Interim Results - Part 2

CGU PLC 11 August 1999 Part 2 CGU plc STATISTICAL APPENDIX - ISSUED 11 AUGUST 1999 UNAUDITED GROUP RESULTS FOR 6 MONTHS ENDED 30 JUNE 1999 All results in the statistical appendix are before merger integration costs 6 months to 30 June 3 months to 30 June 1999 1998 1998 1999 1998 at at at at at average average average average average 1999 roe 1999 roe 1998 roe 1999 roe 1999 roe OPERATING PROFIT £m £m £m £m £m Life assurance UK 122 107 107 62 53 France 45 43 42 23 23 Netherlands 63 63 61 31 30 Other Europe 14 6 7 7 6 United States 8 6 6 4 4 Canada 1 2 2 1 1 Rest of World (3) 1 1 (1) 1 --- --- --- --- --- 250 228 226 127 118 === === === === === General insurance UK 48 71 71 32 35 France 26 29 28 24 17 Netherlands 21 29 29 10 16 Other Europe 7 12 12 7 8 United States 102 50 49 40 17 Canada 38 27 27 28 35 Australia & NZ 12 23 23 3 17 Rest of World 16 13 15 11 7 Group reinsurance 17 15 15 13 11 --- --- --- --- --- 287 269 269 168 163 === === === === === Associated undertakings UK 3 2 2 1 2 France 1 2 2 (1) 1 Other Europe 4 1 1 2 1 Rest of World - 1 1 - - --- --- --- --- --- 8 6 6 2 4 === === === === === Asset management/ other financial services UK 7 - - 3 1 France 4 2 2 3 1 Netherlands 5 5 5 1 2 Other Europe 1 5 5 1 4 --- --- --- --- --- 17 12 12 8 8 === === === === === Operating profit UK 180 180 180 98 91 France 76 76 74 49 42 Netherlands 89 97 95 42 48 Other Europe 26 24 25 17 19 United States 110 56 55 44 21 Canada 39 29 29 29 36 Australia & NZ 12 23 23 3 17 Rest of World 13 15 17 10 8 Group reinsurance 17 15 15 13 11 --- --- --- --- --- 562 515 513 305 293 Unallocated expenses (38) (30) (30) (20) (17) Unallocated interest charges - external (33) (38) (38) (18) (20) - intra-group (61) (45) (45) (30) (22) Goodwill amortisation (10) (1) (1) (5) (1) --- --- --- --- --- Pre-tax operating profit before merger integration costs 420 401 399 232 233 === === === === === GROUP GENERAL INSURANCE RESULTS 6 months to 30 June 3 months to 30 June 1999 1998 1998 1999 1998 at at at at at average average average average average 1999 roe 1999 roe 1998 roe 1999 roe 1999 roe £m £m £m £m £m Underwriting result UK (137) (158) (158) (59) (82) France (19) (14) (14) (4) (6) Netherlands (10) (4) (4) (4) (1) Other Europe (31) (21) (20) (13) (8) United States (89) (145) (141) (56) (80) Canada (18) (29) (30) - 7 Australia & NZ (22) (15) (15) (14) - Rest of World (10) (14) (15) (4) (7) Group reinsurance - (8) (8) 4 (1) ----- ----- ----- ----- ----- (336) (408) (405) (150) (178) ===== ===== ===== ===== ===== Longer term investment return (LTIR) UK 185 229 229 91 117 France 45 43 42 28 23 Netherlands 31 33 33 14 17 Other Europe 38 33 32 20 16 United States 191 195 190 96 97 Canada 56 56 57 28 28 Australia & NZ 34 38 38 17 17 Rest of World 26 27 30 15 14 Group reinsurance 17 23 23 9 12 --- --- --- --- --- 623 677 674 318 341 === === === === === General insurance result UK 48 71 71 32 35 France 26 29 28 24 17 Netherlands 21 29 29 10 16 Other Europe 7 12 12 7 8 United States 102 50 49 40 17 Canada 38 27 27 28 35 Australia & NZ 12 23 23 3 17 Rest of World 16 13 15 11 7 Group reinsurance 17 15 15 13 11 --- --- --- --- --- 287 269 269 168 163 === === === === === Note: Investment income, which is included in the longer term investment return is analysed below. 