Asset Disclosures |
|
|
|
|
|
|
|
Page 59 |
||
4.01 Investment portfolio |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
Market |
Market |
Market |
|
|
|
|
|
|
|
|
value |
value |
value |
|
|
|
|
|
|
|
|
At |
At |
At |
|
|
|
|
|
|
|
|
30.06.11 |
30.06.10 |
31.12.10 |
|
|
|
|
|
|
|
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide funds under management |
|
|
370,338 |
330,959 |
364,846 |
|||||
Client and policyholder assets |
|
|
|
|
(315,528) |
(278,337) |
(310,546) |
|||
Non-unit linked with-profits assets1 |
|
|
|
|
(19,732) |
(19,505) |
(19,927) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets to which shareholders are directly exposed |
|
|
35,078 |
33,117 |
34,373 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprising: |
|
|
|
|
|
|
|
|
|
|
Assets held to back the UK non-linked non profit business: |
|
|
|
|
|
|||||
|
Legal & General Pensions Limited (LGPL)2 |
|
25,528 |
24,169 |
25,107 |
|||||
|
Other UK non profit insurance business |
|
552 |
922 |
642 |
|||||
|
|
|
|
|
|
|
|
26,080 |
25,091 |
25,749 |
Assets held to back other insurance businesses (including Triple-X reserves) |
3,105 |
3,180 |
3,280 |
|||||||
Group capital and financing assets3 |
|
|
|
|
4,369 |
3,252 |
3,656 |
|||
Other shareholder assets3 |
|
|
|
1,524 |
1,594 |
1,688 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,078 |
33,117 |
34,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Includes assets backing participating business in France of £2,468m (H1 10: £2,196m; FY 10: £2,304m). |
|
|
||||||||
2. LGPL is the main operating subsidiary for the UK's annuity business. |
|
|
|
|
||||||
3. The presentation of shareholder assets has been amended to align the presentation with the Group's reporting segments. 2010 comparatives have been restated accordingly. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysed by asset class: |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
UK |
|
Group |
Other |
|
|
|
|
|
|
LGPL |
non |
Other |
capital |
share- |
Total |
Total |
Total |
|
|
|
|
profit |
insurance |
and |
holder |
|
|
|
|
|
|
|
insurance |
business |
financing |
assets |
|
|
|
|
|
|
|
business |
|
assets |
|
|
|
|
|
|
|
At |
At |
At |
At |
At |
At |
At |
At |
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
30.06.10 |
31.12.10 |
|
|
|
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
- |
- |
- |
989 |
10 |
999 |
830 |
975 |
|
Bonds |
4.02 |
23,834 |
191 |
2,942 |
1,868 |
1,070 |
29,905 |
28,084 |
28,870 |
|
Derivative assets1 |
|
1,013 |
237 |
12 |
298 |
- |
1,560 |
1,925 |
1,713 |
|
Property |
|
187 |
9 |
- |
131 |
6 |
333 |
178 |
275 |
|
Cash (including cash |
|
|
|
|
|
|
|
|
||
equivalents) |
494 |
115 |
151 |
1,083 |
438 |
2,281 |
2,100 |
2,540 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,528 |
552 |
3,105 |
4,369 |
1,524 |
35,078 |
33,117 |
34,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Derivative assets are shown gross of derivative liabilities. Exposures arise from: |
|
|
|
|||||||
a. The use of derivatives for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management; |
||||||||||
b. Derivatives matching guaranteed equity bonds within the Nationwide Life portfolio. |
|
|
|
|||||||
|
||||||||||
|
||||||||||
Asset Disclosures |
|
|
|
|
|
|
|
Page 60 |
||
4.02 Bond portfolio summary |
|
|
|
|
|
|
||||
(i) Analysed by sector |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
|
|
|
|
|
|
Notes |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereigns, Supras and Sub-Sovereigns |
|
|
3,255 |
14 |
5,257 |
18 |
||||
Banks |
- Tier 11 |
|
4.04 |
366 |
2 |
398 |
1 |
|||
|
- Tier 2 and other subordinated |
|
4.04 |
1,414 |
6 |
1,602 |
5 |
|||
|
- Senior |
|
|
1,521 |
6 |
2,558 |
9 |
|||
Utilities |
|
|
|
|
|
2,980 |
13 |
3,217 |
11 |
|
Consumer Services and Goods |
|
|
|
2,123 |
9 |
2,458 |
8 |
|||
Financial Services |
|
|
|
762 |
3 |
1,013 |
3 |
|||
Technology and Telecoms |
|
|
|
1,574 |
7 |
1,845 |
6 |
|||
Insurance |
|
|
|
|
|
1,026 |
4 |
1,192 |
4 |
|
Industrials |
|
|
|
|
|
1,235 |
5 |
1,462 |
5 |
|
Oil and Gas |
|
|
|
|
|
1,309 |
6 |
1,513 |
5 |
|
Health Care |
|
|
|
|
|
558 |
2 |
615 |
2 |
|
Property |
|
|
|
|
|
550 |
2 |
617 |
2 |
|
Traditional and secured asset backed securities |
|
4.03 |
4,113 |
17 |
5,105 |
17 |
||||
CDO |
|
|
|
|
