L&G Half-year Results Part 4c

International Financial Reporting Standards

Page 53

Notes to the Financial Statements

4.08 Gross written premiums

Full year

30.06.08

30.06.07

31.12.07

£m

£m

£m

From continuing operations

UK life and pensions participating business

249 

193 

382 

UK life and pensions non-participating business

2,418 

1,421 

3,152 

Total UK life and pensions

2,667 

1,614 

3,534 

USA

182 

169 

345 

Netherlands

158 

143 

259 

France

152 

205 

348 

Total life and pensions

3,159 

2,131 

4,486 

General insurance

Household

129 

122 

255 

Other business 

13 

36 

52 

Total General insurance

142 

158 

307 

Total gross written premiums

3,301 

2,289 

4,793 

4.09 Acquisitions

Total net

Date of

Cash

Transaction

Total

assets

acquisition

paid

costs

cost

acquired

Company name

Notes

£m 

£m 

£m 

£m 

Nationwide Life Limited

(i)

31/01/08

250 

2 

252 

252 

Nationwide Unit Trust Managers Limited

(ii)

31/01/08

49 

1 

50 

50 

Suffolk Life Group Plc

(iii)

06/05/08

62 

1 

63 

63 

The Group has acquired 100% of the shares of each company. No goodwill has arisen in respect of these acquisitions.

(i) Nationwide Life Limited

The values of the purchased interest in long term business on acquired insurance and investment contracts have been calculated using discounted cash flow methodology. These contracts were recognised on the balance sheet at £127m and £2m gross of tax respectively (with corresponding deferred liabilities tax of £19m and £1m). The intangible assets will be amortised in line with the expected emergence of profit from the business. With effect from 31 January 2008 it has contributed £8m to the consolidated profit before tax and before amortisation of the purchased interest in long term business.

(ii) Nationwide Unit Trust Managers Limited

The value of the purchased interest in long term business on investment contracts acquired has been calculated using discounted cash flow methodology. This is recognised on the balance sheet at £29m gross of tax, with corresponding deferred tax liability of £8m. The intangible asset will be amortised in line with the expected emergence of profit from the business. With effect from 31 January 2008 it has contributed £2m to the consolidated profit before tax and before amortisation of the purchased interest in long term business.

(iii) Suffolk Life Group Plc

The value of the purchased interest in long term business on investment contracts acquired has been calculated using discounted cash flow methodology. This is recognised on the balance sheet at £47m gross of tax, with corresponding deferred tax liability of £13m. The value of the acquired customer relationship intangible has been calculated using the discounted cash flow methodology and recognised on the balance sheet at £15m gross of tax, with a corresponding deferred tax liability of £3m. The intangible assets will be amortised in line with the expected emergence of profit from the business. With effect from 6 May 2008 it has contributed £1m to the consolidated profit before tax and before amortisation of the purchased intangibles.

International Financial Reporting Standards

Page 54

Notes to the Financial Statements

4.09 Acquisitions (continued)

(i) Nationwide Life Limited - Assets and liabilities at date of acquisition

Book value

Adjustments

Fair value

£m 

£m 

£m 

Assets

Purchased interest in long term business

-

129 

129 

Financial investments

1,276 

-

1,276 

Reinsurers' share of contract liabilities

286 

-

286 

Deferred acquisition costs

15 

(15)

- 

Income tax recoverable

15 

(15)

- 

Other assets

4 

-

4 

Cash and cash equivalents

599 

-

599 

Total assets

2,195 

99 

2,294 

Liabilities

Non-participating contract liabilities

1,221 

-

1,221 

Tax liabilities

8 

15 

23 

Other liabilities

801 

(3)

798 

Total liabilities

2,030 

12 

2,042 

Net assets

165 

87 

252 

Adjustments include the recognition of acquired intangibles and application of consistent Group accounting policies.

(ii) Nationwide Unit Trust Managers Limited - Assets and liabilities at date of acquisition

Book value

Adjustments

Fair value

£m 

£m 

£m 

Assets

Purchased interest in long term business

-

29 

29 

Deferred acquisition costs

29 

(29)

- 

Other assets

70 

-

70 

Cash and cash equivalents

30 

-

30 

Total assets

129 

-

129 

Liabilities

Provisions

14 

-

14 

Deferred income liabilities

1 

(1)

- 

Tax liabilities

5 

5 

10 

Other liabilities

55 

-

55 

Total liabilities

75 

4 

79 

Net assets

54 

(4) 

50 

Adjustments include the recognition of acquired intangibles and application of consistent Group accounting policies.

