Embedded Value (EEV) basis supplementary information 230 Independent auditor’s report to Prudential plc on the European
This report may contain certain ‘forward-looking statements’ with respect to certain of Prudential’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Prudential’s control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Prudential’s actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in Prudential’s forward-looking statements. Prudential undertakes no obligation to update the forward-looking statements contained in this report or any other forward-looking statements it may make.
Operating profit from continuing operations based on longer-term investment returns £957m £699m
Following our decision to acquire the minority shareholding in Egg, we have targeted annualised cost savings of £40 million across our UK operations by 2007. During 2006, we will undertake a further review of the cost base in these operations. We also see opportunities for revenue synergies across our UK brands’ five million marketable customers.
Profitability on new business and internal rates of return remain high and we will continue to emphasise unit-linked products, which offer higher returns and greater capital efficiency. Unitlinked products accounted for 63 per cent of sales across the region in 2005.
Prudential has made good progress with the new panels announced to date and is strongly positioned to take advantage of the depolarised marketplace as this develops over the next few years. Prudential achieved APE sales of £4 million through this channel in 2005 and expects that multi-ties will start to have a greater impact on sales in the future.
Property Release Plan, in October. This innovative product gives customers greater flexibility and control over the time of when they draw down funds, thereby reducing total interest charges over the lifetime of the loan. Performance to date has been encouraging with growing support from both advisers and customers.
Including these individuals with Prudential branded general insurance policies, to whom Prudential can sell long-term products,
Share total return index (figures are to 31 December 2005, before tax and charges).
JNL sells variable, fixed and fixed index annuities, as well as life insurance and institutional products. All three annuity products are long-term personal retirement products, which offer tax-deferred accumulation on the funds invested until proceeds are withdrawn from the policy. Fixed annuities offer customers a guarantee of principal and a minimum guaranteed rate of return on their premiums. Fixed index annuities also offer these features, but vary from fixed annuities in that they offer potential upside from equity
JNL took advantage of attractive issuance opportunities during 2005, and continues to participate in this market on an opportunistic basis.
create a very significant increase in the level of distributions from retirement savings plans. Life expectancy in the US continues to increase while at the same time the average retirement age is decreasing. This has led to a large increase in the average time individuals will spend in retirement. Consequently, there is a growing risk that individuals’ finances will be insufficient to cover the costs of living through retirement. These consumers will have a growing need for independent financial advice and will increasingly seek guarantees and longevity protections from the products they purchase.
(JNL), the Group has prepared supplementary pro forma results that show the effect of adopting these standards if they had been applied in 2004 for those businesses. The two areas of change that are of particular relevance to Prudential’s results are: ■ Altered valuation bases for JNL derivatives and fixed income securities; and
The increase mainly reflects the substantial work being undertaken for the implementation of IFRS and EEV reporting, Sarbanes-Oxley and other regulatory costs.
Negative economic assumption changes of £349 million in 2005 compared with negative economic assumption changes of £126 million in 2004. Economic assumption changes in 2005 comprised negative £81 million in the UK, negative £3 million in the US and negative £265 million in Asia.
Earnings per share, based on EEV basis operating profit after tax and related minority interests were 56.6 pence, compared to 43.2 pence in 2004. Earnings per share, based on IFRS operating profit after tax and related minority interests, were 32.2 pence, compared with a 2004 figure of 22.7 pence.
Egg) held £865 million of Innovative Tier 1 capital, in the form of perpetual securities, £186 million Upper Tier 2 and £1,112 million of Lower Tier 2 capital. Following the implementation of the FCD, it is advantageous to the Group from a regulatory capital standpoint to raise its long-term debt in hybrid form and it is the
Prudential’s weighted average cost of capital (WACC) is circa 9.2 per cent, which is based on the net core debt and shares outstanding at the end of 2005, an equity market premium of four per cent and a market beta of 1.4. Prudential’s WACC has increased since the end of 2004 largely due to an increase in the assumed equity risk premium. Prudential continues to retain a significant portion of the Rights Issue proceeds which results in a higher proportion of the Group’s capital being funded by equity which, in turn, results in a temporary increase in the Group’s
(£136 million) and Vietnam (£127 million) making further substantial contributions. Our other markets of China, India, Indonesia, Japan,
do so. The impact of gains or losses on currency conversions is recorded as a component of shareholders’ funds within the statement of recognised income and expense. The impact of exchange rate fluctuations in 2005 is discussed elsewhere in this financial review.