|
1,048 |
4 |
1,053 |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
23,834 |
100 |
29,905 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.10 |
30.06.10 |
30.06.10 |
30.06.10 |
|
|
|
|
|
|
Notes |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereigns, Supras and Sub-Sovereigns |
|
|
2,709 |
12 |
4,658 |
16 |
||||
Banks |
- Tier 11 |
|
4.04 |
490 |
2 |
517 |
2 |
|||
|
- Tier 2 and other subordinated |
|
4.04 |
1,656 |
7 |
1,884 |
7 |
|||
|
- Senior |
|
|
1,353 |
6 |
2,063 |
7 |
|||
Utilities |
|
|
|
|
|
2,714 |
12 |
2,962 |
11 |
|
Consumer Services and Goods |
|
|
|
2,195 |
10 |
2,556 |
9 |
|||
Financial Services |
|
|
|
794 |
4 |
1,012 |
4 |
|||
Technology and Telecoms |
|
|
|
1,455 |
7 |
1,729 |
6 |
|||
Insurance |
|
|
|
|
|
937 |
4 |
1,072 |
4 |
|
Industrials |
|
|
|
|
|
963 |
4 |
1,160 |
4 |
|
Oil and Gas |
|
|
|
|
|
1,253 |
6 |
1,488 |
5 |
|
Health Care |
|
|
|
|
|
529 |
2 |
556 |
2 |
|
Property |
|
|
|
|
|
494 |
2 |
553 |
2 |
|
Traditional and secured asset backed securities |
|
4.03 |
3,748 |
17 |
4,745 |
17 |
||||
CDO |
|
|
|
|
|
1,124 |
5 |
1,129 |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
22,414 |
100 |
28,084 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 61 |
|||
4.02 Bond portfolio summary (continued) |
|
|
|
|
|
|||||
(i) Analysed by sector (continued) |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
31.12.10 |
31.12.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
Notes |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereigns, Supras and Sub-Sovereigns |
|
|
3,042 |
13 |
5,034 |
17 |
||||
Banks |
- Tier 11 |
|
4.04 |
480 |
2 |
513 |
2 |
|||
|
- Tier 2 and other subordinated |
|
4.04 |
1,619 |
7 |
1,811 |
6 |
|||
|
- Senior |
|
|
1,448 |
6 |
2,168 |
8 |
|||
Utilities |
|
|
|
|
|
2,831 |
12 |
3,033 |
11 |
|
Consumer Services and Goods |
|
|
|
2,160 |
9 |
2,503 |
9 |
|||
Financial Services |
|
|
|
776 |
3 |
1,036 |
4 |
|||
Technology and Telecoms |
|
|
|
1,538 |
7 |
1,768 |
6 |
|||
Insurance |
|
|
|
|
|
978 |
5 |
1,103 |
4 |
|
Industrials |
|
|
|
|
|
1,124 |
5 |
1,299 |
4 |
|
Oil and Gas |
|
|
|
|
|
1,321 |
6 |
1,509 |
5 |
|
Health Care |
|
|
|
|
|
551 |
2 |
563 |
2 |
|
Property |
|
|
|
|
|
552 |
2 |
588 |
2 |
|
Traditional and secured asset backed securities |
|
4.03 |
3,996 |
17 |
4,920 |
16 |
||||
CDO |
|
|
|
|
|
1,017 |
4 |
1,022 |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
23,433 |
100 |
28,870 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Tier 1 holdings include £55m (H1 10: £53m; FY 10: £55m) of preference shares. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional analysis of sovereign debt exposures |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereigns, Supras and Sub-Sovereigns |
||||||
|
|
|
|
|
|
|
LGPL |
Total |
LGPL |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value by region |
|
|
|
|
|
|
||||
United Kingdom1 |
|
|
|
|
|
1,972 |
2,383 |
1,909 |
2,366 |
|
USA |
|
|
|
|
|
283 |
574 |
276 |
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portugal |
|
|
|
|
|
- |
6 |
- |
12 |
|
Italy |
|
|
|
|
|
207 |
301 |
77 |
189 |
|
Ireland |
|
|
|
|
|
- |
4 |
29 |
45 |
|
Greece |
|
|
|
|
|
- |
1 |
- |
15 |
|
Spain |
|
|
|
|
|
- |
32 |
- |
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
207 |
344 |
106 |
304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
|
|
|
|
|
132 |
365 |
131 |
359 |
|
Netherlands |
|
|
|
|
|
28 |
552 |
28 |
553 |
|
France |
|
|
|
|
|
121 |
325 |
117 |
251 |
|
Belgium |
|
|
|
|
|
- |
35 |
- |
31 |
|
Europe - Other |
|
|
|
|
|
427 |
576 |
413 |
543 |
|
Rest of World |
|
|
|
|
|
85 |
103 |
62 |
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
3,255 |
5,257 |
3,042 |
5,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. LGPL holds liquidity in the form of cash and cash equivalents of £494m (FY 10: £496m) and gilts of £1,972m (FY 10: £1,909m). |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 62 |
|||
4.02 Bond portfolio summary (continued) |
|
|
|
|
|
|||||
(ii) Analysed by domicile |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
|
|
|
|
9,367 |
40 |
10,766 |
37 |
|
USA |
|
|
|
|
|
6,999 |
29 |
9,365 |
31 |
|
Europe |
|
|
|
|
|
5,707 |
24 |
7,859 |
26 |
|
Other |
|
|
|
|
|
1,761 |
7 |
1,915 |
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
