L&G 2008 Final Results Part 2

New Business

Page 25

2.01  New business summary

APE1

PVNBP2

Margin3

APE

PVNBP

Margin

2008

2008

2008

2007

2007

2007

Notes

£m

£m

%

£m

£m

%

Risk and savings4

2.02

1,138 

8,533 

3.1 

1,160 

8,892 

3.6 

International4

2.05

113 

896 

3.6 

114 

915 

4.1 

1,251 

9,429 

3.1 

1,274 

9,807 

3.7 

UK core retail investments

2.08

229 

161 

International retail investments

2.08

6 

2 

Total core retail investments

235 

163 

Total

1,486 

1,437 

2008

2007

Notes

£m

£m

Investment management

2.11

33,091 

54,431 

1. Annual Premium Equivalent (APE) is calculated for total new business, including core retail investments, but excluding institutional fund management new business, and comprises the new annual premiums together with 10% of single premiums. 2. The present value of new business premiums (PVNBP) on the EEV basis is defined as the present value of annual premiums plus single premiums for any given period. It is calculated using the same assumptions as for the contribution from new business but determined as at the point of sale. 3. The new business margin is defined as the contribution from new business (including the cost of solvency capital) divided by the PVNBP. 4. Excludes core retail investments.

2.02  Analysis of Risk and Savings1 new business by product

APE

Contri-

PVNBP

Margin 

bution

from new

business2

For the year ended 31 December 2008

£m

£m

£m

%

Protection

207 

62 

1,005 

6.2 

Annuities

281 

209 

2,806 

7.4 

Total Risk

488 

271 

3,811 

7.1 

Unit linked bonds

131 

(13)

1,306 

(1.0)

Pensions, stakeholder and other non profit

328 

(8)

2,183 

(0.4)

With-profits savings

191 

15 

1,233 

1.2 

Total Savings

650 

(6)

4,722 

(0.1)

Total Risk and Savings

1,138 

265 

8,533 

3.1 

Cost of capital3

65 

Contribution from new business before cost of capital

330 

For the year ended 31 December 2007

Protection

223 

108 

1,161 

9.3 

Annuities

205 

187 

2,045 

9.1 

Total Risk

428 

295 

3,206 

9.2 

Unit linked bonds

251 

21 

2,512 

0.8 

Pensions, stakeholder and other non profit

253 

(14)

1,674 

(0.8)

With-profits savings

228 

19 

1,500 

1.3 

Total Savings

732 

26 

5,686 

0.5 

Total Risk and Savings

1,160 

321 

8,892 

3.6 

Cost of capital3

19 

Contribution from new business before cost of capital

340 

1. Excludes core retail investments. 2. The contribution from new business is defined as the present value at point of sale of assumed profits from new business written in the period and then rolled forward to the end of the financial period using the risk discount rate applicable at the end of the reporting period. 3. For 2008 the cost of capital relating to new business reflects a risk margin of 4.5% in the risk discount rate and an equity backing ratio for the assets backing the solvency capital of 55% (2007 risk margin of 3.0% and equity backing ratio of 79%). 

2.03  Internal rate of return on non profit business

2008

2007

%

%

Non profit internal rate of return (including solvency margin)

13 

14 

New Business

Page 26

2.04  Analysis of Risk and Savings1 PVNBP

Annual

Present

Capital-

Single

PVNBP

PVNBP

premiums

value

isation

premiums

of annual

factor2

premiums

2008

2008

2008

2008

2008

2007

£m

£m

£m

£m

£m

Protection

207 

1,005 

4.9 

- 

1,005 

1,161 

Annuities

- 

- 

-

2,806 

2,806 

2,045 

Total Risk

207 

1,005 

4.9 

2,806 

3,811 

3,206 

Unit linked bonds

- 

- 

-

1,306 

1,306 

2,512 

Pensions, stakeholder and other non profit

181 

715 

4.0 

1,468 

2,183 

1,674 

With-profits savings

108 

395 

3.7 

838 

1,233 

1,500 

Total Savings

289 

1,110 

3.8 

3,612 

4,722 

5,686 

Total Risk and Savings

496 

2,115 

4.3 

6,418 

8,533 

8,892 

1. Excludes core retail investments. 2. The capitalisation factor is the present value of annual premiums divided by the amount of new annual premiums.