Fixed index annuities (formerly referred to as equity-indexed annuities) are deferred annuities that enable policyholders to obtain a portion of an equity-linked return but provide a guaranteed minimum return. JNL guarantees an annual minimum interest rate, although actual earnings may be higher and are based on a participation in an equity index over its indexed option period. JNL’s profit arises from the investment income earned and the fees charged on the policy, less the expenses incurred, which include the costs of the guarantees, and the return credited to the policy. Fixed index annuities contain provision for early surrender.
result does not reflect the long-term benefit that will arise in the future from current management initiatives and capital expenditure in the year under review, as it focuses instead on the amounts accruing to shareholders in the current year only from business already in force.
Illustration of IFRS basis and EEV basis profit profiles for a typical with-profits product units of profit years
Previously, he was Chief Executive of Lloyd’s of London from July 1999 until December 2005.
Development Unit and in 1998 he also assumed responsibility for Lloyd’s North America business unit. Prior to his appointment to Lloyd’s he was responsible for corporate strategy at National
Freight Corporation plc, and prior to that he was a partner at management consultants Bain and Co and a director of private equity company Apax
Chief Executive of M&G, a position he held at the time of M&G’s acquisition by Prudential in March 1999. He joined M&G in October 1992. He is also a non-executive director of Close Brothers Group plc.
The directors are committed to high standards of corporate governance and support the Combined Code on Corporate
The Audit Committee reviewed the Group’s statement on internal control systems prior to its endorsement by the Board. It also reviewed the policies and processes for identifying, assessing and managing business risks. The Committee also received the minutes of the Disclosure Committee and the Group Operational Risk
The Nomination Committee now comprises exclusively independent non-executive directors and the Chairman and until 5 May 2005 included the former Group Chief Executive. The current Group Chief Executive is also closely involved in the work of the Committee and is invited to attend and contribute to meetings of the Committee. The Committee meets as required to consider candidates for appointment to the Board and to make recommendations to the Board in respect of those candidates. The
■ has served on the Board for more than nine years.
195 and the European Embedded Value (EEV) basis supplementary information on pages 204 to 229. It is the responsibility of the auditor to form independent opinions, based on its audit of the financial statements and its review of the EEV basis supplementary information; and to report its opinions to the Company’s shareholders. Its opinions are given on pages 197 and 230.
Group Risk Framework is based on the concept of ‘three lines of defence’. Primary management responsibility for strategy, performance management and risk control lies with the Board, the
Remuneration Committee meetings to provide background and context on matters relating to the remuneration of the other executive directors, but do not attend when their own remuneration is discussed. No director has any involvement in determining his or her own remuneration. The Remuneration Committee meets on at least three occasions each year and more frequently if necessary.
Schedule B and the provisions relating to the Principles of Good
The principles developed by the Remuneration Committee reflect the relative importance of those elements that are fixed and those that are variable and related to performance: ■ A high proportion of total remuneration will be delivered through performance-related reward; ■ the total remuneration package for each executive director will be set in relation to the relevant employment market; ■ a significant element of performance-related reward will be provided in the form of shares; ■ performance for business unit executives will be measured at both a business unit and Group level; and
The Remuneration Committee normally reviews executive directors’ salaries each year on an individual basis. The policy on basic salaries will be to review individual salaries with respect to the relevant market taking into account total remuneration.
In normal circumstances, directors may take up their right to receive shares at any time during the following seven years.
Michael McLintock the award was equivalent to 80 per cent of basic salary.
Mark Wood resigned as a director of the Company effective 17 October 2005 and his employment ended on 1 February 2006.
Date of Notice period Notice period Name contract to the Company from the Company
Companies Act 1985) in force for the benefit of the directors of the
The interests of directors in shares of the Company include changes between 31 December 2005 and 15 March 2006. All interests are beneficial.
3. Michael Garrett’s shareholding at 1 January 2005 includes 1,666 shares received as a result of the Rights Issue which were not reported in the 2004 Annual Report.
