the introduction of
auto-enrolment and the strength of our individual pensions and
drawdown propositions. The increase in margin from 1.2% in 2014 to
1.8% in 2015 is largely attributed to a reduction in acquisition
and maintenance unit costs resulting from the increase in volumes
of business sold.
Intermediary Protection volumes have increased by 49% and
margins have increased from 6.7% in 2014 to 8.4% in 2015. Sales
were driven through changes to products to provide the right cover
to our customers and through enhancing our digital and telephone
based service propositions.
Consumer new business volumes more than quadrupled, up 385% to
GBP165m on 31 December 2015 from GBP34m on 31 December 2014. There
was strong recognition for the quality, fairness and value for
money provided by our core direct to consumer products. The new
business contribution and margin reflect the development investment
leading to 2015 launch of the direct to consumer proposition.
Royal London Asset Management performed well in a year of
turbulent market conditions. Gross new business inflows of GBP3.1bn
were slightly down on the more buoyant period in 2014 (GBP3.8bn),
but still a strong performance.
31 Dec 2015 Present New business New business
value of contribution margin
new business
premiums
GBPm GBPm %
Intermediary
Pensions 6,107 107.9 1.8
Protection 502 42.3 8.4
Consumer 165 (14.6) (8.8)
------------------------- -------------- -------------- -------------
Total life and pensions
business 6,774 135.6 2.0
------------------------- -------------- -------------- -------------
Wealth 3,146 22.2 0.7
------------------------- -------------- -------------- -------------
Total 9,920 157.8 1.6
------------------------- -------------- -------------- -------------
31 Dec 2014 Present New business New business
value of contribution margin
new business
premiums
GBPm GBPm %
Intermediary
Pensions 4,454 55.6 1.2
Protection 338 22.7 6.7
Consumer 34 (12.9) (37.9)
------------------------- -------------- -------------- -------------
Total life and pensions
business 4,826 65.4 1.4
------------------------- -------------- -------------- -------------
Wealth 3,755 29.9 0.8
------------------------- -------------- -------------- -------------
Total 8,581 95.3 1.1
------------------------- -------------- -------------- -------------
Notes: The new business contribution in the table represents the
new business contribution grossed up for tax at 20% (2014: 21%).
This is to aid comparability with proprietary companies which
typically pay tax at the main corporation tax rate of 20% (2014:
21%).
The new business margin represents the ratio of the new business
contribution to PVNBP.
EEV Operating profit before exceptional items
In 2015 the Group achieved an EEV operating profit from
continuing operations before exceptional items of GBP244m (2014:
GBP220m). This result reflects strong contributions from new
business and good existing business profits, which were broadly in
line with prior years. Existing business profits include benefits
from operating efficiency projects to improve cost control across
the business and improved persistency assumptions on GAO's
following Pension Freedoms. The results also include additional
non-recurring costs of investment into the business and costs in
providing for remediation following the introduction of our
Independent Governance Committee.
Embedded Value
Embedded value exceeded GBP3bn for the first time this year
following total EEV profit after tax in the year of GBP181m (+13%).
The increase is due to the strong operating performance and
favourable economic variances, albeit lower than the variances seen
in 2014 mainly due to the low gilt yield environment. The result
also reflects a ProfitShare allocation of GBP70m (after tax), which
is up 17% on 2014 ProfitShare of GBP60m.
ProfitShare
In 2015, Royal London's Board exercised its discretion to
allocate GBP70m (GBP74m gross of tax in EEV) of ProfitShare to
qualifying policyholders (previously known as Mutual Dividend). In
2014, the corresponding figure was GBP60m (GBP64m gross of tax in
EEV). This was due to the continued strong performance of the Group
in the year and the stable capital position.
IFRS results
The main financial basis we use for assessing our results is the
EEV basis. However, we also report our results on an IFRS basis.
Our total transfer to Unallocated Divisible Surplus in the year was
GBP218m, an increase of 63% on 2014. The increase is due to the
same reasons as the increase in our EEV performance. The IFRS
results has benefitted from a reduction in commission due to
IFAs.