23,834 |
100 |
29,905 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.10 |
30.06.10 |
30.06.10 |
30.06.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
|
|
|
|
9,014 |
40 |
10,393 |
37 |
|
USA |
|
|
|
|
|
7,053 |
31 |
9,458 |
34 |
|
Europe |
|
|
|
|
|
5,061 |
23 |
6,852 |
24 |
|
Other |
|
|
|
|
|
1,286 |
6 |
1,381 |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
22,414 |
100 |
28,084 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
31.12.10 |
31.12.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
|
|
|
|
9,246 |
39 |
10,517 |
36 |
|
USA |
|
|
|
|
|
7,528 |
32 |
9,790 |
34 |
|
Europe |
|
|
|
|
|
5,302 |
23 |
7,130 |
25 |
|
Other |
|
|
|
|
|
1,357 |
6 |
1,433 |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
23,433 |
100 |
28,870 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within LGPL, all non-sterling denominated bonds are currency hedged back to sterling. |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
(iii) Analysed by credit rating |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
4,317 |
18 |
7,209 |
24 |
|
AA |
|
|
|
|
|
2,695 |
11 |
3,686 |
12 |
|
A |
|
|
|
|
|
|
8,773 |
38 |
10,104 |
34 |
BBB |
|
|
|
|
|
5,974 |
25 |
6,735 |
23 |
|
BB or below |
|
|
|
|
|
347 |
1 |
415 |
1 |
|
Unrated: Bespoke CDOs |
|
|
936 |
4 |
936 |
3 |
||||
Other |
|
|
|
|
|
792 |
3 |
820 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,834 |
100 |
29,905 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 63 |
|||
4.02 Bond portfolio summary (continued) |
|
|
|
|
|
|||||
(iii) Analysed by credit rating (continued) |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.10 |
30.06.10 |
30.06.10 |
30.06.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
3,911 |
17 |
6,669 |
24 |
|
AA |
|
|
|
|
|
2,337 |
10 |
3,002 |
11 |
|
A |
|
|
|
|
|
|
8,704 |
39 |
10,030 |
35 |
BBB |
|
|
|
|
|
5,297 |
24 |
6,057 |
21 |
|
BB or below |
|
|
|
|
|
397 |
2 |
476 |
2 |
|
Unrated: Bespoke CDOs |
|
|
1,028 |
5 |
1,028 |
4 |
||||
Other |
|
|
|
|
|
740 |
3 |
822 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,414 |
100 |
28,084 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
31.12.10 |
31.12.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
4,218 |
18 |
6,996 |
24 |
|
AA |
|
|
|
|
|
2,444 |
10 |
3,092 |
11 |
|
A |
|
|
|
|
|
|
8,949 |
39 |
10,125 |
35 |
BBB |
|
|
|
|
|
5,718 |
24 |
6,424 |
22 |
|
BB or below |
|
|
|
|
|
379 |
2 |
479 |
2 |
|
Unrated: Bespoke CDOs |
|
|
912 |
4 |
912 |
3 |
||||
Other |
|
|
|
|
|
813 |
3 |
842 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,433 |
100 |
28,870 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other unrated bonds have been assessed and rated internally and are all assessed as investment grade. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 64 |
|||
4.02 Bond portfolio summary (continued) |
|
|
|
|
|
|||||
(iv) CDOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group holds collateralised debt obligations (CDOs) with a market value of £1,053m at 30 June 2011 (H1 10: £1,129m; FY 10: £1,022m). |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
These holdings include £899m (H1 10: £992m; FY 10: £875m) relating to four CDOs that were constructed in 2007 and 2008 in accordance with terms specified by Legal & General as part of a strategic review of the assets backing the annuity portfolio. These CDOs mature in 2017 and 2018. The Group selected at outset and manages the reference portfolios underlying the CDOs to give exposure to globally diversified portfolios of investment grade corporate bonds. The Group is able to substitute the constituents of the original reference portfolios with new reference assets, allowing the management of the underlying credit risk although no substitutions were made in 2010 or for the six months ended 30 June 2011. A breakdown of the underlying CDO reference portfolio by sector is provided below: |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
At |
At |
|
|
|
|
|
|
|
|
30.06.11 |
30.06.10 |
31.12.10 |
|
|
|
|
|
|
|
|
% |
% |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
|
|
|
|
|
14 |
14 |
14 |
|
Utilities |
|
|
|
|
|
|
10 |
10 |
10 |
|
Consumer Services & Goods |
|
|
26 |
26 |
26 |
|||||
Financial Services |
|
|
|
|
6 |
6 |
6 |
|||
Technology & Telecoms |
|
