Interim Results
St. James's Place Capital PLC
26 July 2005
PRESS RELEASE
26 July 2005
INTERIM RESULTS
FOR THE SIX MONTHS
TO 30 JUNE 2005
St. James's Place Capital plc ('SJPC'), the wealth management group, today
announces its new business and financial results for the half year ended 30 June
2005.
The text of the announcement is attached:
Enquiries:
Mike Wilson, Chairman Tel: 020 7514 1985
Andrew Croft, Group Finance Director Tel: 020 7514 1985
Nitya Bolam, Brunswick Tel: 020 7404 5959
PART 1
ST. JAMES'S PLACE GROUP
INTERIM RESULTS
FOR THE SIX MONTHS
TO 30 JUNE 2005
NEW BUSINESS UP 15% AND OPERATING PROFITS UP 14%
St. James's Place Capital plc, the wealth management group, today announces its
new business and financial results for the half year ended 30 June 2005.
Key points include:
•Pre-tax operating profit of £45.9 million (on an achieved profit basis)up 14%
•Total pre-tax profit of £70.2 million (on an achieved profit basis) up 71%
•New business pre-tax profits of £24.3 million up 20%
•New business premiums of £103.8 million (on an APE basis) up 15%
•Funds under management at £10.5 billion which over the twelve months are up 22%
•Fees from wealth management services at £11.9 million up 27%
•Net asset value per share 156.3p
•Size of the Partnership 1,134
•Dividend increased by 4% to 1.3p per share (2004: 1.25p)
Mike Wilson, Chairman, commented:
'We are delighted with the strong first half performance which saw impressive
growth in new business, fees from wealth management services, funds under
management and operating profit.
'The second quarter saw our highest ever quarter for new business which was up 29%
and funds under management exceeded £10 billion for the first time.
'Particular highlights for the six months were increases of 26% in pensions
business and 25% in unit trust sales. We are seeing a growing demand for
pensions and our advice based business model means that we will be well placed
to take advantage of this in the lead up to Pensions 'A' Day in April 2006.'
CONTENTS
PART 1 NEW BUSINESS FIGURES
PART 2 CHAIRMAN'S STATEMENT AND FINANCIAL COMMENTARY
PART 3 ACHIEVED PROFIT RESULTS
PART 4 INTERNATIONAL FINANCIAL REPORTING STANDARDS RESULTS
ST. JAMES'S PLACE GROUP
NEW BUSINESS FIGURES
FOR THE SIX MONTHS TO 30 JUNE 2005
LONG-TERM SAVINGS
Unaudited Unaudited
3 Months to 6 Months to
30 June 2005 30 June 2005
NEW PREMIUMS 2005 2004 Change 2005 2004 Change
£'m £'m % £'m £'m %
New Regular
Premiums
Pensions* 12.1 6.9 75% 19.3 14.2 36%
Protection 6.0 6.8 (12%) 11.6 12.6 (8%)
18.1 13.7 32% 30.9 26.8 15%
New Single
Premiums
Investment 210.1 155.0 36% 377.0 339.6 11%
Pensions 90.7 84.8 7% 152.4 132.9 15%
300.8 239.8 25% 529.4 472.5 12%
Unit Trust
Sales 114.1 86.6 32% 200.4 159.7 25%
(including
PEPs and ISAs)
Unaudited Unaudited
3 Months to 6 Months to
30 June 2005 30 June 2005
NEW 2005 2004 Change 2005 2004 Change
BUSINESS
(RP + 1/10th £'m £'m % £'m £'m %
SP)
Investment 32.4 24.2 34% 57.7 50.1 15%
Pensions 21.2 15.3 39% 34.5 27.3 26%
Protection 6.0 6.8 (12%) 11.6 12.6 (8%)
------ ------ ------- ------- ------ -------
Total 59.6 46.3 29% 103.8 90.0 15%
------ ------ ------- ------- ------ -------
* see Note 3 to the New Business figures
ST. JAMES'S PLACE GROUP
WEALTH MANAGEMENT SERVICES
KEY BUSINESS HIGHLIGHTS
FOR THE SIX MONTHS TO 30 JUNE 2005
Unaudited
Gross fees generated from additional
wealth management services £11.9m up 27% (2004: £9.4m)
New Mortgage Advances £2,025.0m
St. James's Place Bank £198.9m
Other lenders £1,826.1m
Portfolio Management Services
New portfolios £22.8m
Trust and Estate Planning Services
Number of cases 401
St. James's Place Bank - in-force business
*Number of facilities 64,309
Number of accounts 24,065
Credit balances £642.7m
Mortgages £1,256.5m
Average mortgage value £170.2k
Loans and credit cards £22.5m
*Number of facilities denotes the number of individual mortgages, personal
loans, credit cards, current accounts and savings accounts, where one client may
hold a number of facilities. The average number of facilities per client is 2.7.
ST. JAMES'S PLACE GROUP
NEW BUSINESS FIGURES
FOR THE SIX MONTHS TO 30 JUNE 2005
Notes
1. New business from long-term savings is calculated in accordance with the life
assurance industry convention by adding together new regular premiums and one-tenth
of single premiums and unit trust sales.
2. Sales of manufactured business on an APE basis for the six months were 83% of
the total reported.
Sales of stakeholder pensions by St. James's Place Partnership have been
included in the reported figures. These have been included under Pensions and
amount to £9.1 million regular premiums (2004: £7.3 million) and £11.7 million
single premiums (2004: £9.3 million). This equates to £10.3 million new business
premiums (2004: £8.2 million).
Sales of protection business through a panel of providers have been included in
the reported figures under New Regular Premiums Protection. These amount to £7.1
million of new regular premiums (2004: £7.4 million) for the six months to 30
June 2005. This equates to £7.1 million new business premiums (2004: £7.4
million).
3. The comparative figures for pensions regular premiums include £0.2 million of
investment regular premiums.
PART 2
CHAIRMAN'S STATEMENT
Financial Performance
I am delighted to report continued strong performance in the first half of 2005.
