The whole world was shaken by those tragic events, and we feel deep sympathy for the victims and their families.Thankfully, none of our employees lost their lives.
We propose a final dividend of 23.75 pence, which brings the total for the year to 38 pence.
Our biggest long-term savings operation is Norwich Union in the UK, which produced 54% of our worldwide new business in 2001. Record sales helped to enhance our position as the UK’s leading life company, with an increased market share of over 11%.This growth demonstrated the excellent performance of the business and the strength of the Norwich Union brand, in a market that continues to experience a flight to quality as customers seek the reassurance of a trusted provider with financial strength.
In Poland, where we have a 29% share of the pensions market and funds under management of £2.2 billion, sales were limited by difficult economic conditions and a competitive market. However, Poland’s proposed entry into the European Union in 2004 means we have a leading position in a dynamic and progressive country with prospects for future growth.
�Singapore New partnership with the DBS, one of the largest banks in South East Asia, gives CGNU a platform for future growth in this highly attractive market.
In August 2001 we agreed a partnership with DBS, one of the largest banks in south-east Asia and the leading bank in Singapore.The 10year agreement gives CGNU exclusive access to about four million DBS customers in Singapore for the distribution of life and general insurance products. We also acquired The Insurance Corporation of Singapore, the life and general insurance subsidiary of DBS, as part of the transaction.The partnership made an encouraging start, with total sales of £63 million in the first four months. Our presence in this highly attractive long-term savings market will be further enhanced during 2002 by the introduction of Navigator, our successful master trust investment service from Australia, and changes to the regulatory framework that will favour low-cost providers over traditional higher-cost tied agents.
Community involvement plays an increasingly important part in the group’s corporate life. For instance, we continue to provide support for crime prevention measures, including Neighbourhood Watch initiatives in the UK, Canada and Australia.
The return on capital for continuing operations of 10.8% (2000: 7.1%) considerably exceeds the 8.7% return on the capital employed in our businesses (2000: 6.7%), enhancing value for our shareholders.
From Left Mike Biggs Philip Twyman Tony Wyand Patrick Snowball Philip Scott
Richard Harvey FIA (51) Group Chief Executive Appointed Group Chief Executive in April 2001 having been previously appointed to the Board as Deputy Group Chief Executive in May 2000. Joined Norwich Union in 1992, holding senior positions in New Zealand and the United Kingdom before joining the Norwich Union Board in 1995 and becoming Group Chief Executive in 1998. Member of the Nomination Committee.
The following changes to directors’ interests during the period 1 January 2002 to 26 February 2002, have been reported to the Company. They relate to shares acquired through market purchases and the reinvestment of dividends in Personal Equity Plans and/or Individual Savings Accounts.
(3) “Benefits”relate to the provision of a company car allowance and private medical insurance. As a result of the merger of CGU and Norwich Union, Philip Scott and Patrick Snowball found it necessary to acquire accommodation in London to perform better their Group executive duties, as distinct from their operational duties which are based in York and Norwich respectively. Accordingly both received a lump sum payment from the Company of £108,250 to put towards their accommodation requirements in London. This amount has been included under “Benefits”.
(4) During the year, no directors exercised any share options and therefore no gains on such were made. No new options were granted to directors nor did any options lapse.
At Awards Awards Awards At 1 January granted vesting lapsing 31 December 2001 during year during year during year 2001 Number Number Number Number Number
(5) The CGNU Long Term Incentive Plan was approved by shareholders at last year’s Annual General Meeting and awards were granted to directors in September 2000, subject to the condition that shareholders’ approval was obtained. Awards under the plan are made on an annual basis and the 2001 award was made in May. Awards are subject to the attainment of performance conditions over a three year performance period.
We read other information contained in the Annual Report and consider whether it is consistent with the audited accounts. This other information comprises the Chairman’s statement, Group at a glance, Group Chief Executive’s review, Operating review, Financial review, Directors’ report, Corporate governance statement and Remuneration report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the accounts. Our responsibilities do not extend to any other information.
The valuation of long-term business included in the Group’s balance sheet comprises two elements: the net assets of the long-term business operations, stated in accordance with United Kingdom accounting principles; and an additional asset, called the additional value of in-force long-term business, which is shown separately and represents the difference between the total embedded value of the long-term operations and their net assets included in these accounts. Movements in the additional value of internally-generated in-force long-term business are taken to the revaluation reserve.
1,816 Profit from long-term business operations before tax 1,126 1,053 47 CGNU plc
(90) Change in the equalisation provision (U & 38) (56) (27)
*Stated before the effect of foreign exchange movements which are reported within the foreign exchange (losses)/gains line.