|
|
9 |
9 |
9 |
||||
Insurance |
|
|
|
|
|
|
6 |
6 |
6 |
|
Industrials |
|
|
|
|
|
|
20 |
20 |
20 |
|
Oil & Gas |
|
|
|
|
|
|
6 |
6 |
6 |
|
Health Care |
|
|
|
|
|
|
3 |
3 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
100 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The CDOs are termed as super senior since default losses on the reference portfolio have to exceed 27.5%, on average across the four CDOs, before the CDOs incur any default losses. Assuming an average recovery rate of 30%, then over 39% of the reference names would have to default before the CDOs incur any default losses. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Beyond 27.5% of default losses on the reference portfolio, losses to the CDO would occur at a rate that is a multiple of the loss rate on the reference portfolio. For illustration a £200m loss could be incurred if default losses to the reference portfolios exceeded 30.4% or if 43.4% of the names in the diversified global investment grade portfolio defaulted, with an average 30% recovery rate. (All figures are averages across the four CDOs.) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
The underlying reference portfolio has had no reference entity defaults in 2010 or for the six months ended 30 June 2011. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Losses are limited under the terms of the CDOs to assets and collateral invested. |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
These CDOs also incorporate features under which, in certain circumstances, the Group can choose either to post additional cash collateral or to allow wind up of the structures. These features are dependant on the portfolios' weighted average spreads, default experience to date and time to maturity. No additional collateral was posted to any of the CDOs during the six months ended 30 June 2011 (H1 10: £nil; FY 10: £nil). During the period, the Group received £nil (H1 10: £nil; FY 10: £155m) of previously posted collateral. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
These CDOs are valued using an external valuation which is based on observable market inputs. This is then validated against the internal valuation. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
For the purposes of valuing the non profit annuity regulatory and IFRS liabilities the yield on the CDOs is included within the calculation of the yield used to calculate the valuation discount rate for the annuity liabilities. An allowance for the risks, including default, is also made. For EEV purposes, the yield on the CDOs, reduced by the realistic default assumption, is similarly included in assumed future investment returns. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
The balance of £154m (H1 10: £137m; FY 10: £147m) of CDO holdings includes a £37m (H1 10: £36m; FY 10: £37m) exposure to an equity tranche of a bespoke CDO. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 65 |
|||
4.03 Traditional and secured asset backed securities summary |
|
|
||||||||
(i) By security |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional asset backed securities: |
|
|
|
|
|
|
||||
Residential Mortgage-Backed Securities - Prime1 |
|
|
469 |
12 |
830 |
16 |
||||
Residential Mortgage-Backed Securities - Sub-prime2 |
|
- |
- |
25 |
- |
|||||
Commercial Mortgage-Backed Securities |
|
|
250 |
6 |
461 |
9 |
||||
Credit Card |
|
|
|
|
|
6 |
- |
196 |
4 |
|
Auto |
|
|
|
|
|
10 |
- |
76 |
2 |
|
Consumer Loans |
|
|
|
42 |
1 |
44 |
1 |
|||
Student Loans |
|
|
|
|
|
20 |
- |
53 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
797 |
19 |
1,685 |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisations and debentures: |
|
|
|
|
|
|
|
|||
Secured Bond |
|
|
|
|
|
1,743 |
43 |
1,784 |
35 |
|
Commercial Property Backed Bonds |
|
224 |
5 |
224 |
5 |
|||||
Infrastructure / Private Finance Initiative / Social housing |
|
1,025 |
25 |
1,029 |
20 |
|||||
Whole Business Securitisation |
|
|
|
269 |
7 |
272 |
5 |
|||
Other secured holdings3 |
|
|
|
|
55 |
1 |
111 |
2 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,316 |
81 |
3,420 |
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional and secured asset backed securities |
4,113 |
100 |
5,105 |