IFRS Balance sheet
As a result of our performance in the year, the Unallocated
Divisible Surplus has increased from GBP3,139m at 31 December 2014
to GBP3,357m at 31 December 2015.
Our balance sheet remains robust and we experienced no
significant asset impairments in the period. Our total investment
portfolio (including investment property) was GBP65,165m at 31
December 2015, an increase on 31 December 2014 of 1.5%. Our
financial investments portfolio remains high quality, with the
majority (88%) of our bond investments in assets rated A or above.
51% (31 December 2014 53%) of our asset portfolio is in fixed
income investments and cash.
The Group's exposure to sovereign debt from Portugal, Italy,
Ireland, Greece and Spain amounted to less than 1.0% of the total
assets of the total investment portfolio.
Investment performance
We measure our investment returns against benchmarks that we
have constructed from market indices weighted to reflect the asset
mix of each sub-fund. In 2015 the investments backing the asset
shares of the Royal London with-profits Fund achieved a return of
4.1%, which was behind the return achieved in 2014 of 10.9% but
slightly above our benchmark of 3.2%.
The Royal London with-profits investment performance for UK
equities was 1.8% (benchmark 1.0%), overseas equities returned 6.1%
(benchmark 6.6%), returns from corporate bonds were 1.2% (benchmark
0.5%), government bonds achieved a return of 0.5% (benchmark 0.0%),
private equities 21.7% (benchmark 1.0%) and our property portfolio
returned 15.3% (benchmark 13.8%).
Movement in staff pension scheme surplus
The Royal London Group Pension Scheme (RLGPS) had a surplus of
GBP71m at the end of 2015, an increase of GBP23m on the previous
year. This increase was mainly due to a rise in the rate used to
discount the scheme liabilities, which reflects an increase in the
yields available on high-quality corporate bonds, as well as
lower-than-expected levels of inflation during 2015.
We also operate two schemes for ex-Royal Liver employees. The
surpluses from these schemes are included as part of the valuation
of the closed Royal Liver Sub-fund and therefore do not count
towards the surplus position of the Royal London Open Fund. The
combined Royal Liver scheme surplus as at 31 December 2015 was
GBP104m (2014: GBP80m). The surplus increased over the year because
of the impact of the increase in the discount rate.
2. Capital Strength
The Group's capital strength has continued to improve in 2015,
as a result of the good operating profits and the subordinated debt
issue in November 2015.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 02:00 ET (06:00 GMT)
In November we made a GBP350m subordinated debt issue of a
13-year subordinated notes guaranteed by the Royal London Mutual
Insurance Society Ltd. The notes carry a coupon of 6 1/8(th) % and
were issued at par. The issue was heavily oversubscribed,
indicating strong investor support. This debt issue ensured that
our capital position remained strong as we entered 2016 and
absorbed the introduction of Solvency II, the European Union
directive that will now regulate how we manage and report risk and
capital. Our preparations for Solvency II have gone well and, as a
Group, we are well positioned to cope with the increased reporting
that this will necessitate. More importantly, we have the capital
strength to support these disclosures. Solvency II transforms the
way in which we report our capital - look out for further detail on
this in our future press releases.
Our regulatory (Insurance Group Directive) capital position is
summarised as follows:
2015 2014
------------------- ------ -------- -------- ------ -------- --------
GBPm Open Closed Total Open Closed Total
Fund Funds Fund Funds
Available capital
(including
tier 2 capital) 4,007 10,276 14,283 3,917 9,449 13,366
Capital required (472) (750) (1,222) (527) (814) (1,341)
------------------- ------ -------- -------- ------ -------- --------
Surplus 3,535 9,526 13,061 3,390 8,635 12,025
Restriction
on surplus
of closed funds - (9,526) (9,526) - (8,635) (8,635)
------------------- ------ -------- -------- ------ -------- --------
Excess capital 3,535 - 3,535 3,390 - 3,390
------------------- ------ -------- -------- ------ -------- --------
Capital cover 849% 100% 133% 744% 100% 134%
------------------- ------ -------- -------- ------ -------- --------
Our total Group available regulatory capital increased from
GBP13,366m at 31 December 2014 to GBP14,283m at 31 December 2015.