New business from long-term savings and investment (measured on the industry
basis of annual premiums plus one tenth of single premiums) increased by 15%
over the period.
The financial statements have been restated to present the result and prior year
comparatives in accordance with International Financial Reporting Standards
('IFRS'). The pre-tax profits for the first half year on this basis were £13.1
million (2004: £8.2 million).
The Board considers, however, that the Achieved Profit Basis, which is shown as
supplementary information, provides a more meaningful measure of the Group's
performance.
On the Achieved Profit Basis the pre-tax result for the period was up 71% to
£70.2 million compared with £41.0 million for the same period of 2004. The
operating profit, which is the best indication of the underlying performance of
the business, increased by 14% to £45.9 million (2004: £40.3 million) over the
period.
The net asset value per share was 156.3 pence (31 December 2004: 145.8 pence),
up 7%.
The Financial Commentary in this announcement provides further details on the
result for the half year.
Dividend
In our 2004 annual results announcement the Board resolved to increase the full
year dividend by 3.6% and in my statement at that time, I commented that the
Group was now in a position to be able to continue to grow dividends in the
future.
The Board has therefore resolved to increase the dividend in respect of the six
months to 30 June 2005 by 4% to 1.3 pence per share (2004: 1.25 pence per
share). The dividend will be paid on 19 September to those shareholders on the
Register at the close of business on 5 August. As with recent dividend payments,
shareholders will be offered an alternative of a scrip dividend.
New Business
The first half of 2005 has seen strong growth in new business over the same
period last year.
Whilst new business was up 1% in the first quarter of 2005 compared with the
first quarter of 2004, it grew by 29% in the second quarter. This was our
strongest ever quarterly new business performance and gives us an increase of
15% for the year.
This performance is particularly pleasing as this growth was on top of a 31%
increase in the first half of 2004.
In our Report & Accounts for 2004 we stated that our aim is to continue to
manufacture around 80% of our new business and our manufactured business
accounted for 83% of the total new business in the first half of 2005.
A particular highlight for the six month period was the 26% increase in pensions
business and we are beginning to see the pensions market awakening in the lead
up to Pensions 'A' Day in April 2006. In addition unit trust and ISA business
was up 25% in the six month period and total investment business was up 15%.
Gross fees from wealth management services were up 27% to £11.9 million (2004:
£9.4 million).
The St. James's Place Partnership
The membership of the St. James's Place Partnership at 30 June 2005 was 1,134,
an increase of three since the start of the year. Whilst we are disappointed we
remain committed to recruiting the highest quality advisers and to retaining
only those Partners who are profitable to the Group in the longer term.
Although it is unlikely there will be any meaningful growth in Partnership
numbers at the year end, we have introduced a number of initiatives focussing on
recruitment in the second half of the year. Every effort will be made, including
the introduction of further initiatives if necessary, to achieve our stated
objectives of increasing Partner numbers by 5 - 10% per annum.
Intermediaries continue to consider their options in the face of the slower than
originally expected development of multi-ties - however feedback and results
from those who have joined the Partnership convince us that St. James's Place
provides the right home for financial advisers who can meet our quality
standards.
It is pleasing to note that following an 18% increase in individual Partner
productivity for 2004, productivity per Partner increased by a further 16%
during the first six months of this year compared with the same period last
year.
Investment Management
I am delighted to announce that our funds under management have now passed the
£10 billion level and stand at £10.5 billion at the end of June 2005. This is an
increase of 22% since June 2004.
The FTSE 100 returned 14.5% in the year to 30 June 2005 and equity markets have
recovered since the 2003 lows, with the FTSE 100 now just off its levels of five
years ago.
It is encouraging that, against this backdrop, an investment equally placed into
our five Pension Managed Funds over a five year period would be showing 1st
quartile returns. In addition, five of our eleven unit trusts are ranked in the
1st quartile over five years.
St. James's Place continues to be recognised for the success of its Investment
Management Approach, with two Standard & Poor's awards for its pension funds -
one being a 'runner-up' Group award and the other a 1st place award for the SJP
/ THSP Managed Pension Fund. St. James's Place works exclusively with Stamford
Associates as an adviser to its Investment Committee and Stamfords won the
'Multi-Manager' award in the Global Investor magazine's recent 'Awards for
Excellence'.
Investment in IT systems
During the first half of the year we have incurred expenditure of £1.8 million
on the continued development and implementation of our IT infrastructure project
(internally called the Service Delivery Infrastructure 'SDI' programme).
The first phase of the project was successfully implemented in our offices at
the beginning of the year and is proving beneficial in terms of improved
management information and access to records. The delivery and roll-out of phase
II software has been put back largely as a consequence of the significant amount
of recent regulatory change in the industry. Therefore, we do not now expect to
see any savings in operational expenditure before 2006. The project costs are
now expected to be approximately £1.0 million higher than originally forecast,
with expenditure in the second half of the year in the order of £2.2 million.
Board Changes
There have been a number of non-executive Board changes since my statement of 1
March 2005. In that statement I announced the appointment of Simon Gulliford as
an independent non-executive director, with effect from the Annual General
Meeting on 12 May 2005. Simon's appointment was approved by the shareholders at
the AGM.
Shortly after the AGM we also announced the appointment of Mike Power as an
independent non-executive director. Mike is Professor of Accounting and Director
of the ESRC Centre for Analysis of Risk and Regulation at the London School of
Economics and Political Science, where he has worked since 1987. He is a Fellow
of the Institute of Chartered Accountants in England and Wales and an Associate
of the UK Chartered Institute of Taxation.
Anthony Loehnis and Lord Weir stepped down from the Board with effect from the
AGM. We announced some further non-executive director changes yesterday. Roger
Walsom has joined the Board as an independent non-executive director with effect
from 22 July 2005. Roger recently retired following a long career as a Partner
of Ashurst, a leading City law firm, and his legal expertise will be especially
valuable in the light of the regulatory environment in which we operate. In
addition, John Edwards joined the Board on 22 July 2005 as a representative of
HBOS plc, replacing Phil Hodkinson and Grenville Turner who resigned on that
date. John is Chief Executive of the Insurance and Investment Division at HBOS
plc. Charles Bailey will resign as a non-executive director with effect from 29
September 2005.
