29th Jul 2005 07:05
Friends Provident PLC29 July 2005 29 July 2005 Friends Provident plc Restatement of Full Year Results to 31 December 2004 under International Financial Reporting Standards Friends Provident plc has today disclosed the effects of restating consolidated31 December 2004 closing shareholders' funds and 2004 profits underInternational Financial Reporting Standards (IFRS). This includes the impact ofconsolidating the 51% holding in F&C Asset Management plc. Friends Provident hasalso given an update on the project to produce European Embedded Values (EEVs). The effects of the IFRS restatement are as follows (provisional unauditedfigures): 2004 2004 restated IFRS MSS £m £m________________________________________________________________________________Underlying profit before tax 171* 236**Profit after tax 153 179Equity shareholders' funds 2,437 2,444________________________________________________________________________________ * IFRS underlying profit for 2004 represents underlying profit (based on longer-term investment return) attributable to equity holders before amortisation of acquired intangible assets and present value of acquired in-force business, non-recurring items and tax. ** Restated modified statutory solvency (MSS) underlying profit for 2004 is MSS operating profit before amortisation of goodwill, operating exceptional items and tax, as reported in the 2004 preliminary statement, but restated to remove policyholder tax, as explained in appendix 3 note i. Philip Moore, Group Finance Director, said that the restatement of the figuresunder IFRS does not materially impact Friends Provident's achieved profitresults, embedded value, or group solvency, and has no impact on dividendpolicy. The Group maintains that the achieved profit basis as developed by EEVprinciples will continue to provide a more representative method of accountingfor long-term business. "As reported at the time of our Preliminary Results Announcement in March 2005,the rule changes will prohibit the deferral of some acquisition costs and changethe calculation of actuarial liabilities, for "investment" products. Thesechanges affect the timing of the recognition of profits but have no impact onthe total profit. The IFRS basis is therefore more cautious than the MSS basis,increasing the reported financing strain of new business." "These changes in accounting approach do not affect the economics of FriendsProvident's business and have no material impact on the statutory basis on whichthe solvency and distributable reserves of life companies are based. The Group's cash position has continued to strengthen and is unchanged by IFRS, hencethere is no change to our dividend growth policy. Dividend cover becomes a lessrelevant and comparable measure under IFRS. However, the dividend remains wellcovered by IFRS profits at 1.3 times." "Friends Provident will continue to seek to maximise shareholder value bypursuing increasing profits on a realistic basis, and will not change itscommercial behaviour to manage the timing of reported profits under an IFRSbasis." Friends Provident has also released today an indication of the expected effectsof restating embedded value and VNB on an EEV basis. A complete restatement ofthe Group's 2004 Full Year results under EEV will be presented on 12th Octoberthis year. Philip Moore said: "Friends Provident is adopting a market consistent "bottom up" approach to EEV.Today, we are outlining our approach and provide some indicative informationwith regard to the key results, including that, in respect of 2004, anyreduction in total embedded value will be less than 5% and the increase in thecontribution from new business will be at least 10%." - Ends - For further information, please contact: Nick Boakes Friends Provident plc 020 7760 3131Di Skidmore Friends Provident plc 020 7760 3131Simon Moyse Finsbury Limited 020 7251 3801 Ref: F102 Notes to editors:1. Friends Provident plc also issued today a Trading Statement for the first six months of 2005. 2. A copy of both announcements can be found in the News and Financial Results section of Friends Provident website: http://www.friendsprovident.com/media/news 3. A presentation of the Trading Statement, Restatement of 2004 Full Year Results under International Financial Reporting Standards and update of the European Embedded Value Project will take place at 10.30am today at JP Morgan Cazenove, 20 Moorgate, London EC2R 6DA. 4. The slides and full narrative of the presentation to analysts and fund managers will be available from 11.30am and can be viewed on http://www.friendsprovident.com/presentations 5. An On-Demand webcast will be available from 2.00pm and can be viewed on http://www.friendsprovident.com/results Appendix 1: Reconciliation of Underlying Profit and Profit After Tax Full year to 31 December 2004 Notes £m_____________________________________________________________________________Modified statutory solvency operating profit*before tax, as previously published 317_____________________________________________________________________________Policyholder tax (i) (81)_____________________________________________________________________________Modified statutory solvency operating profit*before