Our IGD excess capital has increased by 4% and the Group has
maintained a strong regulatory capital cover of 133% (31 December
2014 134%).
The available capital of the closed sub-funds is retained within
those funds, as it is ultimately for the benefit of the closed
sub-fund policyholders. Therefore only the surplus of the open fund
counts towards our Group capital position. The excess regulatory
capital of the Royal London Open Fund increased by 4% from
GBP3,390m to GBP3,535m. The IGD capital cover for the Royal London
Open Fund of 849% increased on 2014 (744%).
Our realistic capital position is summarised as follows:
2015 2014
GBPm Open Closed Total Open Closed Total
Fund Funds Fund Funds
Available capital
(including tier
2 capital) 3,596 3,585 7,181 3,407 3,052 6,459
Capital required - - - (15) - (15)
---------------------- ------ -------- -------- ------ -------- --------
Surplus 3,596 3,585 7,181 3,392 3,052 6,444
Closed fund transfer
commitments (3,585) (3,585) - (3,052) (3,052)
---------------------- ------ -------- -------- ------ -------- --------
Excess capital 3,596 - 3,596 3,392 - 3,392
---------------------- ------ -------- -------- ------ -------- --------
Our excess realistic capital (the excess of assets over
liabilities, as measured by the PRA's realistic reporting
requirements) has increased from GBP3,392m to GBP3,596m. This
increase is due to a strong operating result and the impact of the
issue of the subordinated debt issue of GBP350m.
3. Other Matters
ProfitShare and Mutuality
Whatever value we generate in the years ahead, the changes we
made to our ProfitShare scheme recently will ensure that more of
our customers benefit. With ProfitShare, we are using our status as
a mutual to allow customers to share in our success - and last year
we announced plans to significantly expand the number of customers
who will benefit from our scheme.
Our growth over recent years has attracted many new customers,
but many of these new customers don't have with-profits policies
and therefore haven't qualified to share in our profits. That's all
set to change, as we are converting the pensions policies to
with-profits and hence broadening the base of those eligible to
take part in ProfitShare to allow far more of our customers to
become members - in effect part owners - of Royal London. It's
important to note, however, that this is not being done at the
expense of existing with-profits customers, who will continue to
receive payouts and ProfitShare allocations determined in the same
way as before. Bonuses increased significantly in 2015 as outlined
later in this report.
The expansion of ProfitShare will allow our customers to get
even more out of a scheme that has proved a big hit with members
and has helped us secure our future as a mutual. Over the past
decade we have given back more than GBP530m to our eligible
with-profits policyholders - and we remain as committed as ever to
basing our business model on our mutual status, so as many of our
customers as possible can profit from our growth and have their say
in how we run our business. We're also dedicated to meeting our
responsibility to ensure we give our customers and members good
value, high-quality products and services.
Ratings agencies
Our capital strength and financial stability are reflected in
our financial ratings from external ratings agencies. Our credit
ratings remain unchanged in 2015 at 'A - stable outlook' from
Standard and Poor's and 'A2 - Good Financial Security' from
Moody's.
APPENDIX 1 and APPENDIX 2 include the Group's IFRS and EEV
primary financial statements and basis of preparation notes. The
full set of IFRS and EEV results will be available on the Royal
London Group website in April 2016.