6 months to 30 June 3 months to 30 June 1999 1998 1998 1999 1998 at at at at at average average average average average 1999 roe 1999 roe 1998 roe 1999 roe 1999 roe £m £m £m £m £m Investment income UK 157 195 195 82 100 France 28 27 26 20 16 Netherlands 18 17 17 8 8 Other Europe 30 29 28 16 16 United States 149 158 154 75 79 Canada 52 51 52 26 25 Australia & NZ 29 36 36 14 17 Rest of World 20 22 25 11 12 Group reinsurance 15 22 22 8 11 ----- ----- ----- ----- ----- 498 557 555 260 284 ===== ===== ===== ===== ===== Worldwide Life & Savings New Business - 6 months to 30 June New single premiums New annual premiums Investment products Local Local Local 6 months currency 6 months currency 6 months currency 1999 1998 growth 1999 1998 growth 1999 1998 growth £m £m % £m £m % £m £m % UK Individual pensions 202 163 24 33 29 14 Group pensions 182 149 22 22 23 (4) Mortgage - - - 18 24 (25) Other life 951 697 36 9 11 (18) PEPs/ISAs/ Unit Trusts - - - - - - 427 264 62 ----- ----- --- --- --- --- --- --- --- 1,335 1,009 32 82 87 (6) 427 264 62 France AFER (excl. unit-linked) 351 207 66 - - - Unit-linked & other savings 226 266 (17) 6 5 13 Group protection business 75 70 5 1 1 - --- --- --- --- -- -- 652 543 17 7 6 11 Netherlands Individual pensions 41 51 (21) - - - Group pensions 88 41 114 9 6 49 Universal life 8 8 2 8 6 36 Other individual life 24 42 (46) 18 17 (2) Group life 6 5 19 3 2 46 --- --- --- --- --- --- 167 147 11 38 31 19 Italy Unit-linked 538 456 15 15 6 155 Savings, protection & other 77 32 134 21 23 (11) --- --- --- --- --- --- 615 488 23 36 29 23 Poland Life & savings 6 3 119 32 30 18 Pensions - - - 2 - n/a --- --- --- --- --- --- 6 3 119 34 30 24 Germany Life & savings 17 - n/a 7 1 n/a Pensions & annuities 50 - n/a 8 - n/a --- --- --- --- --- --- 67 - n/a 15 1 n/a Other Europe Life & pensions 74 29 148 5 4 29 UCITS (ii) - - - - - - 56 68 (21) --- --- --- -- -- -- -- -- ---- 74 29 148 5 4 29 56 68 (21) United States Life assurance 4 4 (3) 5 7 (30) Pensions & annuities 85 83 - 6 5 - --- --- -- -- -- -- 89 87 - 11 12 (10) Other 14 13 7 11 6 88 ----- ----- -- --- --- --- --- --- --- Total 3,019 2,319 28 239 206 17 483 332 44 ===== ===== == === === === === === === Notes: (i) Average exchange rates used and premiums are gross of reassurance. (ii) UCITS are collective investments sold throughout Europe and Asia. (iii) 1998 figures exclude sales from discontinued business. GENERAL INSURANCE ANALYSIS BY TERRITORY UNITED KINGDOM General insurance 6 months to 30 June Premium income Underwriting result Operating ratio 1999 1998 Growth 1999 1998 1999 1998 £m £m % £m £m % % Personal Motor 256 263 (3) (48) (41) 119 116 Homeowners 301 276 9 11 (16) 96 106 Other 75 140 (46) 12 20 109 83 ---- ---- ---- ---- 632 679 (7) (25) (37) 105 105 Commercial Motor 168 179 (6) (51) (43) 132 125 Property 228 273 (16) (8) (23) 103 108 Liability 135 165 (19) (42) (42) 131 127 Other 103 122 (16) 5 5 94 95 ---- ---- ----- ----- 634 739 (14) (96) (103) 115 114 ---- ---- ----- ----- Total 1266 1418 (11) (121) (140) 110 110 London market 100 131 (24) (16) (18) 113 115 ---- ---- ----- ----- Total 1366 1549 (12) (137) (158) 110 110 ==== ==== ===== ===== Underwriting ratios 1999 1998 % % Claims 81 82 Commission 16 15 Expenses 13 13 --- --- 110 110 === === UNITED KINGDOM General insurance 3 months to 30 June Premium income Underwriting result Operating ratio 1999 1998 Growth 1999 1998 1999 1998 £m £m % £m £m % % Personal Motor 126 139 (9) (19) (22) 115 117 Homeowners 148 134 11 18 2 88 99 Other 35 70 (49) 2 9 120 86 --- --- --- --- 309 343 (10) 1 (11) 102 103 Commercial Motor 81 85 (5) (19) (26) 124 132 Property 107 136 (21) (10) (8) 109 106 Liability 64 77 (18) (21) (27) 133 136 Other 51 61 (16) 4 (1) 91 100 --- --- --- --- 303 359 (16) (46) (62) 115 118 --- --- --- --- Total 612 702 (13) (45) (73) 108 110 London market 44 57 (22) (14) (9) 132 119 --- --- --- --- Total 656 759 (13) (59) (82) 110 111 === === === === Underwriting ratios 1999 1998 % % Claims 79 82 