I would like to thank Phil, Grenville and Charles on behalf of the Board for
their excellent contributions and support over the years.
I am delighted that these changes will enable us to comply with the Combined
Code provision that at least half the Board comprises independent non-executive
directors.
Regulation and compliance
As previously commented the insurance industry has been going through an
unprecedented period of change.
During the first half of the year the full range of general insurance products
have become regulated and on 1 June the Group implemented the changes arising
from depolarisation.
We are hopeful that we are through the bulk of the regulatory changes and are
now focussing our efforts on the preparation for Pensions 'A' Day in April 2006.
We regard these changes as having a positive impact on the higher income market,
as the demand from individuals grows - this will therefore benefit St. James's
Place.
We are well advanced in our preparation for the forthcoming changes and will
shortly be launching a Pensions Audit service for our clients and prospective
clients to enable them to maximise the opportunities.
Partners and staff
On behalf of the Directors and shareholders I would like to thank all members of
the Partnership and staff for their continued enthusiasm, commitment and
contribution towards the substantial growth achieved during the first six
months.
Outlook
The Board believes the economic and social backdrop, together with the
forthcoming Pensions 'A' Day changes provides continuing growth opportunities
for the Group.
We are more convinced than ever that our own dedicated distribution, the St.
James's Place Partnership, gives us a real competitive edge for the future and
will enable us to meet our longer term goal to grow new business by 15 - 20% per
annum.
FINANCIAL COMMENTARY
The financial commentary is as usual presented in two sections: a section
providing a commentary on the results for the period and a second section
covering other matters of interest to shareholders and investors.
Section 1:
Commentary on the Results
We have presented our results on the new International Financial Reporting
Standards and an Achieved Profit basis which brings into account the value of
future cash flows on the in-force business.
The commentary covers the results on both bases:
International Financial Reporting Standards ('IFRS')
In common with all listed companies we are required to present our 2005 results,
including this interim statement, in accordance with International Financial
Reporting Standards.
The comparative numbers have been restated onto the IFRS basis and we have
issued a separate press release on the restatement which can be found on our
website at www.sjpc.co.uk.
The full IFRS accounts are shown later in this announcement. The table below
shows the pre-tax profit of the Group on this basis.
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 2005 30 June 2004 31 December
2004
£' Million £' Million £' Million
Life business 12.2 7.8 11.6
Unit trust business 5.9 4.8 11.8
Other (3.2) (1.4) (6.8)
--------- --------- ----------
14.9 11.2 16.6
IT systems development (1.8) (3.0) (5.6)
LAHC - - 28.0
--------- --------- ----------
Profit before tax 13.1 8.2 39.0
========= ========= ==========
Life business
The profit from the life business at £12.2 million (2004: £7.8 million) has
increased by 56% over the prior period reflecting the stronger new business,
higher funds under management and the continued emergence of cash flows from
prior years' business.
Unit trust business
The growth in new business and higher funds under management have seen unit
trust profits increase by 23% from £4.8 million in 2004 to £5.9 million for the
six months to 30 June 2005.
Other
'Other' shows the earnings from the core business other than the Group's life
and unit trust business. During the six months there was a loss of £3.2 million
(2004: loss of £1.4 million). Included in the current year loss is the £1.8
million cost of a provision, highlighted in the full year 2004 financial
commentary, to cover the expected future rental of an unutilised office.
In addition 'Other' includes a £1.7 million cost of expensing share options in
accordance with IFRS 2. The prior year figure has been restated to reflect the
corresponding cost in the first half of 2004 of £0.1 million.
As previously covered in the Chairman's Statement, we have expensed £1.8 million
(2004: £3.0 million) on the continued development of our strategic IT
development.
The total net assets of the Group on an IFRS basis at 30 June 2005 were £229.5
million (31 December 2004: £222.2 million) resulting in a net asset per share of
51.8 pence (31 December 2004: 50.6 pence).
Achieved Profit Basis
The table below summarises the pre-tax profit of the combined business:
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 2005 30 June 2004 31 December
2004
£' Million £' Million £' Million
Life business 37.8 32.2 62.9
Unit trust business 13.1 12.5 29.5
Other* (3.2) (1.4) (6.8)
---------- --------- ----------
47.7 43.3 85.6
IT systems development (1.8) (3.0) (5.6)
---------- --------- ----------
Operating profit 45.9 40.3 80.0
Investment return 22.6 3.5 30.0
Economic assumption changes 1.7 (2.8) 2.1
---------- --------- ----------
Profit from core business 70.2 41.0 112.1
LAHC - - 28.0
---------- --------- ==========
Total pre-tax profits 70.2 41.0 140.1
========== ========= ==========
* Other profits for 2004 have been restated for the adoption of IFRS2
Share-based Payments.
The total pre-tax profit for the six months was £70.2 million (2004: £41.0
million) representing growth of some 71%.
The operating profit for the period was up 14% from £40.3 million to £45.9
million. Included within this operating result is new business profit of £24.3
million, up 20%. The growth in new business profit reflects the 15% increase in
new business, whilst limiting expense growth to 6%.
Life operating profit for the period was £37.8 million (2004: £32.2 million) and
a full analysis of this result can be found later in this annoucement. New
business profits increased by 15% from £12.9 million for the prior year to £14.9
million.
Unit trust operating profit for the period was £13.1 million (2004: £12.5
million) and a full analysis of this result can be found later in this
announcement. Within this operating profit the new business profit increased by
29% to £9.4 million, principally as a result of the higher new business volumes.
During the six months there has been a small deterioration in persistency rates
and this is reflected in a £1.8 million negative experience variance.
Other and SDI costs are previously commented on in the IFRS section.
The investment variance during the first six months of 2005 was £22.6 million
(2004: £3.5 million). This reflects that the average after tax increase in our
fund prices of some 4 - 5 % above the growth assumed in the achieved profit
calculation.