100 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The two categories above are based on the following definitions: Traditional Asset Backed Securities are securities, often with variable expected redemption profiles issued by Special Purpose Vehicles and typically backed by pools of receivables from loans or personal credit. Debentures are securities with fixed redemption profiles issued by firms typically secured on property and Securitisations are securities with fixed redemption profiles that are issued by Special Purpose Vehicles and secured on revenues from specific assets or operating companies. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.10 |
30.06.10 |
30.06.10 |
30.06.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional asset backed securities: |
|
|
|
|
|
|
||||
Residential Mortgage-Backed Securities - Prime1 |
369 |
10 |
650 |
14 |
||||||
Residential Mortgage-Backed Securities - Sub-prime2 |
- |
- |
21 |
- |
||||||
Commercial Mortgage-Backed Securities |
|
|
230 |
6 |
419 |
9 |
||||
Credit Card |
|
|
|
|
|
9 |
- |
285 |
6 |
|
Auto |
|
|
|
|
|
14 |
- |
119 |
2 |
|
Consumer Loans |
|
|
|
43 |
1 |
47 |
1 |
|||
Student Loans |
|
|
|
|
|
21 |
1 |
42 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
686 |
18 |
1,583 |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisations and debentures: |
|
|
|
|
|
|
|
|||
Secured Bond |
|
|
|
|
|
1,525 |
41 |
1,571 |
33 |
|
Commercial Property Backed Bonds |
|
227 |
6 |
227 |
5 |
|||||
Infrastructure / Private Finance Initiative / Social housing |
|
989 |
27 |
991 |
21 |
|||||
Whole Business Securitisation |
|
|
|
273 |
7 |
276 |
6 |
|||
Other secured holdings3 |
|
|
|
|
48 |
1 |
97 |
2 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,062 |
82 |
3,162 |
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional and secured asset backed securities |
3,748 |
100 |
4,745 |
100 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 66 |
|||
4.03 Traditional and secured asset backed securities summary (continued) |
|
|||||||||
(i) By security (continued) |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
31.12.10 |
31.12.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional asset backed securities: |
|
|
|
|
|
|
||||
Residential Mortgage-Backed Securities - Prime1 |
453 |
11 |
714 |
15 |
||||||
Residential Mortgage-Backed Securities - Sub-prime2 |
|
- |
- |
18 |
- |
|||||
Commercial Mortgage-Backed Securities |
|
|
242 |
6 |
439 |
9 |
||||
Credit Card |
|
|
|
|
|
12 |
- |
242 |
5 |
|
Auto |
|
|
|
|
|
12 |
- |
128 |
3 |
|
Consumer Loans |
|
|
|
41 |
1 |
47 |
1 |
|||
Student Loans |
|
|
|
|
|
20 |
1 |
39 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780 |
19 |
1,627 |
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisations and debentures |
|
|
|
|
|
|
|
|||
Secured Bond |
|
|
|
|
|
1,668 |
42 |
1,687 |
34 |
|
Commercial Property Backed Bonds |
|
227 |
6 |
230 |
5 |
|||||
Infrastructure / Private Finance Initiative / Social housing |
|
1,002 |
25 |
1,004 |
20 |
|||||
Whole Business Securitisation |
|
|
|
267 |
7 |
269 |
5 |
|||
Other secured holdings3 |
|
|
|
|
52 |
1 |
103 |
2 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,216 |
81 |
3,293 |
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional and secured asset backed securities |
3,996 |
100 |
4,920 |
100 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. 57% (H1 10: 61%; FY 10: 54%) of Prime RMBS holdings relate to UK mortgages. |
|
|
|
|
||||||
2. 51% (H1 10: 52%; FY 10: 52%) of Sub-prime RMBS holdings have a credit rating of AAA and 70% (H1 10: 55%; FY 10: 54%) relate to the UK. |
||||||||||
3. Other secured holdings in LGPL include covered bonds of £20m (H1 10: £13m; FY 10: £17m). |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 67 |
|||
4.03 Traditional and secured asset backed securities summary (continued) |
|
|||||||||
(ii) By credit rating |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.11 |
30.06.11 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
1,072 |
26 |
1,831 |
36 |
|
AA |
|
|
|
|
|
825 |
20 |
891 |
17 |
|
A |
|
|
|
|
|
|
1,453 |
36 |
1,510 |
30 |
BBB |
|
|
|
|
|
595 |
14 |
663 |
13 |
|
BB or below |
|
|
|
|
|
30 |
1 |
70 |
1 |
|
Unrated |
|
|
|
|
|
138 |
3 |
140 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
4,113 |
100 |