Appendix 1
Consolidated income statement - EEV basis for the year ended 31
December 2015
2015 2014
GBPm GBPm
------ ------- -------
Continuing operating activities
Contribution from new business 137 85
Profit from existing business
- Expected return 76 91
- Operating experience variances 3 56
- Operating assumption changes 74 12
Expected return on opening net
worth 27 42
Profit on uncovered business 7 7
Strategic development costs and
other items (80) (73)
------------------------------------------------ ------- -------
Operating profit before tax from
continuing operations and exceptional
items 244 220
Gain arising on business combinations -
Exceptional cost arising from
regulatory change - (61)
------------------------------------------------ ------- -------
Total operating profit before tax
from continuing operations 244 159
Operating profit/(loss) before tax -
from discontinued operations
------------------------------------------- --- ------- -------
Total operating profit before
tax 244 159
Economic experience variances 21 325
Economic assumption changes 32 (143)
Movement in RLGPS pension scheme
surplus 23 (42)
Financing costs (43) (40)
ProfitShare (74) (64)
EEV profit before tax from continuing
operations 203 195
Attributed tax charge 22 35
EEV profit after tax from continuing
operations 181 160
EEV profit after tax from discontinued - -
operations
------------------------------------------ ---- ------- -------
Total EEV profit after tax 181 160
------------------------------------------------ ------- -------
Consolidated Balance Sheet - EEV basis as at 31 December
2015
2015 2014
GBPm GBPm
------------------------------------------ ------- -----------
Assets
Assets held in closed funds 31,631 32,927
Assets backing non-participating
liabilities 24,084 21,938
Reinsurance assets 7,528 7,576
Assets backing participating liabilities
and net worth
- UK equities 1,715 1,781
- Overseas equities 775 687
- Land and buildings 852 776
- Approved fixed interest securities 2,154 2,313
- Other fixed interest securities 1,432 1,332
- Other assets 738 669
Value of in-force business 2,034 1,838
Royal London Group Pension scheme
(RLGPS) surplus 71 48
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 02:00 ET (06:00 GMT)
Total 73,014 71,885
------------------------------------------ ------- -----------
Liabilities
Liabilities in closed funds 31,631 32,927
Non-participating liabilities 24,084 21,938
Reinsured liabilities 7,528 7,576
Participating liabilities 5,363 5,438
Current liabilities 1,241 1,020
Total 69,847 68,899
------------------------------------------ ------- -----------
Embedded Value
Net worth 1,062 1,100
Value of in-force business 2,034 1,838
Pension scheme surplus (RLGPS) 71 48
Total 3,167 2,986
------------------------------------------ ------- -----------
Value of in-force business - EEV basis as at 31 December
2015
2015 2014
GBPm GBPm
----------------------------------------- ------------------------------------------------------- ------
Value of in-force business before
allowance for burn-through and capital
costs 2,066 1,881
Burn-through cost (3) (9)
Cost of capital (29) (34)
----------------------------------------- ------------------------------------------------------- ------
Value of in-force business 2,034 1,838
----------------------------------------- ------------------------------------------------------- ------
(a) Basis of preparation
The EEV results presented in this document have been prepared in
accordance with the EEV Principles and the Additional Guidance
issued in 2005 by the CFO Forum. They provide supplementary
information for the year ended 31 December 2015 and should be read
in conjunction with the Group's IFRS results. These contain
information regarding the Group's financial statements prepared in
accordance with IFRS issued by the International Accounting
Standards Board and adopted for use in the European Union.
The EEV Principles and Guidance were designed for use by
proprietary companies to assess the value of the firm to its
shareholders. As a mutual, Royal London has no shareholders.
Instead we regard our members as the nearest equivalent to
shareholders and have interpreted the EEV Principles and Guidance
accordingly. With-profits policies held by members do not generally
contribute to the value of in-force business. However, the
liabilities associated with these contracts are deducted from total
assets to arrive at net worth. Hence, any movement in liabilities
not matched by a corresponding movement in assets will change the
net worth and flow through the income statement. The reported
embedded value provides an estimate of Royal London's value to its
members.