The total net assets of the Group on an achieved profit basis at 30 June 2005
were £692.3 million (31 December 2004: £640.4 million) resulting in a net asset
per share of 156.3 pence (31 December 2004: 145.8 pence).
Section 2:
Other Matters
Noted below are a number of issues about the Group that are of interest to
shareholders.
(i) Expenses
This section provides a reminder to shareholders of categories and nature of
expenditure incurred.
Shareholders will recall that 'commission, investment expenses and third party
administration costs' are met from corresponding policy margins. Any variation
in these costs flowing from changes in the volumes of new business or the level
of the stock markets does not directly impact the profitability of the Company.
The 'other new business related costs', such as sales force incentivisation vary
with the level of sales - determined on our internal measure. As production
rises or falls these costs will move in the corresponding direction.
'Establishment costs' are the running costs of the Group's infrastructure and
are relatively fixed in nature in the short term. Consequently these costs
remain broadly the same irrespective of new business volumes.
The 'contribution from third party product sales' reflects the net income
received from wealth management sales of £2.2 million (2004: £1.7 million),
sales of stakeholder products of £0.8 million (2004: £1.2 million) and sales
through the protection panel of £4.2 million (2004: £4.3 million).
The table below provides a breakdown of the expenditure for the combined
financial services activities.
Table of Expenditure
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
£' Million £' Million £' Million
Paid from policy margins
Commission 55.5 50.3 99.1
Investment expenses 17.6 11.9 25.2
Third party administration 8.9 8.8 20.5
--------- --------- ---------
82.0 71.0 144.8
--------- --------- ---------
Direct expenses
Other related new business costs 9.5 8.3 16.7
Establishment costs 38.2 35.9 71.7
Contribution from third party
product sales (7.2) (7.2) (14.2)
--------- --------- ---------
40.5 37.0 74.2
--------- --------- ---------
122.5 108.0 219.0
========= ========= =========
(ii) Taxation
As highlighted in previous financial commentaries, the UK life company has not
been receiving full tax relief.
Since the year end the position has improved marginally and at 30 June 2005
there are approximately £106 million of excess unrelieved expenses being carried
forward which have a potential value of £21.2 million. In addition to these
unrelieved expenses, there is also a further £197 million of expenses, which
under life company tax regulations are deferred over a period of seven years and
will fall into account in future years. These deferred expenses will ultimately
have a value of £39.4 million.
The cash crystallisation of these deferred tax assets is dependent upon the
level and timing of future net realised capital gains. At 30 June 2005 there was
a net unrealised profit position in the unit linked funds of some £254 million
which when realised would extinguish the unrelieved expenses being carried
forward.
At 30 June 2005 an IFRS deferred tax asset of £7.3 million continues to be
recognised in respect of these expenses and in the Achieved Profit the
corresponding value placed on the expenses is £34.0 million.
(iii) European Court of Justice VAT case
As stated in the full year financial commentary the industry was awaiting an
opinion from the European Court of Justice on a case regarding the VAT status of
insurance related services.
On 3 March 2005, the European Court of Justice released its judgment which when
implemented would lead to VAT becoming due on the administration charges in
relation to insurance related outsourced contracts.
HM Revenue & Customs has recently issued a consultation document containing
draft legislation which is intended to take effect from 1 January 2006.
St. James's Place Capital is intending to respond to this consultation document
and we are continuing to review the options available to reduce or mitigate the
potential adverse impact.
As part of this review we will be assessing in the second half of 2005 the level
of the £4.0 million provision established last year.
(iv) Development in Achieved Profit Reporting
As noted in the 2004 full year Financial Commentary, St. James's Place Capital
intends to adopt the new European Embedded Value Principles (the EEV principles)
from the end of 2005. The adoption of the principles will impose a number of
changes in our current methodology and we will make an announcement on the
impact of the restatement in the fourth quarter of the year.
Based on an initial, qualitative assessment of the likely changes of the move to
the EEV principles, we have the following comments at this stage:
(a) Some of the issues relevant to the other organisations do not affect SJPC.
In particular we do not write significant financial guarantees and options, or
with-profits or annuity business, nor do we have a pension fund deficit or debt.
(b) There will be a number of areas which will need to be reviewed, with some
level of change being likely. In particular:
• the risk margin included in the discount rate. We currently expect that
the discount rate will reduce somewhat.
• the methodology for allocating expenses between acquisition and
maintenance costs, including the allocation of overheads, any anticipated
expense overruns and holding company operating expenses. We currently expect
that a larger proportion of expenses will be allocated to in-force policies and
less to new business.
• the required capital to support the business (over and above the value
placed on the liabilities). This currently allows for the requirements of the
Solvency 1 Directive, but the review will also incorporate thinking about SJPC's
risk appetite and the results of the individual capital assessment work. We
currently do not expect that the required capital will differ significantly from
the Solvency 1 level.
• the treatment of expected future non-contractual increases, such as
indexation increases. The EEV principles suggest that the value of these should
ideally be included within the new business value of the original contract when
it is written. SJPC's current approach is to include the value of such increases
as they arise, as this treatment is aligned with our reported new business
figures. We will further examine this treatment, but it is unlikely we will
change our practice going forward.
Alongside these changes in methodology, additional disclosure is required.
(v) Analysis of Achieved Profit
The table below provides a summarised breakdown of the Achieved Profit position
at the reporting dates:
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
£' Million £' Million £' Million
Value of in-force
- Life 436.2 363.9 400.0
- Unit trust 114.5 92.6 104.8
Net assets 141.6 104.6 135.6
--------- --------- ---------
692.3 561.1 640.4
========= ========= =========
(vi) Share options maturity
Options outstanding under the various share option schemes at 30 June 2005
amount to 49.2 million (31 December 2004: 52.3 million).