5,105 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
30.06.10 |
30.06.10 |
30.06.10 |
30.06.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
1,133 |
30 |
1,862 |
40 |
|
AA |
|
|
|
|
|
769 |
21 |
855 |
18 |
|
A |
|
|
|
|
|
|
1,156 |
31 |
1,244 |
26 |
BBB |
|
|
|
|
|
544 |
14 |
607 |
13 |
|
BB or below |
|
|
|
|
|
14 |
- |
21 |
- |
|
Unrated |
|
|
|
|
|
132 |
4 |
156 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
3,748 |
100 |
4,745 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGPL |
LGPL |
Total |
Total |
|
|
|
|
|
|
|
At |
At |
At |
At |
|
|
|
|
|
|
|
31.12.10 |
31.12.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
|
|
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
|
|
|
1,223 |
31 |
1,939 |
39 |
|
AA |
|
|
|
|
|
788 |
20 |
848 |
17 |
|
A |
|
|
|
|
|
|
1,263 |
31 |
1,314 |
27 |
BBB |
|
|
|
|
|
567 |
14 |
626 |
13 |
|
BB or below |
|
|
|
|
|
23 |
1 |
61 |
1 |
|
Unrated |
|
|
|
|
|
132 |
3 |
132 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
3,996 |
100 |
4,920 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the £888m (H1 10: £897m; FY 10: £847m) of traditional ABS holdings held outside of LGPL, 76% are rated AAA (H1 10: 76%; FY 10: 79%). |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
The credit ratings of monoline wrapped bonds are based on the rating of the underlying securities. |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 68 |
|||
4.04 Group subordinated bank exposures |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
Total |
Total |
Total |
Total |
Total |
|
|
|
|
|
At |
At |
At |
At |
At |
At |
|
|
|
|
|
30.06.11 |
30.06.11 |
30.06.10 |
30.06.10 |
31.12.10 |
31.12.10 |
|
|
|
|
|
£m |
% |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 |
|
|
|
|
|
|
|
|
|
|
|
United Kingdom1 |
|
169 |
8 |
264 |
11 |
244 |
10 |
||
|
USA |
|
|
|
84 |
4 |
106 |
4 |
119 |
5 |
|
Europe |
|
|
|
115 |
6 |
118 |
5 |
114 |
5 |
|
Others |
|
|
|
30 |
2 |
29 |
1 |
36 |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tier 1 |
|
|
|
398 |
20 |
517 |
21 |
513 |
22 |
|
|
|
|
|
|
|
|
|
|
|
|
Lower tier 2 |
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
704 |
34 |
804 |
34 |
806 |
35 |
||
|
USA |
|
|
|
430 |
22 |
502 |
21 |
520 |
22 |
|
Europe |
|
|
|
193 |
10 |
213 |
9 |
184 |
8 |
|
Others |
|
|
|
74 |
4 |
84 |
4 |
79 |
3 |
|
|
|
|
|
|
|
|
|
|
|
Upper tier 2 |
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
75 |
4 |
94 |
4 |
94 |
4 |
||
|
USA |
|
|
|
19 |
1 |
26 |
1 |
19 |
1 |
|
Europe |
|
|
|
57 |
3 |
68 |
3 |
55 |
3 |
|
Others |
|
|
|
3 |
- |
5 |
- |
3 |
- |
|
|
|
|
|
|
|
|
|
|
|
Other subordinated |
|
|
|
|
|
|
|
|||
|
United Kingdom |
|
- |
- |
5 |
- |
- |
- |
||
|
USA |
|
|
|
47 |
2 |
76 |
3 |
51 |
2 |
|
Europe |
|
|
|
- |
- |
- |
- |
- |
- |
|
Others |
|
|
|
- |
- |
7 |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tier 2 and other subordinated |
1,602 |
80 |
1,884 |
79 |
1,811 |
78 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
2,000 |
100 |
2,401 |
100 |
2,324 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. The exposure to UK tier 1 debt includes issuances from the UK subsidiaries of European banks where there is no explicit parental guarantee. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
4.05 Value of policyholder assets held in Society and LGPL |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30.06.11 |
At 30.06.10 |
At 31.12.10 |
|
|
|
|
|
|
|
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With-profits business |
|
|
|
25,987 |
25,072 |
26,442 |
||||
Non profit business |
|
|
|
40,864 |
37,286 |
40,244 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,851 |
62,358 |
66,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 69 |
|||
4.06 With-profits non-linked business invested asset mix and investment return |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
UK |
UK |
UK |
|
|
|
|
|
|
|
return |
with- |
with- |
with- |
|
|
|
|
|
|
|
|
profits |
profits |
profits |
|
|
|
|
|
|
|
|
asset |
|
|
|
|
|
|
|
|
|
|
share |
non par |
other |
As at 30 June 2011 |
|
|
|
% |
% |
% |
% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
2 |
41 |
3 |
(63) |
|
Bonds |
|
|
|
|
|
3 |
40 |
87 |
150 |
|
Property |
|
|
|
|
|
4 |
14 |
- |
- |
|
Cash |
|
|
|
|
|
- |
5 |
10 |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
