CGNU Interim Results 2001-Pt5

CGNU PLC
1 August 2001



PART 5 of 6

Page 28


12.  Earnings per share


a)   Basic earnings per share

                                     6 months 2001            6 months 2000
                                     --------------           -------------
                                          Net of              Net of        
                                            tax,                tax,        
                                      minorities          minorities        
                                             and                 and        
                              Before  preference     Per  preference     Per
                                 tax    dividend   share    dividend   share
                                  £m          £m       p          £m       p
Operating profit                                                            
 - ongoing business before                                                  
 amortisation of goodwill,                                                  
 amortisation of acquired                                                   
 additional value of                                                        
 in-force long-term business                                                
 and exceptional items           728         463    20.6         365    16.3
                                                                            
Adjusted for the following                                               
 items:
- Operating (loss)/profit                                                   
  on discontinued                                                           
  businesses                    (21)        (14)   (0.6)          85     3.8
  
- Amortisation of goodwill      (30)        (30)   (1.3)        (18)   (0.8)
  
- Amortisation of acquired                                                  
  additional value of                                                       
  in-force long-term                                                        
  business                      (17)        (12)   (0.5)         (9)   (0.4)
                                    
- Exceptional items                -           -       -           -       -
  
- Short-term fluctuation in                                                 
  investment returns           (446)       (507)  (22.6)          32     1.4
  
- Change in the                                                             
  equalisation provision        (22)        (16)   (0.7)         (9)   (0.4)
  
                                                                            
- Policyholders' Protection                                                 
  Board levy                    (14)        (10)   (0.5)           -       -

- Net profit/                                                            
   (provision for loss)                                                      
   arising on the sale                                                       
   of subsidiary undertakings    247         247    11.0           -       -
                                 
                                    
- Loss on withdrawal from                                                   
  London Market operations         -           -       -           -       -
  
- Merger transaction costs         -           -       -        (49)   (2.2)
  
                              ------      ------  ------      ------  ------
Profit/(loss) attributable                                                  
 to equity shareholders          425         121     5.4         397    17.7
                              ======      ======  ======      ======  ======


                                                              Full year 2000
                                                              --------------
                                                              Net of        
                                                                tax,        
                                                          minorities        
                                                                 and        
                                                          preference     Per
                                                            dividend   share
                                                                  £m       p
Operating profit - ongoing business before amortisation                     
 of goodwill, amortisation of acquired additional value                     
 of in-force long-term business and exceptional items            636    28.3
                                                                            
Adjusted for the following items:                                           
- Operating (loss)/profit on discontinued businesses           (423)  (18.8)
  
- Amortisation of goodwill                                      (92)   (4.1)
  
- Amortisation of acquired additional value of                              
  in-force long-term business                                   (22)   (1.0)
  
- Exceptional items                                            (352)  (15.7)
  
- Short-term fluctuation in investment returns                 (117)   (5.2)
  
- Change in the equalisation provision                          (19)   (0.8)
  
- Policyholders' Protection Board levy                             -       -
  
- Net profit/(provision for loss)arising on the sale of                   
   subsidiary undertakings                                     (977)  (43.5)
  
- Loss on withdrawal from London Market operations             (314)  (14.0)
  
- Merger transaction costs                                      (50)   (2.2)
  
                                                              ------  ------
Profit/(loss) attributable to equity shareholders            (1,730)  (77.0)
                                                              ======  ======


Earnings per share has been calculated based on the operating profit from
ongoing business before amortisation of goodwill, amortisation of acquired
additional value of in-force long-term business and exceptional items, after
taxation, attributable to equity shareholders, as well as on the profit
attributable to equity shareholders, as the directors believe the former
earnings per share figure provides a better indication of operating
performance. The calculation of basic earnings per share uses a weighted
average of 2,252 million (six months to 30 June 2000: 2,244 million, full year
2000: 2,247 million) ordinary shares in issue.

The actual number of shares in issue at 30 June 2001 was 2,253 million 
(30 June 2000: 2,246 million, 31 December 2000: 2,251 million).

b)   Diluted earnings per share

                           6 months            6 months        Full year   
                             2001                2000            2000
                          ----------           -------         ---------   
                         Weighted          Weighted         Weighted       
                          average           average          average       
                           number            number           number       
                               of     Per        of    Per        of    Per
                  Total    shares   share    shares  share    shares  share
                     £m         m       p         m      p         m      p
                                                                         
Profit/(loss)                                                            
 attributable                                                            
 to equity                                                               
 shareholders       121     2,252     5.4     2,244   17.7     2,247 (77.0)
Dilutive effect                                                          
 of options           -         2       -         6  (0.1)         4    0.1
                 ------    ------  ------    ------ ------    ------ ------
Diluted                                                                    
 earnings           121     2,254     5.4     2,250   17.6     2,251 (76.9)
                 ======    ======  ======    ====== ======    ====== =====

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Page 29


13. Longer-term investment return

The longer-term investment return is calculated separately for each principal
general insurance business and certain long-term operations. In respect of
equities and properties, the return is calculated by multiplying the opening
market value of the investments, adjusted for sales and purchases during the
period, by the longer-term rate of investment return. The longer-term rate of
investment return is determined using consistent assumptions between
operations, having regard to local economic and market forecasts of investment
return. The allocated longer-term return for other investments is the actual
interest income receivable for the period.

The principal assumptions underlying the calculation of the longer-term
investment return are:


                                        Longer-term rates of return
                                     Equities                 Properties
                                2001          2000        2001        2000
                                   %             %           %           %
                                                                          
United Kingdom                  8.1%          8.1%        6.6%        6.6%
France                          7.5%          7.5%        6.5%        6.5%
Ireland                         8.7%          8.7%        6.7%        6.7%
Netherlands                     8.4%          8.4%        6.5%        6.5%
Australia and New Zealand      10.0%         10.0%        8.0%        8.0%
Canada                          9.3%          9.3%        7.3%        7.3%
United States                   9.3%          9.3%        7.3%        7.3%


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