The total number of options including those in the SJP Employee Trust, together
with their anticipated proceeds, are set out in the table below:
Earliest date of exercise Average Number of Anticipated
exercise price share options proceeds
outstanding
---------------- --------------- ------------
£ Million £' Million
Immediate 1.69 21.9 37.1
Jul - Dec 2005 1.44 5.2 7.5
Jan - Jun 2006 0.94 4.8 4.5
Jul - Dec 2006 1.39 3.1 4.3
Jan - Jun 2007 1.65 5.1 8.4
Jul - Dec 2007 1.52 4.4 6.7
Jan - Jun 2008 1.04 2.4 2.5
Jul - Dec 2008 1.33 0.6 0.8
Jan - Jun 2009 1.57 0.7 1.1
Jul - Dec 2009 1.50 0.4 0.6
Jan - Jun 2010 2.20 0.5 1.1
Jul - Dec 2010 1.00 0.1 0.1
--------- ---------
49.2 74.7
========= =========
Included within those share options that are immediately exercisable are 11.3
million options with an expiry date before the end of July 2007 with anticipated
proceeds of £15.1 million.
PART 3
ACHIEVED PROFIT
COMBINED LIFE AND UNIT TRUST
The following information shows the result for the Group, adopting an achieved
profit basis for reporting life and unit trust business.
SUMMARISED ACHIEVED PROFIT
CONSOLIDATED PROFIT & LOSS ACCOUNT
(unaudited)
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
--------- --------- ---------
£' Million £' Million £' Million
Life business 37.8 32.2 62.9
Unit trust business 13.1 12.5 29.5
Other * (3.2) (1.4) (6.8)
--------- --------- ---------
47.7 43.3 85.6
IT systems development (1.8) (3.0) (5.6)
--------- --------- ---------
Operating profit 45.9 40.3 80.0
Investment return variances 22.6 3.5 30.0
Economic assumption changes 1.7 (2.8) 2.1
--------- --------- ---------
Profit from core business 70.2 41.0 112.1
LAHC - - 28.0
--------- --------- ---------
Achieved profit on ordinary activities
before tax 70.2 41.0 140.1
Tax
Life business (16.2) (8.4) (23.4)
Unit trust business (5.9) (4.2) (11.6)
Other 2.2 - 1.2
LAHC - - -
--------- --------- ---------
(19.9) (12.6) (33.8)
Profit on ordinary activities after tax 50.3 28.4 106.3
========= ========= =========
Dividends 6.9 6.4 11.8
Pence Pence Pence
Proposed dividend per share 1.3 1.25 2.85
Basic earnings per share 11.5 6.6 24.5
Diluted earnings per share 11.0 6.4 23.7
* Other profit for 2004 has been restated for the adoption of IFRS 2
'Share-based Payment'
ACHIEVED PROFIT CONSOLIDATED BALANCE SHEET
30 June Restated* Restated*
2005 30 June 31 December
2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Assets
Intangible assets
Deferred acquisition costs 305.6 285.6 294.4
Value of long-term business
in-force
- long-term insurance 396.8 334.3 362.9
- unit trusts 114.5 92.6 104.8
Property & equipment 6.2 6.9 6.9
Deferred tax assets 56.2 46.1 54.9
Investment property 195.5 37.6 129.8
Investments
Equities 6,090.3 5,048.8 5,637.9
Fixed income securities 623.7 630.1 656.3
Investment in collective
investment schemes 468.2 288.2 381.4
Currency forwards 4.0 5.3 0.2
Reinsurance share of
insurance provisions 81.5 88.8 70.3
Insurance contract receivables 9.2 4.5 8.5
Income tax assets 12.3 5.3 7.8
Other receivables 96.6 74.8 89.9
Cash & cash equivalents 1,168.8 940.7 897.2
-------- --------- ---------
Total assets 9,629.4 7,889.6 8,703.2
======== ========= =========
Liabilities
Insurance contract
liability provisions 392.3 304.8 307.3
Other provisions 19.5 0.8 17.7
Financial liabilities
Investment contracts 7,976.0 6,506.6 7,236.2
Borrowings 20.7 45.0 22.4
Currency forwards 3.8 2.4 6.6
Deferred tax liabilities 122.0 89.3 103.8
Reinsurance payables 11.3 10.9 11.3
Payables related to
direct insurance contracts 12.5 15.1 11.2
Deferred income 237.4 227.9 231.8
Income tax liabilities 6.0 4.6 5.1
Other payables 67.1 70.3 51.2
Net asset value attributable
to unit holders 68.5 50.8 58.2
-------- --------- ---------
Total liabilities 8,937.1 7,328.5 8,062.8
======== ========= =========
Net assets 692.3 561.1 640.4
======== ========= =========
Shareholders' equity
Share capital 66.5 65.3 65.9
Share premium 22.3 10.6 15.9
Other reserves (8.5) (8.3) (8.4)
Retained earnings 612.0 493.5 567.0
-------- --------- ---------
Total shareholders' equity 692.3 561.1 640.4
======== ========= =========
Net asset per share 156.3p 128.8p 145.8p
* The 2004 balance sheet has been restated to be consistent with the format of
the IFRS balance sheet
NOTES TO THE ACHIEVED PROFIT RESULTS
I. BASIS OF PREPARATION
The information enclosed shows the Group's results as measured on an achieved
profit basis, which includes the results of the both the Group's long-term
assurance and unit trust business on a basis determined in accordance with the
ABI Guidance 'Supplementary Reporting for long term assurance business (the
achieved profits method)' issued in December 2001. The objective of the achieved
profit basis is to provide shareholders with more realistic information on the
financial position and performance of the Group than that provided by the
International Financial Reporting Standards ('IFRS') basis.
As described in greater detail later in this announcement, the Group has
restated its accounts at 30 June 2004 and 31 December 2004 in accordance with
IFRS. This has not impacted on the Achieved Profit results for Life and Unit
Trust business but has affected Other profit and the presentation of the balance
sheet. Further detail on these changes is included in our results on the IFRS
basis.
Except as noted below, the achieved profit accounting policies used by the Group
in the preparation of this interim report are consistent with those applied in
preparing the achieved profit results in the financial statements for the year
ended 31 December 2004.