Conditional Conditional Date of original date of Year of share awards Conditionally Scrip Shares share awards end of Shares date of vesting initial outstanding awarded dividends released in outstanding at restricted released Date of award or release grant at 1 Jan 2005 in 2005 accumulated 2005 31 Dec 2005 period in 2005 release (pence) (pence)
Options outstanding under the Savings-Related Share Option (SAYE) Scheme are set out below. The Savings-Related Share Option
Further information on the use of derivatives and hedge accounting by the Group is also provided in notes D3 and G3 on pages 115 and 145 respectively.
At the Annual General Meeting in 2005, the shareholders granted authority to the directors for the purchase by the Company of its own shares in accordance with the relevant provisions of the
Benefits and claims and movement in unallocated surplus of with-profits funds (33,100) (26,593)
Net asset value attributable to unit holders of consolidated unit trusts and similar funds G1 965 808
A2: Basis of preparation The consolidated financial statements consolidate the Group and the Group’s interest in associates and jointly controlled entities.
The consolidated financial statements have been prepared and approved by the directors in accordance with International Financial
Measurement’ and IFRS 4, ‘Insurance Contracts’, have been adopted as at 1 January 2005 rather than 1 January 2004. This treatment is consistent with the policy typically applied by groups with banking operations where the practical consequences of adopting these standards for 2004 are significant.
IAS 32, IAS 39 and IFRS 4 standards have been adopted from 1 January 2005 when, at the same time, the Group has improved the policy applied for UK regulated with-profits funds. Comparatives have not been restated for this change. Note A6 provides a summary of the changes made in 2005 and their numeric effect on shareholders’ equity at 1 January 2005.
Loans collateralised by mortgages and other unsecured loans were carried at unpaid principal balances, net of unamortised discounts and premiums and an allowance for loan losses, except for loans held by UK insurance operations which were carried at fair value.
For loans and receivables carried at amortised cost, the impairment amount is the difference between amortised cost and the present value of the expected cash flows discounted at the original effective interest rate.
Derivative financial instruments are used to reduce or manage investment, interest rate and currency exposures, to facilitate efficient portfolio management and for investment purposes. The Group’s policy is that amounts at risk through derivative transactions are covered by cash or by corresponding assets.
(iii) Cash flow hedges – the effective portion of changes in the fair value of derivatives designated as cash flow hedges are recognised in equity. Movements in fair value relating to the ineffective portion are booked in the income statement. Amounts recognised directly in equity are recorded in the income statement in the periods in which the hedged item affects profit or loss.
A4: Significant accounting policies continued Financial liabilities designated at fair value through profit and loss
The Group operates a number of pension schemes around the world. The largest of these schemes is the PSPS, a defined benefit scheme. The Group also operates defined contribution schemes. Defined contribution schemes are schemes where the Company pays contributions into a fund and the Company has no legal or constructive obligation to pay further contributions should the assets of that fund be insufficient to pay the employee benefits relating to employee service in both current and prior periods. Defined benefit schemes are post-employment benefits plans that are not defined contribution schemes.
A4: Significant accounting policies continued The Company has established trusts to facilitate the delivery of Prudential plc shares under employee incentive plans and savings-related share option schemes. The cost to the Company of acquiring these treasury shares held in trusts is shown as a deduction from shareholders’ equity.
The Group provides supplementary analysis of profit before tax attributable to shareholders that distinguishes operating profit based on longer-term investment returns from other constituent elements of the total profit. As a result of the differences described above, in respect of adoption of the standards IAS 32, IAS 39 and IFRS 4 from 1 January 2005, the 2004 analysis is prepared on an inconsistent basis from that in 2005 and those intended to be presented in future years. The key area of difference relates to the valuation basis of derivatives and debt securities of JNL as described in section B1.
With the exception of derivatives used for managing equity exposure, value movements on derivatives held by JNL are included within short-term fluctuations. For the purposes of distinguishing actuarial gains and losses on defined benefit pension schemes in this analysis, plan assets include Prudential policies held by the schemes.
Under IFRS, all inter-company transactions are eliminated on consolidation. Investment management fees charged by M&G, and the
(b) Actuarial gains and losses. These gains and losses arise from changes in assumptions, the difference between actual and expected investment return on the scheme assets, and experience gains and losses on liabilities.