Consolidated Group balance sheet At 31 December 2001 am Assets £m £m
Creditors 1,829 Creditors arising out of direct insurance operations 1,119 1,212 2,442 Creditors arising out of reinsurance operations 1,494 1,584
Earned premiums, net of reinsurance – 176 1,205 3,007 Allocated investment return transferred from the non-technical account – 55 152 417 Claims incurred, net of reinsurance – (173) (978) (3,025)
Other Europe 2 2 International Australia and New Zealand 7 16 Other International 4 5 57 CGNU plc
Total premiums written and investment sales – continuing operations 29,813 28,121 28,339 27,026 General insurance business premiums – discontinued operations (v) 1,187 3,442 1,103 3,213
Total investment return before tax (4,514) 3,753 30 1,713 61 CGNU plc
Longer-term return credited to operating results: Long-term business* 539 564 Non-long-term business 6,405 6,717
Operating profit – continuing operations before amortisation of goodwill, amortisation of acquired additional value of in-force long-term business
Fortis Australia Limited Australia 100% 3 July 2001 Eurovita Italcasse Assicurazioni S.p.A Italy 50.96% 11 July 2001 The Insurance Corporation of Singapore Singapore 100% 21 August 2001 Unicorp Vida, Compania de Seguros y Reaseguros Spain 50% 11 September 2001 Ahorro Andaluz, Entidad Gestora de Fondos de Penslones Spain 50% 11 September 2001 Bia Galicia, Compania de Seguros y Reaseguros, S.A. Spain 50% 24 September 2001 Bank Nagelmackers Belgium 100% 30 November 2001 Caja España Vida, Compania de Seguros y Reaseguros Spain 50% 26 December 2001 Risparmio Vita Assicurazioni S.p.A Italy 100% 28 December 2001 66 CGNU plc Annual report + accounts 2001 Notes to the accounts continued
(ii) On 3 July 2001, the Group completed the acquisition of Fortis Australia Limited from Fortis Group for a cash consideration of £124 million, including transaction costs. The net assets at the date of acquisition were £76 million giving rise to goodwill of £48 million.
The carrying value of land and buildings comprises: Long-term business Non-long-term business Group £m £m £m £m £m £m
Share of result for the year after tax 10 4 14 Foreign exchange rate movements (3) (4) (7) Unrealised investment losses after tax (5) (2) (7) Dividends received – (4) (4)
DL receives payments from the Arena companies in respect of fees for loan administration services, and also under the terms of interest rate swaps written between DL and the Arena companies to hedge their respective exposures to movements in interest rates arising from these transactions. In each case, the effect of the interest rate swaps is that the Arena companies swap all or part of the interest flows receivable from customers in respect of the securitised mortgage loans into fixed interest flows which are designed broadly to match the interest payable to the noteholders. DL has no right, nor any obligation, to repurchase the benefit of any of the securitised mortgage loans, other than in certain circumstances where DL is in breach of warranty.
Acquisitions /(disposals) of subsidiaries (7) (91) (193) (291) Charge for the year 8 101 68 177
Net book value at 31 December 2000 47 128 181 356 27 – Own shares
The allotted, called up and fully paid share capital of the Company at 31 December 2001 was: 2,254,928,378 (2000: 2,251,102,449) ordinary shares of 25 pence each 564 563 77 CGNU plc
France Life assurances: Up to eight years 3.5 to 4.5 TD 88/90 Eight years and over 2.5 to 3.5 TD 88/90 Annuities 2.5 to 4.5 TPRV (prospective table)
(j) The General Accident preference shares, included in minority interests at their par value of £250 million together with an £8 million accrual for dividends, are listed on the London Stock Exchange. Their fair value at 31 December 2001 was £331 million (2000: £297 million), based on their quoted market price.
Banking and stockbroking liabilities (29b) 3,312 1,899 Proposed final ordinary dividend (14) 536 535 United Kingdom and overseas tax 174 420 Bank overdrafts 918 500
The Group also operates a variety of smaller pension arrangements in these and other countries, where costs have also been based on those calculated locally.
(Decrease)/increase in cash holdings (69) 119 Foreign exchange rate movements 2 3
Cash at bank and in hand: General business and other activities 922 829 93 Banking and stockbroking 21 17 4
(1,202) Loss for the financial year attributable to equity shareholders (745) (1,657)
• It has been assumed that there will be no changes to the methods and bases used to calculate the statutory technical provisions and current surrender values.
We have audited the supplementary information on pages 92 to 98 in respect of the year ended 31 December 2001, which comprises the summarised profit and loss account – achieved profit basis and the related notes and analyses. The supplementary information has been prepared in accordance with the achieved profits basis, using the methodology and assumptions set out on pages 96 to 98. The supplementary information should be read in conjunction with the accounts prepared on the modified statutory solvency basis, which are on pages 44 to 90.