tax, attributable to equity holders 236_____________________________________________________________________________DAC (ii) (36)Front-end fees (iii) 5Actuarial liabilities (iv) (38)Share option charge (v) (3)Add back PVIF amortisation treated asoperating under MSS (vi) 8F&C (vii) -Other (1)Total (65)_____________________________________________________________________________IFRS underlying profit** before tax,attributable to equity holders 171_____________________________________________________________________________Tax 29Minority interests (xvii) (5)_____________________________________________________________________________IFRS underlying profit** after tax andminority interests 195_____________________________________________________________________________ * (based on longer-term investment return) before amortisation of goodwill and operating exceptional items** (based on longer-term investment return) before amortisation of acquired intangible assets and present value of acquired in-force business, and before non recurring items Full year to 31 December 2004 Notes £m_____________________________________________________________________________Modified statutory solvency profit after taxand minority interest 179_____________________________________________________________________________Underlying profit* adjustments including PVIF amortisation (ii -vii) (65)PVIF amortisation (vi) (8)F&C Reinvestment Plan (vii) (4)Tax on underlying profit* adjustments (viii) 27Reversal of amortisation of goodwill (ix) 37Convertible bond (x) (15)Investments revalued to bid price (xi) 2Non-transferrable pension assets (xii) 2F&C (vii) (2)_____________________________________________________________________________IFRS profit after tax and minority interest 153_____________________________________________________________________________ * based on longer term investment return before amortisation of acquired tangible assets and present value of acquired in-force business and before non-recurring items. Appendix 2. Reconciliation of Equity Shareholders' funds 31 December 31 December 2004 2003 Notes £m £m_______________________________________________________________________________Modified statutory equity shareholders' 2,444 1,965funds_______________________________________________________________________________DAC (ii) 63 99Front end fees (iii) (37) (42)Actuarial liabilities (iv) (233) (196)Investments revalued to bid price (xi) (12) (13)Recognition of internally generated intangible assets (xiii) 16 17Reversal of Friends Provident plc proposed dividends payable (xiv) 102 84Business Combinations (xv) 94 88Convertible bond amortisation and fair value of option (x) (25) (10)Taxation (viii,xvi) 43 14F&C (vii) (14) (6)Other (4) (5)_______________________________________________________________________________IFRS equity shareholders funds 2,437 1,995_______________________________________________________________________________ Appendix 3. Explanatory Notes i. Policyholder taxMSS requires that the balance on the long-term business technical account isgrossed up by 30%. This adjustment deducts the policyholder tax element of thegross up. ii. DACThe DAC asset has been reduced on investment contracts (i.e. contracts notmeeting the definition of insurance), as only incremental acquisition costs(i.e. commission) can be deferred under IFRS. This reduces the amortisationcharge from DAC on in-force business, however this is offset by a greaterreduction in revenue from the write down of DAC on new business. iii. Front end feesIn accordance with IAS 18 Revenue, front end fees received on contracts shouldbe deferred and recognised across the lifetime of the contract on a reasonablebasis. iv Actuarial liabilitiesSterling reserves and actuarial funding adjustments, which reduced MSSBtechnical provisions, are removed from the calculation of investment contractliabilities under IFRS. v. Share options chargeIn accordance with IFRS 2 Share based Payments, a charge has been reflectedwhich represents the fair value of share based payments awarded (i.e. optionsgranted) during the year. Exemptions for Inland Revenue exempt schemes under UKGAAP do not apply under IFRS. vi. PVIF amortisationThe reversal of PVIF amortisation previously included within operating profitunder MSS; amortisation of acquired intangibles is excluded from our IFRSmeasure of underlying profit under IFRS. vii. F&CImpacts relate principally to the amortisation of intangible assets, such asinvestment management service agreements recognised on acquisitions and sharebased payment charges; F&C Reinvestment Plan expenses have been excluded fromunderlying profit under IFRS as they are non-recurring. viii. Tax on underlying profit adjustmentsDeferred taxation adjustments on DAC, actuarial liabilities and acquired PVIFgross-up. ix. Reversal of amortisation of goodwillIn accordance with IAS 36, Impairment of Assets, goodwill is no longeramortised, but is, instead subject to an annual impairment review. x. Convertible bondUnder IFRS, convertible bonds must be separated into a liability, measured atamortised cost, and an embedded derivative, being the option to convert toequity. Due to FP's 'cash settlement option' on conversion