International Financial Reporting Standards

Page 55

Notes to the Financial Statements

4.09 Acquisitions (continued)

(iii) Suffolk Life Group Plc - Assets and liabilities at date of acquisition

Book value

Adjustments

Fair value

£m 

£m 

£m 

Assets

Purchased interest in long term business

-

62 

62 

Plant and equipment

1 

- 

1 

Investment property

503 

- 

503 

Financial investments

1,763 

(2)

1,761 

Income tax recoverable

1 

-

1 

Other assets

60 

- 

60 

Cash and cash equivalents

738 

2 

740 

Total assets

3,066 

62 

3,128 

Liabilities

Non-participating contract liabilities

2,893 

- 

2,893 

Senior borrowings

153 

-

153 

Tax liabilities

- 

16 

16 

Other liabilities

3 

-

3 

Total liabilities

3,049 

16 

3,065 

Net assets

17 

46 

63 

Adjustments include the recognition of acquired intangibles and application of consistent Group accounting policies.

International Financial Reporting Standards

Page 56

Notes to the Financial Statements

4.10 Segmental analysis

The Group is organised into three main business segments:

- Long term business 

- Investment management

- General insurance

Other operations comprise estate agencies, regulated mortgage network, corporate expenses and assets held outside the three main business segments, none of which constitute a separately reportable segment.

As a result of Society's long term fund restructure, the Society shareholder capital held outside the LTF has been reclassified as attributable to long term business. The comparatives have been restated accordingly.

(i)  Income statement analysed by business segments

Long term

Investment

General

Other

Elimination

Total

business

manage-

insurance

operations

of inter

ment

segment

amounts

Six months ended 30 June 2008

£m

£m

£m

£m

£m

£m

Total revenue from continuing operations1

(551)

(13,380)

136 

122 

(112)

(13,785)

Total expenses from continuing operations

(66)

(13,521)

157 

141 

(112)

(13,401)

(Loss)/profit from continuing operations after income tax

(61)

64 

(16)

(14)

- 

(27)

Inter segment revenue

(17)

(47)

- 

(48)

112 

- 

Six months ended 30 June 2007

£m

£m

£m

£m

£m

£m

Total revenue from continuing operations1

3,234 

5,443 

149 

242 

(110)

8,958 

Total expenses from continuing operations

2,842 

5,342 

196 

163 

(110)

8,433 

Profit/(loss) from continuing operations after income tax

241 

50 

(33)

71 

- 

329 

Inter segment revenue

(14)

(30)

- 

(66)

110 

- 

Full year ended 31 December 2007

£m

£m

£m

£m

£m

£m

Total revenue from continuing operations1

6,540 

11,379 

308 

233 

(258)

18,202 

Total expenses from continuing operations

5,793 

11,169 

384 

319 

(258)

17,407 

Profit/(loss) from continuing operations after income tax

719 

109 

(55)

(55)

- 

718 

Inter segment revenue

(40)

(79)

- 

(139)

258 

- 

1. Total revenue from continuing operations includes investment return (further details provided in the consolidated income statement).

(ii) Balance sheet analysed by business segments

Long term

Investment

General

Other

Elimination

Total

business

manage-

insurance

operations

of inter

ment

segment

amounts

As at 30 June 2008

£m

£m

£m

£m

£m

£m

Total assets

78,592 

194,339 

420 

3,326 

(2,211)

274,466 

Total liabilities

73,929 

193,457 

322 

4,119 

(2,211)

269,616 

Total equity

4,663 

882 

98 

(793)

- 

4,850 

As at 30 June 2007

£m

£m

£m

£m

£m

£m

Total assets

71,901 

165,220 

554 

4,942 

(1,549)

241,068 

Total liabilities

68,228 

164,445 

418 

3,555 

(1,549)

235,097 

Total equity

3,673 

775 

136 

1,387 

- 

5,971 

As at 31 December 2007

£m

£m

£m

£m

£m

£m

Total assets

75,279 

204,313 

473 

3,266 

(2,046)

281,285 

Total liabilities

70,449 

203,550 

359 

3,349 

(2,046)

275,661 

Total equity

4,830 

763 

114 

(83)

- 

5,624 

International Financial Reporting Standards

Page 57

Notes to the Financial Statements

4.10 Segmental analysis (continued)

(iii) Revenue and assets by geographic segments

UK

USA

Netherlands

France

Elimination

Total

of inter

segment

amounts

30 June 2008

£m

£m

£m

£m

£m

£m

Total revenue from continuing operations

(14,132)

182 

85 

81 

(1)

(13,785)

Total assets 

267,924 

2,624 

1,751 

2,223 

(56)

274,466 

30 June 2007

Total revenue from continuing operations

8,416 

163 

173 

207 

(1)

8,958 

Total assets 

235,254 

2,486 

1,495 

1,880 

(47)

241,068 

31 December 2007

Total revenue from continuing operations

17,204 

338 

290 

373 

(3)

18,202 

Total assets 

274,975 

2,588 

1,663 

2,110 

(51)

281,285 

4.11 Financial investments

At 30.06.08

At 30.06.07

At 31.12.07

£m

£m

£m

Equities

133,566 

125,932 

149,567 

Unit trusts

4,716 

5,147 

4,659 

Debt securities

107,501 

88,465 

104,087 

Accrued interest

1,425 

1,187 

1,363 

Derivative assets

2,600 

271 

694 

Loans and receivables

1,439 

858 

1,348 

251,247 

221,860 

261,718