For 2005, additional gains and losses have been recognised as explained in note B1.
A5: Changes from previous accounting basis and reconciliation to previously published 2004 results on first-time adoption of IFRS continued Share-based payments
Previously, under UK GAAP, shareholders’ dividends were accrued in the period to which they related regardless of when they were declared. Under IFRS, dividends declared after the balance sheet date in respect of the prior reporting period are treated as a non-adjusting event. The appropriation reflected in the statement of changes in equity, therefore, includes the final dividend in respect of the prior year.
UK GAAP in IFRS format changes IFRS (note i) (note i) (notes ii and iii) basis
(iii) Other recognition and measurement changes Under IFRS, dividends declared after the balance sheet date are not recognised as a liability. In addition, subject to required impairment testing, goodwill under IFRS is the carrying value at adoption date as discussed above. Adjustments in the table include the write-back of amortisation previously charged under UK GAAP from 1 January 2004.
Reflecting previous UK GAAP basis of provisioning 16,149 (7,807) (8,342) (16,149)
Based on profit for the year 742 (226) 1 517 24.4p 24.4p
B4: New business continued Insurance products – new business premiums and contributions*
Department of Work and Pensions rebate business 83 89 – – 8 9
Group’s shareholders’ funds is represented by net assets in currencies other than sterling.
and Egg. Certain over-the-counter derivatives contain a credit risk element that is controlled through evaluation of collateral agreements and master netting agreements on interest rate and currency swaps. Prudential is also exposed to credit-related losses in the event of non-performance by counterparties.
Investments Contracts (GICs). Perfect matching is not possible for interest-sensitive and fixed index annuities because of the nature of the liabilities (which include guaranteed surrender values) and options for prepayment contained in the assets. The US supervisory authorities require JNL to calculate projections to test JNL’s ability to run off its liabilities with assets equal to statutory reserves in a number of specified future economic scenarios. If JNL is unable to satisfy all of these tests, which are carried out at least annually, then it may be required to establish additional statutory reserves.
For ‘investment’ contracts that do not contain discretionary participation features, IAS 39 and, where the contract includes an investment management element, IAS 18, apply measurement principles to assets and liabilities attaching to the contract that may diverge from those previously applied. Details of the impact for Prudential are described below.
The cost of guarantees, options and smoothing is very sensitive to the bonus, market value reduction (MVR), and investment policy the
In addition to the policyholder liabilities above, JNL has entered into a programme of funding arrangements under contracts which, in substance, are almost identical to GICs. The liabilities under these funding arrangements totalled £3,267 million and are included in ‘other non-insurance liabilities’ in the balance sheet above.
D4: Asian operations continued On the US GAAP basis the calculations are deterministic, that is to say based off a single set of projections, and expected long-term rates of return are applied.
WPSF with-profits of PAC assurance assurance subsidiaries SAIF (note i) fund (note ii) JNL subsidiaries operations M&G Egg and funds Group
Management actions encompass, but are not confined to, investment allocation decisions, levels of reversionary bonuses, crediting rates, and total claim values. To illustrate the flexibility of management actions, rates of regular bonus are determined for each type of policy primarily by targeting them at a prudent proportion of the long-term expected future investment return on the underlying assets. The expected future investment return is reduced as appropriate for each type of policy to allow for items such as expenses, charges, tax and shareholders’ transfers. However, the rates declared may differ by product type, or by date of payment of the premiums or date of issue of the policy, if the accumulated annual bonuses are particularly high or low relative to a prudent proportion of the achieved investment return.
For other UK long-term business subsidiaries the amounts retained within the companies are at levels which provide an appropriate level of capital strength in excess of the regulatory minimum.
E2: Balance sheet for banking operations Assets, liabilities and shareholders’ funds included in the Group consolidated balance sheet with respect to banking operations are as follows: £m £m
Securities sold under agreement to repurchase – 131 – – – 131
The primary market risk to which Egg is exposed is interest rate risk. Interest rate risk arises in Egg as a result of fixed rate, variable rate and non-interest bearing assets and liabilities. Exposure to interest rate movements arises when there is a mismatch between interest rate sensitive assets and liabilities.