II. METHODOLOGY AND ASSUMPTIONS
The achieved profits methodology recognises as profit the discounted value of
the expected future statutory surpluses arising from the contracts in-force at
the period end ('the value of long-term business in-force'). These future
surpluses are calculated by projecting future cash flows using realistic
assumptions for each component of the cash flow. Actuarial assumptions for the
mortality, morbidity and persistency experience of the contracts and the
expenses and taxation expected to be incurred are based on recent experience and
are reviewed annually. The future economic and investment conditions are based
on the period end conditions and are likely to change from year to year.
Economic Assumptions
The principal economic assumptions used within the cash flows at 30 June 2005
are set out below.
30 June 30 June 31 December
2005 2004 2004
Risk discount rate (net of tax) 7.75% 8.5% 8.0%
Future investment returns:
- Gilts 4.25% 5.0% 4.5%
- Equities 6.75% 7.5% 7.0%
- Unit-linked funds:
- Capital growth 3.35% 4.5% 3.7%
- Dividend income 2.9% 2.5% 2.8%
- Total 6.25% 7.0% 6.5%
Expense inflation 4.0% 4.5% 4.25%
Indexation of capital gains 1.6% 2.0% 1.8%
The risk discount rate is used to discount the projected future cash flows from
the business in-force to a present value. The rate is set by reference to the
assumed future investment returns.
The assumed future pre-tax returns on fixed interest securities are set by
reference to the 15 year gilt yield index. The other investment returns are set
by reference to this assumption.
The expense inflation and indexation of capital gains assumptions are based on
the rate of inflation implicit in the current valuation of 15 year index-linked
gilts (currently 2.6%). This figure is increased by a 1.5% loading to reflect
increases in earnings to derive the expense inflation assumption and is reduced
by 1% to derive the indexation of capital gains.
Experience Assumptions
The principal experience assumptions, which are reviewed annually, were derived
as follows:
• The persistency experience is derived where possible from the Company's
own experience, or otherwise from external industry experience.
• Maintenance expenses have been set in line with the costs charged by the
Company's third party administrators, together with an allowance for the
Company's own maintenance costs.
• Mortality and morbidity assumptions have been set by reference to the
Company's own experience, published industry data and the rates charged by the
Company's reassurers.
A provision of £7.0 million before tax (31 December 2004: £6.9 million) has been
set up within the cash flows to provide for adverse morbidity experience on
critical illness plans.
Other items
The value of new business has been established at the end of the reporting
period. It has been calculated using actual acquisition costs.
In projecting future surpluses allowance has been made for the cost of
maintaining a statutory solvency margin on the business in-force.
Future taxation has been determined assuming a continuation of the current tax
legislation.
The achieved profits results are calculated on an after-tax basis and are
grossed up to the pre-tax level for presentation in the profit and loss account.
The rate of tax used was 30% except for the Irish life business, which was
grossed up at 12.5%. These are unchanged from 31 December 2004.
III. COMPONENTS OF LIFE AND UNIT TRUST ACHIEVED PROFIT
The pre-tax components of the achieved profit result for life and unit trust
business are shown below.
Life business 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
---------- --------- ---------
£'Million £'Million £'Million
New business contribution 14.9 12.9 23.7
Profit from existing business
Unwind of discount rate 21.4 20.2 38.1
Experience variances (0.2) (1.8) (2.8)
Operating assumption changes - (0.7) 0.7
Investment income 1.7 1.6 3.2
---------- --------- ---------
Life operating profit before tax 37.8 32.2 62.9
Investment return variances 16.0 1.9 20.6
Economic assumption changes 1.8 (2.8) 2.3
---------- --------- ---------
Life profit before tax 55.6 31.3 85.8
Attributed tax (16.2) (8.4) (23.4)
---------- --------- ---------
Life profit after tax 39.4 22.9 62.4
========== ========= =========
New business contribution after tax is £10.6 million (30 June 2004: £9.4
million).
Unit trust business 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
---------- --------- ---------
£' Million £' Million £' Million
New business contribution 9.4 7.3 14.3
Profit from existing business
Unwind of discount rate 5.5 5.0 9.3
Experience variances (1.8) 0.2 5.9
Operating assumption changes - - -
---------- --------- ---------
Unit trust operating profit
before tax 13.1 12.5 29.5
Investment return variances 6.6 1.6 9.4
Economic assumption changes (0.1) - (0.2)
---------- --------- ---------
Unit trust profit before tax 19.6 14.1 38.7
Attributed tax (5.9) (4.2) (11.6)
---------- --------- ---------
Unit trust profit after tax 13.7 9.9 27.1
========== ========= =========
New business contribution after tax is £6.6 million (30 June 2004: £5.1
million).
6 Months 6 Months 12 Months
Unit trust and life business Ended Ended Ended
combined 30 June 30 June 31 December
2005 2004 2004
---------- --------- ---------
£' Million £' Million £' Million
New business
contribution 24.3 20.2 38.0
Profit from existing business
Unwind of discount rate 26.9 25.2 47.4
Experience variances (2.0) (1.6) 3.1
Operating assumption changes - (0.7) 0.7
Investment income 1.7 1.6 3.2
---------- --------- ---------
Operating profit before tax 50.9 44.7 92.4
Investment return variances 22.6 3.5 30.0
Economic assumption changes 1.7 (2.8) 2.1
---------- --------- ---------
Profit before tax 75.2 45.4 124.5
Attributed tax (22.1) (12.6) (35.0)
---------- --------- ---------
Profit after tax 53.1 32.8 89.5
========== ========= =========
New business contribution after tax is £17.2 million (30 June 2004: £14.5 million).
IV. SENSITIVITIES
The table below shows the impact of changes in economic assumptions on the
combined life and unit trust reported value of new business and value of
long-term business in-force of changes to the risk discount rate, the assumed
rate of long-term investment return and market movements.