Commission 17 15 Expenses 14 14 --- --- 110 111 === === FRANCE General insurance 6 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 FFrm FFrm % FFrm FFrm % % Agents/brokers Property 1542 1565 (1) (37) (5) 99 96 Motor 1238 1152 8 (49) (56) 103 104 Health 590 568 4 49 32 89 93 Other 596 508 18 (41) (51) 108 110 ---- ---- ----- ----- 3966 3793 5 (78) (80) 100 100 Direct 233 126 84 (107) (56) 148 142 ---- ---- ----- --- Total 4199 3919 7 (185) (136) 103 101 ==== ==== ===== === 3 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 FFrm FFrm % FFrm FFrm % % Agents/brokers Property 535 534 - (8) 9 108 103 Motor 537 476 13 (13) (44) 103 110 Health 262 245 7 24 22 92 93 Other 176 186 (5) (10) (27) 112 122 ---- ---- ----- ---- 1510 1441 5 (7) (40) 104 106 Direct 147 66 120 (33) (22) 121 129 ---- ---- ----- --- Total 1657 1507 10 (40) (62) 105 107 ==== ==== ===== === Underwriting ratios 6 months to 3 months to 30 June 30 June 1999 1998 1999 1998 % % % % Claims 71 68 69 66 Commission 18 19 19 22 Expenses 14 14 17 19 --- --- --- --- Operating 103 101 105 107 === === === === NETHERLANDS General insurance 6 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 Flm Flm % Flm Flm % % Domestic 84 82 3 2 8 96 88 Motor 214 201 6 (50) (13) 125 106 Commercial fire 138 138 - 10 (3) 88 99 Liability 69 67 3 (9) (14) 115 129 Personal accident 95 77 22 7 4 85 86 Inward reinsurance 18 18 3 (2) (3) 111 118 Other 92 87 6 8 9 88 87 --- --- --- --- Total 710 670 6 (34) (12) 103 100 === === === === 3 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 Flm Flm % Flm Flm % % Domestic 42 42 - (1) 2 101 95 Motor 114 108 6 (30) (9) 131 110 Commercial fire 73 77 (5) 9 - 84 96 Liability 32 31 3 (7) (4) 128 114 Personal accident 27 25 9 8 1 83 102 Inward reinsurance 7 8 (3) (2) - 120 106 Other 50 46 9 8 6 84 87 --- --- ---- --- Total 345 337 2 (15) (4) 105 101 === === ==== === Underwriting ratios 6 months to 3 months to 30 June 30 June 1999 1998 1999 1998 % % % % Claims 70 67 70 66 Commission 22 23 24 25 Expenses 11 10 11 10 --- --- --- --- Operating 103 100 105 101 === === === === UNITED STATES General insurance Statutory Basis 6 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 $m $m % $m $m % % Personal Automobile 697 679 3 (2) (46) 98 105 Homeowners 208 216 (4) (25) (39) 113 118 Other 66 53 26 9 5 84 90 ---- ---- --- --- 971 948 2 (18) (80) 101 107 Commercial Automobile 280 279 - (31) (45) 110 115 Property 506 512 (1) (95) (72) 119 112 Liability 94 103 (9) (17) (11) 117 109 Workers' compensation 229 212 8 7 1 94 97 Other 64 59 9 11 (31) 91 n/a ---- ---- ----- ----- 1173 1165 1 (125) (158) 110 112 ---- ---- ----- ----- Total 2144 2113 1 (143) (238) 106 110 ==== ==== ===== ===== Underwriting ratios 1999 1998 % % Claims 76 79 Commission 16 17 Expenses 14 14 --- --- 106 110 === === UNITED STATES General insurance Statutory Basis 3 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 $m $m % $m $m % % Personal Automobile 348 343 1 (8) (23) 101 105 Homeowners 113 120 (5) (17) (26) 115 121 Other 38 28 35 4 1 86 92 --- --- --- --- 499 491 2 (21) (48) 103 108 Commercial Automobile 137 138 (1) (20) (34) 114 124 Property 257 260 (1) (63) (37) 124 112 Liability 43 51 (16) (15) (4) 134 108 Workers' compensation 103 106 (3) 12 (1) 89 99 Other 38 35 8 13 (17) 67 n/a --- --- --- --- 578 590 (2) (73) (93) 113 115 ---- ---- ----- ----- Total 1077 1081 - (94) (141) 108 112 ==== ==== ===== ===== Underwriting ratios 1999 1998 % % Claims 78 82 Commission 17 17 Expenses 13 13 --- --- 108 112 === === CANADA General insurance 6 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 C$m C$m % C$m C$m % % Automobile 566 603 (6) (7) 3 101 