Profit before tax – excluding volatility and profit on sale and closure of businesses 3,841 3,145 Volatility*
Earnings per share 49.9p 44.6p * Volatility relates to Insurance and Investments (2006: £410 million, 2005: £749 million) and Central group items (2006: £(3) million, 2005: £(124) million).
Over the past few years, we have developed a strong risk and control infrastructure and this plays an important role in enabling us to drive profitable growth in a controlled and sustainable fashion.
Profit before tax, excluding strengthening of reserves for mortality 973 880 Strengthening of reserves for mortality – (155)
Total profit before tax 1,104 1,321 Attributed shareholder tax (331) (396)
Total assets £147.8bn £124.0bn Risk-weighted assets – post securitisation £91.8bn £80.1bn Risk-weighted assets – pre securitisation £92.6bn £80.1bn Customer deposits £61.2bn £57.9bn £m £m
Trading surplus 435 424 Impairment losses on loans and advances (245) (205)
The four independent Lloyds TSB Foundations support registered charities throughout the UK that enable people, particularly disabled and disadvantaged, to play a fuller role in society. The Foundations receive 1 per cent of the Lloyds TSB Group’s pre-tax profit after adjusting for gains and losses on the disposal of businesses and pre-tax minority interests, averaged over three years, instead of a dividend on their shareholdings. In 2006, £37 million was accrued for payment to registered charities.
We track employee engagement using a quarterly engagement index survey, which attracts a consistently high response rate (see page 27).
Policies are reviewed annually to seek to ensure they remain fit for purpose.
North Asia & Europe & Total Total UK America Australasia Middle East 2007 2006 £m £m £m £m £m £m
The following table provides more detail regarding the sources of capital in the life assurance business. The figures quoted are based on management’s current expectations pending completion of the annual financial return to the FSA. The figures allow for the proposed transfer of £750 million from the Long Term Fund to the Shareholder Fund as at 31 December 2006.
Realistic value of assets of fund 18,121 22,330 19,018 23,242 Support arrangement assets 1,174 – 1,115 –
Information about the remuneration committee’s membership and work is given in the directors’ remuneration report on pages 52 to 61 and its terms of reference are available from the company secretary and are displayed on the Company’s website www.lloydstsb.com.
The effectiveness of the internal control system is reviewed regularly by the audit committee and the board, which also receive reports of reviews undertaken around the Lloyds TSB Group by its risk management function and Group Audit. The audit committee receives reports from the Company’s auditors, PricewaterhouseCoopers LLP, (which include details of significant internal control matters that they have identified) and has a discussion with the auditors at least once a year without executives present, to ensure that there are no unresolved issues of concern.
Basic salaries are reviewed annually, usually in December, taking into account individual performance and market information (which is provided by Towers Perrin) and then adjusted from 1 January of the following year. Basic salary increases for other employees across the Group will be generally in the range of 0-10 per cent. Whilst the salary increases awarded to executive directors are normally consistent with this policy, any variation will be supported by robust and independent competitive market analysis. Salaries payable from 1 January 2007 are as follows: Name J E Daniels M E Fairey T A Dial A G Kane G T Tate H A Weir
Directors’ interests The interests, all beneficial, of those who were directors at 31 December 2006 in shares in Lloyds TSB Group were: At 1 January 2006 (or later date of At 31 December At 22 February
Debt securities and equity shares acquired principally for the purpose of selling in the short term or which are part of a portfolio which is managed for short-term gains are classified as trading securities and recognised in the balance sheet at their fair value. Gains and losses arising from changes in their fair value are recognised in the income statement within net trading income in the period in which they occur.
(a) Analysis of charge for the year 2006 2005 £m £m
Trading Exchange rate contracts: Spot, forwards and futures 116,255 794 1,432
In respect of: Loans and advances to banks (note 17) 1 1 Loans and advances to customers (note 18) 2,193 2,072 20 Available-for-sale financial assets 2006 2005 £m £m
Capital expenditure in respect of investment properties: 2006 2005 £m £m
Insurance policy liabilities can be split into With Profit Fund liabilities, accounted for using the FSA’s realistic capital regime (realistic liabilities) and Non-Profit Fund liabilities, accounted for using a traditional prospective actuarial discounted cash flow methodology as described in the accounting policies.
Claims outstanding comprise those claims that have been notified and those that have been incurred but not reported. Claims incurred but not reported are determined based on the historical emergence of claims and their average cost. The notified claims element represents the best estimate of the cost of claims reported using projections and estimates based on historical experience.
Authorised share capital Sterling £m £m 6,911 million Ordinary shares of 25p each 1,728 1,728 79 million Limited voting ordinary shares of 25p each 20 20 175 million Preference shares of 25p each 44 44
The same conditions apply as for grants made up to August 2004, except that: – the performance condition is linked to the performance of Lloyds TSB Group plc’s total shareholder return (calculated by reference to both dividends and growth in share price) against a comparator group of 15 companies including Lloyds TSB Group plc; – if the performance condition has not been met at the end of the third subsequent year, the options will lapse; and
The Group manages 89 (2005: 86) Open Ended Investment Companies (‘OEICs’), and of these 38 (2005: 36) are consolidated. The Group invested £372 million (2005: £345 million) and redeemed £237 million (2005: £265 million) in the unconsolidated OEICs during the year and had investments, at fair value, of £1,746 million (2005: £2,074 million) at 31 December. The Group earned fees of £149 million from the unconsolidated OEICs (2005: £85 million). The Company held no investments in OEICs at any time during 2005 or 2006.
Finance lease payments relate to leases of premises with a net book value of £14 million (2005: £14 million) and equipment with a net book value of £1 million (2005: £2 million). No arrangements have been entered into for contingent rental payments. The fair value of these finance lease obligations approximates their carrying amount at 31 December 2006 and 2005.
The corporate and retail businesses incur foreign exchange risk in the course of providing services to their customers. All non-structural foreign exchange exposures in the non-trading book are transferred to the trading area where they are monitored and controlled. These risks reside in the authorised trading centres who are allocated exposure limits. The limits are monitored daily by the local centres and reported to Group Treasury. Group Treasury calculates the associated VaR and the closing, average, maximum and minimum for 2005 and 2006 are disclosed on page 34.
The maximum credit risk exposure of the Group in the event of other parties failing to perform their obligations is detailed below. No account is taken of any collateral held and the maximum exposure to loss is considered to be the balance sheet carrying amount or, for non-derivative off-balance sheet transactions and financial guarantees, their contractual nominal amounts.
Included within cash and cash equivalents at 31 December 2006 is £9,054 million (2005: £8,860 million) held within the Group’s life funds, which is not immediately available for use in the business.