Realised and unrealised gains and losses on securities at fair value through profit and loss 14,640
Current tax expense: Deferred tax expense: The deferred tax expense arises as follows: £m £m
For accounting purposes in all cases and for all reporting periods the applicable tax rate for profit attributable to policyholders and unallocated surplus is 100 per cent. This percentage reflects the basis of accounting for unallocated surplus coupled with the distinction made for performance reporting between sources of profit attributable to shareholders, policyholders and unallocated surplus.
Significant estimates and judgement are also employed in valuing certain asset-backed and mortgage-backed securities held by the Piedmont trust entity. These valuations may impact reported shareholder profit and loss amounts through the determination of impairment and recovery amounts. While management believes that the estimates and assumptions employed in developing the fair value estimates are reasonable and present management’s best estimate of such values, a reasonable range of values exists with respect to most assumptions utilised in determining these values. As a result of the potentially significant variability in the estimates of the assumptions used in these models, the range of reasonable estimates of the fair value of these securities is significant.
Borrowings attributable to with-profits funds 39 309 775 – – 81 694 1,898
All over-the-counter derivative transactions are conducted under standardised ISDA (International Swaps and Derivatives Association Inc)
Asset Liability Asset Liability Asset Liability £m £m £m £m £m £m
These derivatives are used for efficient portfolio management to obtain cost effective and efficient exposure to various markets in accordance with the Group’s investment strategies and to manage exposure to interest rate, currency, credit and other business risks.
See also section D3 for use of derivatives by the Group’s US operations.
Goodwill is tested for impairment by comparing the CGUs carrying amount, excluding any goodwill, with its recoverable amount.
For retail and institutional business a risk discount rate of 12 per cent has been applied. This represents the average implied discount rate for comparable UK listed asset managers calculated by reference to risk-free rates, equity risk premiums of 5 per cent and an average
On the basis of the results of this exercise it was determined that all goodwill held in relation to the Japanese business should be written off in 2005.
Contingent rents recognised as income in the year amounted to £46 million (2004: £42 million).
(ii) This debt is exchangeable into preference shares at Prudential’s option.
Court or otherwise. In any event the Company expects that the entire inherited estate will need to be retained within the long-term fund for the foreseeable future to provide working capital and so it has not considered any distribution of the inherited estate to policyholders and shareholders.
Defined benefit schemes in the UK are generally required to be subject to a full actuarial valuation every three years to assess the appropriate level of funding for schemes having regard to their commitments. These valuations include assessments of the likely rate of return on the assets held within the separate trustee administered funds. PSPS was last actuarially valued on 5 April 2002 and this valuation demonstrated the scheme to be 110 per cent funded with an excess of actuarially determined assets over liabilities of 10 per cent representing a fund surplus of £376 million. As a result, no change in employers’ contributions from the current 12.5 per cent of salaries has been required until now.
The change of assumption for discretionary increases follows discussion with the PSPS trustee. For the purpose of future discretionary awards, it is assumed that a cap of a 2.5 per cent rate of increase will apply rather than, as previously applied, the assumed long-term inflation rate.
(ii) The IAS 19 basis assets of the PSPS and M&G schemes, as consolidated into the Group balance sheet, exclude investments in
Prudential insurance policies) are as follows: Actuarial and other gains and losses
The change in the present value of the benefit obligation and the change in fair value of the assets for the total of the PSPS, Scottish
Fair value of plan assets, end of year 4,622 253 4,875
I1: Staff and pension plans continued IAS 19 basis: change in IAS 19 basis: Investments present Economic change in in Prudential Economic value basis: fair value of insurance basis: of benefit net plan assets policies total assets obligation obligation 2004 £m £m £m £m £m
Total employer contributions expected to be paid into the Group defined benefit schemes for the year ending 31 December 2006 amounts to £85 million (2004: £31 million).
In addition, there are other share awards which include the 1,000 Day Long Term Incentive Plan (LTIP) and other arrangements.
I2: Share-based payments continued During the year, the Group granted share options to certain non-employee independent financial advisors. Those options were measured using the Black-Scholes option pricing model with assumptions consistent with those of other share options. These transactions were measured using an option model because the Group does not receive a separate and measurable benefit from those non-employees in exchange for the options granted. As such, the fair value of the options themselves is more readily determinable than the services received in return.