Change in new business contribution Change in the
post-tax value
of long-term
business
in-force
Pre-tax Post-tax
-------- -------- --------
£' Million £' Million £' Million
Reported value at 30 June 2005 24.3 17.2 511.3
Risk discount rate +1% (3.7) (2.6) (32.2)
-1% 3.9 2.8 34.1
Investment return +1% 3.5 2.5 28.4
-1% (3.3) (2.4) (27.0)
Current x110% (2.3) (1.7) (21.5)
withdrawal rate x90% 2.5 1.8 23.5
Unit values +10% - - 47.5
-10% - - (43.8)
V. RECONCILIATION OF IFRS FIGURES TO ACHIEVED PROFIT FIGURES
30 June 30 June 31 December
2005 2004 2004
-------- -------- ---------
£' Million £' Million £' Million
IFRS profit before tax 13.1 8.2 39.0
Movement in life value of in-force 43.4 23.5 74.2
Movement in unit trust value of in-force 13.7 9.3 26.9
-------- -------- ---------
Achieved profit before tax for life and
unit trust business 70.2 41.0 140.1
======== ======== =========
IFRS net assets 229.5 184.7 222.2
Less: acquired value of in-force (69.0) (71.9) (70.5)
Add: deferred tax on acquired value of
in-force 20.5 21.4 21.0
Add: life value of in-force 396.8 334.3 362.9
Add: unit trust value of in-force 114.5 92.6 104.8
-------- -------- ---------
Achieved profit net assets for life and
unit trust business 692.3 561.1 640.4
======== ======== =========
PART 4
INTERNATIONAL FINANCIAL REPORTING STANDARDS
CONSOLIDATED INCOME STATEMENT
Note 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Insurance premium revenue 126.8 111.7 255.1
Less premiums ceded to reinsurers (12.7) (12.9) (27.2)
-------- --------- ---------
Net insurance premium revenue 114.1 98.8 227.9
Fee and commission income 39.2 29.5 62.7
-------- --------- ---------
Profit on sale of investment in
Life Assurabce Holding Corporation - - 28.0
Other investment income 593.1 257.1 821.9
-------- --------- ---------
Total investment income 593.1 257.1 849.9
-------- --------- ---------
Total revenue (net of reinsurance payable) 746.4 385.4 1,140.5
Other operating income 0.3 0.5 1.5
-------- --------- ---------
Net income 2 746.7 385.9 1,142.0
Policy claims and benefits incurred (61.2) (59.0) (105.4)
Less reinsurance recoveries 15.2 13.2 21.7
-------- --------- ---------
Net policyholder claims and benefits
incurred (46.0) (45.8) (83.7)
Change in insurance contract liabilities (75.7) 68.7 54.6
Change in investment contract liabilities (485.5) (291.0) (840.7)
Fees, commission and other acquisition costs (98.9) (86.7) (179.2)
Administration expenses (26.0) (20.7) (49.8)
Other operating expenses (1.5) (1.5) (3.0)
-------- --------- ---------
Operating profit 2 13.1 8.9 40.2
Financing costs - (0.7) (1.2)
-------- --------- ---------
Profit before tax 2 13.1 8.2 39.0
-------- --------- ---------
Tax on policyholders' return (19.4) (8.0) (14.5)
Tax on shareholders' return 12.2 4.0 15.2
-------- --------- ---------
Total tax (expense)/credit (7.2) (4.0) 0.7
-------- --------- ---------
Profit for period attributable to
shareholders 2 5.9 4.2 39.7
======== ========= =========
Dividends 4 6.9 6.4 11.8
Pence Pence Pence
Proposed dividend per share 1.3 1.25 2.85
Basic earnings per share 3 1.3 1.0 9.1
Diluted earnings per share 3 1.3 0.9 8.8
INTERNATIONAL FINANCIAL REPORTING STANDARDS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Opening equity
shareholders' funds 222.2 181.6 181.6
Profit for the financial period,
being total recognised income for
the financial period 5.9 4.2 39.7
Dividends 4 (6.9) (6.4) (11.8)
Issue of share capital
Scrip dividend 4.3 4.6 8.0
Exercise of share options 2.7 1.4 3.8
Consideration paid for own shares (0.5) (1.4) (1.4)
P & L reserve credit in respect of
share option charges 1.8 0.7 2.3
-------- --------- ---------
Net increase to shareholders' funds 7.3 3.1 40.6
-------- --------- ---------
Closing equity shareholders' funds 229.5 184.7 222.2
======== ========= =========
INTERNATIONAL FINANCIAL REPORTING STANDARDS
CONSOLIDATED BALANCE SHEET
Note 30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Assets
Intangible assets
Deferred acquisition costs 6 305.6 285.6 294.4
Acquired value of in force
business 69.0 71.9 70.5
-------- --------- ---------
374.6 357.5 364.9
Property & equipment 6.2 6.9 6.9
Deferred tax assets 7 56.2 46.1 54.9
Investment property 195.5 37.6 129.8
Investments
Equities 6,090.3 5,048.8 5,637.9
Fixed income securities 623.7 630.1 656.3
Investment in Collective
Investment Schemes 468.2 288.2 381.4
Currency forwards 4.0 5.3 0.2
Reinsurance share of insurance
provisions 81.5 88.8 70.3
Insurance contract receivables 9.2 4.5 8.5
Income tax assets 12.3 5.3 7.8
Other receivables 96.6 74.8 89.9
Cash & cash equivalents 1,168.8 940.7 897.2
-------- --------- ---------
Total assets 9,187.1 7,534.6 8,306.0
======== ========= =========
Liabilities
Insurance contract liability
provisions 392.3 304.8 307.3
Other provisions 8 19.5 0.8 17.7
Financial liabilities
Investment contracts 7,976.0 6,506.6 7,236.2
Borrowings 20.7 45.0 22.4
Currency forwards 3.8 2.4 6.6
Deferred tax liabilities 9 142.5 110.7 124.8
Reinsurance payables 11.3 10.9 11.3
Payables related to direct
insurance contracts 12.5 15.1 11.2
Deferred income 10 237.4 227.9 231.8
Income tax liabilities 6.0 4.6 5.1
Other payables 67.1 70.3 51.2
Net asset value attributable
to unit holders 68.5 50.8 58.2
-------- --------- ---------
Total liabilities 8,957.6 7,349.9 8,083.8
======== ========= =========
Net assets 229.5 184.7 222.2
======== ========= =========
Shareholders' equity
Share capital 11 66.5 65.3 65.9
Share premium 22.3 10.6 15.9
Other reserves (8.5) (8.3) (8.4)
Retained earnings 149.2 117.1 148.8
-------- --------- ---------
Total shareholders' equity 229.5 184.7 222.2
======== ========= =========
INTERNATIONAL FINANCIAL REPORTING STANDARDS
CONSOLIDATED STATEMENT OF CASH FLOWS