2.05  Analysis of international1 new business

APE

Contri-

Cost of

PVNBP

Margin 

bution

capital

from new

business2

For the year ended 31 December 2008

£m

£m

£m

£m

%

USA

51 

24 

6 

372 

6.3 

Netherlands

29 

7 

4 

241 

3.1 

France

33 

1 

4 

283 

0.5 

Total

113 

32 

14 

896 

3.6 

For the year ended 31 December 2007

USA

45 

23 

5 

319 

7.3 

Netherlands

27 

6 

3 

227 

2.5 

France

42 

9 

8 

369 

2.4 

Total

114 

38 

16 

915 

4.1 

1. Excludes retail investments. 2. Contribution from new business is reported after the cost of capital.

2.06  Analysis of international1 new business in local currency

APE

Contri-

Cost of

PVNBP

Margin 

bution

capital

from new

business2

For the year ended 31 December 2008

m

m

m

m

%

USA

$94 

$44 

$11 

$691 

6.3 

Netherlands

€36 

€9 

€6 

€305 

3.1 

France

€42 

€2 

€5 

€354 

0.5 

For the year ended 31 December 2007

USA

$90 

$46 

$11 

$637 

7.3 

Netherlands

€38 

€8 

€5 

€331 

2.5 

France

€60 

€13 

€11 

€539 

2.4 

1. Excludes retail investments. 2. Contribution from new business is reported after the cost of capital.

2.07  Analysis of international1 PVNBP in local currency

Annual

Present

Capital-

Single

PVNBP

PVNBP

premiums

value of

isation

premiums

annual

factor

premiums

2008

2008

2008

2008

2008

2007

m

m

m

m

m

USA

$94 

$691 

7.4 

- 

$691 

$637 

Netherlands

€16 

€106 

6.6 

€199 

€305 

€331 

France

€21 

€148 

7.1 

€206 

€354 

€539 

1. Excludes retail investments.

New Business

Page 27

2.08  Analysis of core retail investments new business

Annual

Single

APE

Annual

Single

APE

premiums

premiums

premiums

premiums

2008

2008

2008

2007

2007

2007

£m

£m

£m

£m

£m

£m

UK

41 

1,879 

229 

21 

1,399 

161 

France

- 

63 

6 

- 

24 

2 

Total

41 

1,942 

235 

21 

1,423 

163 

2.09  Analysis of Risk and Savings new business premiums

Annual

Single

APE

Annual

Single

APE

premiums

premiums

premiums

premiums

2008

2008

2008

2007

2007

2007

£m

£m

£m

£m

£m

£m

Protection

- Individual 

140 

- 

140 

160 

- 

160 

- Group

67 

- 

67 

63 

- 

63 

Annuities

- Individual (non profit)

- 

841 

84 

- 

875 

88 

- Individual (with-profits)

- 

27 

3 

- 

47 

5 

- Bulk purchase

- 

1,938 

194 

- 

1,123 

112 

Total Risk

207 

2,806 

488 

223 

2,045 

428 

Non profit savings

- Unit linked bonds

- 

1,306 

131 

- 

2,512 

251 

- Individual pensions

181 

1,460 

327 

141 

1,118 

253 

- DWP rebates

- 

8 

1 

- 

4 

- 

With-profits savings

- Bonds

- 

283 

28 

- 

102 

10 

- Individual pensions

106 

434 

149 

124 

752 

199 

- DWP rebates

- 

118 

12 

- 

124 

12 

- Group pensions

2 

3 

2 

6 

5 

7 

289 

3,612 

650 

271 

4,617 

732 

Core retail investments

- Unit trusts

12 

1,466 

159 

7 

962 

103 

- ISAs

29 

413 

70 

14 

437 

58 

Total Savings

330 

5,491 

879 

292 

6,016 

893 

Total Risk and Savings new business

537 

8,297 

1,367 

515 

8,061 

1,321 

New Business

Page 28

2.10 Analysis of total UK APE

2008

2007

£m

£m

Independent financial advisers

827 

842 

Tied

243 

261 

Direct

34 

36 

Total Individual Risk and Savings

1,104 

1,139 

Individual Risk and Savings1

875 

978 

Core retail investments

229 

161 

Total Individual Risk and Savings

1,104 

1,139 

Group Risk and Savings

263 

182