Intrinsic value of above liabilities for which rights had vested at 31 December 1 –
The share-based payments charge is the sum of £1,842,000 (2004: £1,815,000), which is determined in accordance with IFRS 2,
Prudential Staff Pension Scheme (PSPS). Please refer to note 8 for further details. The effect of this change in policy and attribution of the
The Accounting Standards Board (ASB) published FRS 23, FRS 24, FRS 25 and FRS 26 in December 2004. These accounting standards are, in effect, part of a package of UK standards comprising FRS 23, FRS 24, the disclosure requirements of FRS 25 and FRS 26.
basis of valuation, PSPS accounts for 89 per cent of the liabilities of the Group’s defined benefit schemes.
‘Employee Benefits’. However, individual company accounts of the Company continue to apply UK GAAP. For 2005, this includes the application of FRS 17 in the Company’s primary statements. During 2005, the allocation of pension schemes’ deficits within the Group attaching to PSPS has been clarified and the Company is assuming a portion of the deficit of PSPS on behalf of the Group.
Rate of increase in pension payments for inflation: Guaranteed (maximum 2.5%) 2.50 N/A N/A
8. Pension liabilities continued Movements on the PSPS liability attributable to the Company that is recognised in the Company’s financial statements as a result of the implementation of FRS 17 are as follows: Gross of Related Net of tax liability deferred tax tax liability £m £m £m
13. Guarantees The Company provides a guarantee for the £150 million principal amount of the 9.375 per cent bonds due 2007, which have been issued by one of its finance subsidiaries. In certain instances the Company has also guaranteed that other subsidiaries will meet their obligations when they fall due for payment.
Based on statutory IFRS Pro forma IFRS basis results basis results 2005 2004 Summary results Note £m £m
Based on post-tax profit (loss) from discontinued operations (after minority interests) 0.1p (3.1)p
Pro forma basis adjustments for estimated impact if IAS 32, IAS 39, and IFRS 4 had been adopted from 1 January 2004 for insurance operations 251 206
Shareholders’ share of actuarial and other gains and losses on defined benefit pension schemes 9 (47) (12)
and Scottish Amicable scheme are excluded. These deficits are partially attributable to the Prudential Assurance Company (PAC)
The risk discount rate so derived does not reflect a market beta but instead reflects the risk of volatility associated with the cash flows in the embedded value model.
Under Capital Asset Pricing Methodology (CAPM) the discount rate is determined as: Discount rate = risk-free rate + (beta x equity risk premium)
Assumptions required in the calculation of the value of options and guarantees, for example relating to volatilities and correlations, or dynamic algorithms linking liabilities to assets, have been set equal to the best estimates and, wherever material and practical, reflect any dynamic relationships between the assumption and the stochastic variables.
Pre-tax expected long-term nominal rate of return for US equities 8.4 7.3
Jackson National Life ■ Interest rates are projected using a log-normal generator calibrated to actual market data; ■ corporate bond returns are based on Treasury securities plus a spread that has been calibrated to current market conditions and varies by credit quality; and
Expense levels, including those of service companies that support the Group’s long-term business operations, are based on internal expense analysis investigations and are appropriately allocated to acquisition of new business and renewal of in-force business.
(ii) The £148 million cost of strengthened persistency assumption relates to a number of products, primarily in respect of with-profits bonds. The £73 million cost of strengthened persistency assumption for 2004 relates to the closed book of personal pension policies sold by the now discontinued direct sales force.
Total tax charge on operating profit from continuing operations 363 350
The altered carrying value of core structural borrowings under EEV reflects the application of market values rather than IFRS basis values.
Notes (i) Investment in operations reflects increases in share capital. This includes certain non-cash items as a result of timing differences.
Additional charge for shareholders’ 10% interest on the achieved profits basis in the deficit attributable to the PAC with-profits fund (47)
Product distribution channels ■ Business to business (consulting actuaries and benefit advisers) ■ Partnerships (affinities and banks) ■ Independent financial advisers ■ Multi-tie panels ■ Direct to customers (telephone, internet and mail)