EEV Operating profit follows the same principles, in terms of
items to include and exclude, as Operating Profit with the
exception of certain items which are recognised under IFRS but are
excluded from EEV. This is because the basis of preparing the Group
EEV results, are prepared by reference to the Realistic Balance
Sheet (RBS). Some items recognised under IFRS are inadmissible in
the RBS and are therefore not recognised in our EEV reporting. Most
notably, Operating Profit includes amortisation of intangibles (and
impairment if relevant) whereas in our EEV reporting, we exclude
goodwill or other intangible assets arising on the acquisition of a
subsidiary or business (other than Value of In-Force business)
because such items are not permitted to be recognised in the
RBS.
The RBS is produced at the level of the Parent company. In order
to present the EEV balance sheet as a group balance sheet, the RBS
is grossed up to include the assets and liabilities of subsidiaries
which are included in the RBS at the value of the Parent company's
net investment.
A further presentation adjustment is made to the EEV balance
sheet in respect of reinsurance. The RBS shows reinsured
liabilities net of the related reinsurance asset. The EEV balance
sheet is grossed up to show the reinsured liabilities and assets
separately.
Appendix 2
IFRS consolidated statement of comprehensive income for the year
ended 31 December 2015
2015 2014
GBPm GBPm
-------------------------------------------- ------ --------
Revenues
Gross earned premiums 1,194 1,218
Premiums ceded to reinsurers (400) (1,794)
--------------------------------------------- ------ --------
Net earned premiums 794 (576)
Fee income from investment and fund
management contracts 255 243
Investment return 2,122 7,796
Other operating income 44 47
--------------------------------------------- ------ --------
Total revenues 3,215 7,510
--------------------------------------------- ------ --------
Policyholder benefits and claims
Claims paid, before reinsurance 2,725 2,569
Reinsurance recoveries (470) (432)
--------------------------------------------- ------ --------
Claims paid, after reinsurance 2,255 2,137
Increase /(decrease) in insurance
contract liabilities, before reinsurance (948) 3,749
Reinsurance ceded 160 (1,515)
--------------------------------------------- ------ --------
Increase/(decrease) in insurance
contract liabilities, after reinsurance (788) 2,234
Decrease / (increase) in non-participating
value of in-force business (237) 3
Increase in investment contract
liabilities 903 1,846
--------------------------------------------- ------ --------
Total policyholder benefits and
claims 2,133 6,220
--------------------------------------------- ------ --------
Operating expenses
Administrative expenses 477 486
Investment management expenses 238 190
Amortisation charges and impairment
losses on acquired PVIF and other
intangible assets 40 72
Investment return attributable to
external unit holders 22 101
Other operating expenses 75 42
--------------------------------------------- ------ --------
Total operating expenses 852 891
--------------------------------------------- ------ --------
Finance costs 44 43
--------------------------------------------- ------ --------
Result before tax from continuing
operations 186 356
--------------------------------------------- ------ --------
Tax charge 18 207
--------------------------------------------- ------ --------
Transfer to the unallocated divisible
surplus from continuing operations 168 149
--------------------------------------------- ------ --------
Profit for the year - -
--------------------------------------------- ------ --------
IFRS consolidated statement of comprehensive income for the year
ended 31 December 2014
(continued)
2015 2014
GBPm GBPm
---------------------------------------------- ----- -------
Other comprehensive income:
---------------------------------------------- ----- -------
Items that will not be reclassified
to profit or loss
---------------------------------------------- ----- -------
Remeasurements of defined benefit pension
schemes 50 (15)
---------------------------------------------- ----- -------
Transfer (from)/to the unallocated divisible
surplus 50 (15)
---------------------------------------------- ----- -------
Other comprehensive income for the period - -
net of tax
---------------------------------------------- ----- -------
Total comprehensive income for the year - -
---------------------------------------------- ----- -------
As a mutual company, all earnings are retained for the benefit
of participating policyholders and are carried forward within the
unallocated divisible surplus. Accordingly, there is no profit for
the year shown in the statement of total comprehensive income.