100 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return (% pa) |
|
|
|
2 |
3 |
3 |
- |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested assets (£bn): |
|
|
|
|
|
|
||||
Net of derivative liabilities |
|
|
|
|
13.4 |
2.4 |
1.4 |
|||
Gross of derivative liabilities |
|
|
|
13.5 |
2.4 |
1.4 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2010 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
(4) |
36 |
4 |
(55) |
|
Bonds |
|
|
|
|
|
7 |
43 |
85 |
153 |
|
Property |
|
|
|
|
|
8 |
14 |
1 |
- |
|
Cash |
|
|
|
|
|
- |
7 |
10 |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
100 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return (% pa) |
|
|
|
|
4 |
2 |
5 |
17 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested assets (£bn): |
|
|
|
|
|
|
|
|||
Net of derivative liabilities |
|
|
|
|
13.3 |
2.4 |
1.6 |
|||
Gross of derivative liabilities |
|
|
|
|
13.4 |
2.4 |
1.6 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2010 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
13 |
40 |
3 |
(65) |
|
Bonds |
|
|
|
|
|
9 |
39 |
86 |
153 |
|
Property |
|
|
|
|
|
17 |
15 |
- |
(1) |
|
Cash |
|
|
|
|
|
1 |
6 |
11 |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
100 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return (% pa) |
|
|
|
|
10 |
12 |
8 |
4 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested assets (£bn): |
|
|
|
|
|
|
|
|||
Net of derivative liabilities |
|
|
|
|
13.8 |
2.4 |
1.5 |
|||
Gross of derivative liabilities |
|
|
|
14.0 |
2.4 |
1.5 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All investment return percentages reflect actual investment returns on average asset holdings for the period. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 70 |
|||
4.07 Analysis of fair value measurement bases |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement at the |
|||
|
|
|
|
|
|
|
end of the reporting period based on: |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
As at 30 June 2011 |
|
|
|
£m |
£m |
£m |
£m |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group capital and other insurance business |
|
|
|
|
|
|||||
Equities |
|
|
|
657 |
206 |
136 |
999 |
|||
Bonds1 |
|
|
|
2,210 |
3,646 |
8 |
5,864 |
|||
Derivative assets |
|
|
|
31 |
279 |
- |
310 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,898 |
4,131 |
144 |
7,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non profit non-unit linked |
|
|
|
|
|
|
||||
Bonds1 |
|
|
|
2,674 |
21,351 |
- |
24,025 |
|||
Derivative assets |
|
|
|
30 |
1,220 |
- |
1,250 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,704 |
22,571 |
- |
25,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Fair value measurement at the |
|||
|
|
|
|
|
|
|
end of the reporting period based on: |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
As at 30 June 2010 |
|
|
|
£m |
£m |
£m |
£m |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group capital and other insurance business |
|
|
|
|
|
|||||
Equities |
|
|
|
606 |
106 |
118 |
830 |
|||
Bonds1 |
|
|
|
1,894 |
3,356 |
10 |
5,260 |
|||
Derivative assets |
|
|
|
3 |
270 |
- |
273 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,503 |
3,732 |
128 |
6,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non profit non-unit linked |
|
|
|
|
|
|
||||
Bonds1 |
|
|
|
2,355 |
20,397 |
- |
22,752 |
|||
Derivative assets |
|
|
|
168 |
1,466 |
- |
1,634 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,523 |
21,863 |
- |
24,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement at the |
|||
|
|
|
|
|
|
|
end of the reporting period based on: |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
As at 31 December 2010 |
|
|
£m |
£m |
£m |
£m |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group capital and other insurance business |
|
|
|
|
|
|||||
Equities |
|
|
|
730 |
115 |
130 |
975 |
|||
Bonds1 |
|
|
|
2,093 |
3,134 |
9 |
5,236 |
|||
Derivative assets |
|
|
|
5 |
282 |
- |
287 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,828 |
3,531 |
139 |
6,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non profit non-unit linked |
|
|
|
|
|
|
|
|||
Bonds1 |
|
|
|
2,562 |
21,116 |
- |
23,678 |
|||
Derivative assets |
|
|
|
78 |
1,348 |
- |
1,426 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,640 |