the option element isclassified as an embedded derivative and is fair valued through profit and loss.The 'cash settlement option' was removed by use of a deed poll in April 05,resulting in treatment of the option element as an equity component goingforwards. The adjustment has been excluded from Underlying Profit as it isconsidered to be similar to short-term fluctuations in investment return. xi. Investments revalued to bid priceIn accordance with IAS 39, Financial Instruments: Recognition and Measurement,all assets have been adjusted from mid to bid price, reducing investment values. xii. Non-transferrable pension assetsWhen calculating the net pension surplus/deficit 'plan assets excludenon-transferable financial instruments issued by the entity and held by thefund'; non-transferable financial instruments include units in linked fundsissued by the Group. The adjustment is purely presentational and does not impactshareholders' funds. However, the variance between actual and expected return onnon-transferrable assets flows through the Income Statement rather than directlyto reserves. The adjustment has been excluded from Underlying Profit as it isconsidered to be a component of short-term fluctuations in investment return. xiii. Recognition of internally generated intangible assetsIn accordance with IAS 38 Intangible Assets, certain development expenditure,written off immediately under UK GAAP, must be capitalised. This increases theexpenses as prior year development projects are amortised, but decreasesexpenses by the current year development costs not expensed immediately. xiv. Reversal of Friends Provident plc proposed dividend payableIn accordance with IAS 10 Events after the Balance Sheet Date proposed dividendsdeclared after the balance sheet date are no longer treated as a liability. xv. Business CombinationsPrimarily relates to the reversal of goodwill amortisation following therestatement of acquisitions post demutualisation. xvi. Unrealised Capital Gains Tax (UCGT)The disclosure of a tax liability within actuarial liabilities is notappropriate under IFRS. Given that a tax liability is now disclosed anoffsetting deferred tax asset can also be recognised. xvii. Minority interests (MI)MI includes an adjustment related to the MI share of amortisation of F&Cintangibles. About Friends Provident One of the UK's leading financial services groups• A FTSE 100 company comprising two core businesses: • Friends Provident Life and Pensions Limited, a top ten UK life and pensions company and a leading international cross-border player • F&C Asset Management plc (51% ownership), a top five UK asset manager with a growing European presence Emphasis on service• Five Star awards for Life and Pensions service - the highest of any UK listed life and pensions company - and for E-commerce (source: 2004 Financial Adviser Practiv Service Awards)• Best E-Commerce Provider (source: 2005 LifeSearch Protection Awards)• F&C voted "Best Investment Trust Provider" in the 2005 Personal Finance Magazine Readership Awards• Member of the Raising Standards Quality Mark Scheme Leading-edge systems• Single-platform system capable of accommodating high volumes, cost effectively• Automated interface with back-office IFA and third party systems with over 50% of business transacted online• Winner of Life Insurance Company of the Year at the Professional Pensions UK Pensions Awards 2005• Friends Provident is the only company to receive triple 'e' e-Excellence ratings for individual protection and group pensions awarded by the Financial Technology Research Centre in association with Money Marketing 2005. Fast-growing• Market share (UK life and pensions) has increased 27% since listing in 2001• Funds managed by Friends Provident plc since it listed in 2001, have grown four-fold from c£30 billion to more than £120 billion. Financially strong• Financial strength credit ratings categorised 'strong' (Standard & Poor's A+ with stable outlook, Moody's A2 with positive outlook)• Risk Capital Margin covered over six times (31 December 2004)• Free Asset Ratio 12.2% (31 December 2004) A diversified provider of investment solutions• F&C is a market leader in the investment trust market. The flagship Foreign & Colonial Investment Trust was the first such trust, launched in 1868, and remains the largest of its kind.• F&C's private equity partner, ISIS Equity Partners, was winner of the 2004 BVCA/Real Deals Private Equity House of the Year Award.• F&C is a top five manager of UK commercial property.• F&C Amethyst was winner of its category in the 2005 EuroHedge Awards. Renowned ethical heritage• Founded by Quakers in 1832 to address social needs• Pioneered linking investments with ethical principles (Stewardship - 1984; Responsible Engagement Overlay - reo(R) - 2000)• Stewardship Income Fund winner of the 2005 Lipper Fund Awards, ethical category• F&C (ISIS) overall winner of the Corporation of London's Cities Awards, 2004 and 2005 More 'at a glance' information available at www.friendsprovident.com/fastfacts Friends Provident media image library is available atwww.friendsprovident.com/imagelibrary a Newscast login is required. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Fondul Proprietatea