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IFRS Consolidated Balance Sheet as at 31 December 2015
Group Parent company
2015 2014 2015 2014
ASSETS GBPm GBPm GBPm GBPm
----------------------------- ------- ------- ------- -------
Property, plant
and equipment 42 46 - -
Investment property 5,036 4,727 4,936 4,633
Intangible assets 832 931 777 893
Reinsurers' share
of insurance
contract liabilities 5,302 5,462 5,302 5,462
Pension scheme
asset 177 128 177 128
Deferred tax - - - -
asset
Current tax asset 19 - 22 -
Financial investments 60,129 59,492 42,629 44,231
Investments in
Group entities - - 15,321 12,894
Trade and other
receivables 546 412 383 285
Cash and cash
equivalents 2,823 2,736 2,209 2,259
----------------------------- ------- ------- ------- -------
Total assets 74,906 73,934 71,756 70,785
----------------------------- ------- ------- ------- -------
IFRS Consolidated Balance Sheet as at 31 December 2015
Group Parent company
2015 2014 2015 2014
LIABILITIES GBPm GBPm GBPm GBPm
------------------------ -------- -------- -------- --------
Participating
insurance contract
liabilities 28,874 29,607 28,949 29,682
Participating
investment contract
liabilities 2,326 2,308 2,326 2,308
Unallocated divisible
surplus 3,357 3,139 3,402 3,183
Non-participating
value of in-force
business (1,569) (1,332) (1,569) (1,332)
------------------------ -------- -------- -------- --------
32,988 33,722 33,108 33,841
Non-participating
insurance contract
liabilities 7,291 7,506 7,290 7,504
Non-participating
investment contract
liabilities 24,982 22,691 24,982 22,691
------------------------ -------- -------- -------- --------
32,273 30,197 32,272 30,195
Subordinated
liabilities 743 640 743 640
Payables and
other financial
liabilities 5,156 5,544 5,107 5,486
Provisions 224 250 219 237
Other liabilities 286 316 220 244
Liability to
external unit
holders 3,145 3,122 - -
Current tax liability - 52 - 51
Deferred tax
liability 91 91 87 91
Total liabilities 74,906 73,934 71,756 70,785
------------------------ -------- -------- -------- --------
IFRS Consolidated Statement of cash flows for the period ended
31 December 2015
Group Parent
company company
2015 2014 2015 2014
GBPm GBPm GBPm GBPm
--------------------------------------------- -------------- -------------------------- --------
Cash flows from operating
activities
Transfer to the unallocated
divisible surplus 218 134 219 245
Adjustments for non-cash
items 1,717 (1,036) 1,664 (2,711)
Adjustments for non-operating
items 44 43 (8) 7
Acquisition of investment
property (211) (277) (211) (264)
Net acquisition of financial
investments (1,432) (414) (1,530) (1,777)
Proceeds from disposal
of investment property 331 54 331 50
Changes in operating receivables (134) 96 (98) 29
Changes in operational
payables (422) 1,646 (407) 4,918
Change in liability to
external unit holders 23 636 - -
----------------------------------- --------- -------------- -------------------------- --------
Net cash flows from operating
activities before tax 134 882 (40) 497
Tax (paid)/received (89) (47) (64) 1
----------------------------------- --------- -------------- -------------------------- --------
Net cash flows from operating
activities 45 835 (104) 498
Cash flows from investing
activities
Acquisition of property,
plant and equipment (6) (15) - -
Acquisition of intangibles (15) - - -
Acquisition of Group entities - (180) (30) (8)
Proceeds from disposal
of Group entities - - - 10
Dividends received from
Group entities - - 20 31
Net cash flows from investing
activities (21) (195) (10) 33
----------------------------------- --------- -------------- -------------------------- --------
Cash flows from financing
activities
Proceeds on issue of debt 348 - 348 -
Repayments of other debt
and finance lease liabilities (246) - (246) 14
Interest paid (44) (43) (43) (41)
----------------------------------- --------- -------------- -------------------------- --------
Net cash flows from financing
activities 58 (43) 59 (27)
Net increase / (decrease)
in cash and cash equivalents 82 597 (55) 504
Cash and cash equivalents
as at 1 January 2,730 2,133 2,253 1,749
----------------------------------- --------- -------------- -------------------------- --------
Cash and cash equivalents
at 31 December 2,812 2,730 2,198 2,253
----------------------------------- --------- -------------- -------------------------- --------
An integral part of the operations of the Group is the
management of a portfolio of investment assets. Cash flows relating
to the purchase and sale of these assets have been treated as
operating cash flows for the purposes of the statements of cash
flows. In the Parent company, Open Ended Investment Companies
(OEICs) and other investment funds that are classified for
financial reporting purposes as subsidiaries are also part of this
operating portfolio of investment assets and hence cash flows in
relation to these assets are also classified as operating cash
flows for the Parent company statement of cash flows.