99 Property 283 303 (7) (14) (39) 105 113 Liability 68 87 (21) (25) (19) 134 121 Other 16 17 (7) 3 6 73 67 ---- ---- ---- ---- Total 933 1010 (8) (43) (49) 104 105 ==== ==== ==== ==== 3 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 C$m C$m % C$m C$m % % Automobile 323 346 (6) 7 21 97 94 Property 161 173 (7) 6 13 95 86 Liability 36 41 (11) (15) (11) 141 131 Other 8 9 (7) 1 5 80 50 --- --- ---- --- Total 528 569 (7) (1) 28 99 94 === === ==== === Underwriting ratios 6 months to 3 months to 30 June 30 June 1999 1998 1999 1998 % % % % Claims 72 74 69 64 Commission 19 18 18 18 Expenses 13 13 12 12 --- --- --- --- 104 105 99 94 === === === === Note: CGI integration costs of C$22m are excluded from the 6 months 1998 figures. AUSTRALIA & NZ General insurance 6 months to 30 June Note: All figures are at 6 months to 30 June 1999 average rates of exchange. Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 £m £m % £m £m % % Australia 221 219 1 (27) (19) 114 109 New Zealand 54 52 4 5 4 86 92 --- --- ---- ---- 275 271 2 (22) (15) 109 106 === === ==== ==== 3 months to 30 June Underwriting Operating Premium income result ratio 1999 1998 Growth 1999 1998 1999 1998 £m £m % £m £m % % Australia 113 111 2 (19) (2) 120 102 New Zealand 30 28 10 5 2 72 90 --- --- ---- --- 143 139 3 (14) - 111 100 === === ==== === Underwriting ratios 6 months to 3 months to 30 June 30 June 1999 1998 1999 1998 % % % % Claims 81 76 83 70 Commission 14 14 14 15 Expenses 14 16 14 15 --- --- --- --- 109 106 111 100 === === === === ANALYSIS OF EMBEDDED VALUE AND ACHIEVED PROFITS METHODOLOGY AND ASSUMPTIONS Analysis of embedded value 6 months 6 months 12 months 1999 1998 1998 Restated £m £m £m UK 1,957 1,970 1,935 France 858 880 871 Netherlands 1,641 1,452 1,530 Other Europe 330 170 324 Other 234 248 208 Total 5,020 4,720 4,868 Note: The 6 months 1998 figures have been restated to exclude the effect of smoothing. Achieved profits methodology and assumptions The results have been prepared in accordance with the draft 'Guidance on Accounting for Long Term Insurance Business' in the Group Accounts of Proprietary Companies (The Achieved Profits Method) issued by the ABI and are prepared as a supplement to the statutory basis results contained in this report. For the purpose of producing interim results, the methodology is based on rolling forward the embedded value published at 1998 year-end. Changes in new business, interest rates and investment returns are reflected each quarter, whereas non-economic parameters such as persistency and expenses are normally only adjusted annually in the year end results. Although the group's life and savings business is predominantly long term it also includes substantial businesses such as service companies. Accounting for these businesses continues to be on the traditional method. The key economic assumptions are listed below: United Kingdom France Netherlands 6 months 6 months 6 months 6 months 6 months 6 months 1999 1999 1999 1999 1999 1999 Embedded Operating Embedded Operating Embedded Operating value profit value profit value profit % % % % % % Risk margin 4.0 * 4.0 * 5.2 5.2 4.5 4.5 After tax 4.1 3.3 2.8 2.3 3.1 2.6 discount rate (excluding risk margin) Risk discount 8.3 * 7.4 * 8.1 7.7 7.7 7.2 rate Pre-tax investment returns: Government 5.3 4.4 4.6 3.9 4.7 3.9 fixed interest securities Ordinary shares 7.8 6.9 6.6 5.9 7.5 6.8 Property 6.3 5.4 5.6 4.9 5.6 4.9 Future expense 3.7 3.0 2.5 2.5 2.5 2.5 inflation Tax rate for 30.0 40.0 25.0 grossing up profits and new business contribution * For unit linked business, the risk margin is 4.7%

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