22,464 |
- |
25,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Consolidated CDO holdings have been presented on a net basis within level 2. The analysis excludes cash, loans and receivables and property investments of £2,614m (H1 10: £2,278m; FY 10: £2,815m), as disclosed in Note 4.01. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Disclosures |
|
|
|
|
|
|
Page 70 |
|||
4.07 Analysis of fair value measurement bases (continued) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties in an arm's length transaction. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflects the Group's view of market assumptions in the absence of observable market information. The Group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
The levels of fair value measurement bases are defined as follows: |
|
|
|
|
||||||
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. |
||||||||||
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). |
||||||||||
Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs). |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
In current market conditions, the liquidity of financial instruments is lower than it has been in the past. All of the Group's level 2 assets have been valued using standard market pricing sources, such as iBoxx, IDC and Bloomberg except for bespoke CDO and swaps holdings (see below). In normal market conditions, we would consider these market prices to be observable market prices. However, following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have prudently classified them as level 2. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Our holdings in bespoke CDOs and swaps are priced using an external model which utilise market assumptions. The CDO valuations have also been verified using an internal model. Accordingly, these assets have also been classified in level 2. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets, where internal models are used to represent a small proportion of assets to which shareholders are exposed and reflect unquoted equities including investments in private equity, property vehicles and suspended securities. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the Group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the Group has classified within level 3. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
The Group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The Group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the Group's credit standing, liquidity and risk margins on unobservable inputs. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Where quoted market prices are not available, fair value estimates are made at a point in time, based on relevant market data, as well as the best information about the individual financial instrument. Illiquid market conditions have resulted in inactive markets for certain of the Group's financial instruments. As a result, there is generally limited observable market data for these assets and liabilities. Fair value estimates for financial instruments deemed to be in an illiquid market are based on judgments regarding current economic conditions, liquidity discounts, currency, credit and interest rate risks, loss experience and other factors. These fair values are estimates and involve considerable uncertainty and variability as a result of the inputs selected and may differ significantly from the values that would have been used had a ready market existed, and the differences could be material. As a result, such calculated fair value estimates may not be realisable in an immediate sale or settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value measurement technique could significantly affect these fair value estimates. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independently of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee. |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Significant transfers between levels |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
There have been no significant transfers between levels 1, 2 and 3 for the six months ended 30 June 2011 (H1 10 and FY 10: No significant transfers between levels 1, 2 and 3). |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|