(a) Basis of preparation
The financial statements of the Group and the Parent company
('the financial statements') have been prepared in accordance with
International Financial Reporting Standards (IFRS) and
Interpretations issued by the IFRS Interpretations Committee (IFRS
IC) as adopted for use in the European Union. The financial
statements have also been prepared in accordance with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The financial statements have been prepared on the historical
cost basis as modified by the inclusion of certain assets and
liabilities at fair value as permitted or required by IFRS. The
accounting policies set out below are reviewed for appropriateness
each year. These policies have been applied consistently to all
periods presented in these financial statements, unless otherwise
stated.
All amounts in the financial statements are shown in pounds
sterling, which is the presentational currency of the Group and the
Parent company. Unless otherwise stated, amounts are shown in
millions of pounds, rounded to the nearest million.
New and amended standards adopted by the Group
The following new and amended standards have been adopted by the
Group for the first time in these financial statements:
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 02:00 ET (06:00 GMT)
-- IFRS 9, 'Financial Instruments', final version issued July
2014. This new standard was issued in several phases and will
replace IAS 39, 'Financial Instruments: Recognition and
Measurement' when it becomes effective on 1 January 2018. IFRS 9
covers the classification and measurement of financial instruments,
impairment and hedge accounting. The impact on the financial
statements will continue to be assessed and the Group will also
take into account the interaction between IFRS 9 and the
requirements of the replacement for IFRS 4, when the latter is
issued.
-- IFRS 15, 'Revenue from contracts with customers', effective
from 1 January 2018. This standard establishes a single
comprehensive model for revenue arising from contracts with
customers. The Group is considering how this standard will impact
the reporting of investment contract revenue and has yet to
complete its final assessment.
-- Amendments to IAS 1, 'Disclosure Initiative', effective from
1 January 2016. These amendments may result in some minor changes
to the financial statements disclosures.
There are no other standards or interpretations that are not yet
effective and that would be expected to have a material impact on
the Group.
Appendix 3
Reconciliation of the IFRS unallocated divisible surplus to the
European Embedded Value
2015 2014
GBPm GBPm
------------------------------------------------------- ------ ------
IFRS unallocated divisible surplus 3,357 3,139
Valuation differences between IFRS
and EEV
- Goodwill and intangible assets (277) (273)
- Deferred tax valuation differences - 3
- Subordinated debt at market value (25) (42)
* Capital requirements of subsidiaries and other
valuation differences (18) (46)
Add items only included on an embedded
value basis
- Valuation of asset management and
service subsidiaries 172 187
Other valuation differences (42) 18
------------------------------------------------------- ------ ------
European embedded value 3,167 2,986
------------------------------------------------------- ------ ------
Reconciliation of the IFRS transfer to unallocated divisible
surplus to EEV profit for the year
2015
GBPm 2014
GBPm
------------------------------------------- ------ -------
IFRS transfer to unallocated divisible
surplus 218 134
Amortisation of intangible assets (3) 11
Differences in valuation of subsidiaries 13 17
Change in realistic value of subordinated
debt 17 (26)
Movement in valuation differences
for deferred tax assets (3) 24
Other movements in valuation bases (61) -
EEV profit for the year 181 160
------------------------------------------- ------ -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JMMATMBAJBLF
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March 31, 2016 02:00 ET (06:00 GMT)
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