Note 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Cash generated from operations 12 259.1 (3.0) (94.7)
Interest paid - (0.7) (1.2)
Income taxes received/(paid) 11.1 (1.4) 2.8
-------- --------- ---------
Net cash from operating activities 270.2 (5.1) (93.1)
Cash flows from investing activities
Acquisition of property, plant
and equipment (0.7) (1.5) (3.0)
Proceeds from sale of plant and equipment 0.1 0.2 0.3
Investments:
Proceeds from sale - - 64.4
Interest received 4.2 2.1 5.1
-------- --------- ---------
Net cash from investing activities 3.6 0.8 66.8
Cash flows from financing activities
Proceeds from the issue of share capital 2.6 0.6 3.7
Consideration paid for own shares (0.5) (1.4) (1.4)
Repayment of borrowings (1.7) (8.6) (31.2)
Dividends paid (2.6) (1.8) (3.8)
-------- --------- ---------
Net cash from financing activities (2.2) (11.2) (32.7)
-------- --------- ---------
Net increase in cash and cash
equivalents 271.6 (15.5) (59.0)
Cash and cash equivalents at 1 January 897.2 956.2 956.2
-------- --------- ---------
Cash and cash equivalents 1,168.8 940.7 897.2
======== ========= =========
INTERNATIONAL FINANCIAL REPORTING STANDARDS
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The consolidated interim financial statements for the six months ended 30
June 2005 comprise the interim financial statements of St James's Place Capital
plc (the 'Company') and its subsidiaries (together referred to as the 'Group').
EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated
financial statements of the company, for the year ending 31 December 2005, be
prepared in accordance with International Financial Reporting Standards (IFRSs)
adopted for use in the EU ('EU adopted IFRSs').
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that either are
endorsed by the EU and effective at 31 December 2005 or are expected to be
endorsed and effective at 31 December 2005, the Group's first annual reporting
date at which it is required to use EU adopted IFRSs. Based on these adopted and
unadopted IFRSs, the directors have made assumptions about the accounting
policies expected to be applied, when the first annual IFRS financial statements
are prepared for the year ending 31 December 2005.
The EU adopted IFRSs that will be effective in the annual financial statements
for the year ending 31 December 2005 are still subject to change and to
additional interpretations and therefore cannot be determined with certainty.
Accordingly, the accounting policies for that annual period will be determined
finally only when the annual financial statements are prepared for the year
ending 31 December 2005.
The significant accounting policies applied in the preparation of these interim
financial statements are set out in the IFRS Restatement press release issued by
the Company, which may be accessed on the Company's website: www.sjpc.co.uk.
This press release also sets out the impact of the transition from UK GAAP to
IFRS on the Group's reported financial position and financial performance.
2. SEGMENT REPORTING
Net Income 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Life business
Net insurance premium income 114.1 98.8 227.9
Movement on deferred income (1.7) (1.2) (2.9)
Investment income - unit linked
policyholders 585.0 254.4 813.9
-------- --------- ---------
Total life business 697.4 352.0 1,038.9
Unit trust business
Fee income 22.8 18.0 35.3
Movement on deferred income (3.9) (3.1) (5.3)
-------- --------- ---------
Total unit trust business 18.9 14.9 30.0
Other business
Commission income 22.0 15.8 35.6
Investment income - sale of
investment in LAHC - - 28.0
Investment income - other
shareholders 2.7 1.3 3.1
Investment income - other* 5.4 1.4 4.9
Other operating income 0.3 0.5 1.5
-------- --------- ---------
Total other business 30.4 19.0 73.1
-------- --------- ---------
Total net income 746.7 385.9 1,142.0
======== ========= =========
* Investment income - other relates to investment income on minority interest
holdings in the St. James's Place unit trusts which are subject to consolidation
the minority interest holdings are disclosed as 'net asset value attributable to
unit holders' within the balance sheet). This income is offset by a change in
investment contract liabilities within the income statement.
Segment Result 6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Life business 12.2 7.8 11.6
Unit trust business 5.9 4.8 11.8
Other (5.0) (3.7) (11.2)
Profit on sale of investment - LAHC - - 28.0
-------- --------- ---------
Total operating profit 13.1 8.9 40.2
Financing costs - (0.7) (1.2)
-------- --------- ---------
Profit before tax 13.1 8.2 39.0
Income taxes (7.2) (4.0) 0.7
-------- --------- ---------
Profit after tax 5.9 4.2 39.7
======== ========= =========
3. EARNINGS PER SHARE
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
Pence Pence Pence
Basic earnings per share 1.3 1.0 9.1
Adjustments - disposal of LAHC - - (6.5)
-------- --------- ---------
Basic adjusted earnings per share 1.3 1.0 2.6
======== ========= =========
Diluted earnings per share 1.3 0.9 8.8
Adjustments - disposal of LAHC - - (6.2)
-------- --------- ---------
Diluted adjusted earnings per share 1.3 0.9 2.6
======== ========= =========
The calculation of diluted earnings per share is based on the following figures:
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Profit after tax 5.9 4.2 39.7
Adjustment - disposal of LAHC - - (28.0)
-------- --------- ---------
Adjusted profit 5.9 4.2 11.7
======== ========= =========
Weighted average number of shares
(including shares to be issued) 438.6m 432.9m 434.6m
======== ========= =========
Diluted weighted average number of
shares 458.2m 446.2m 449.3m
======== ========= =========
Number of share options taken into
account in calculating the effect of
dilution 49.2m 56.8m 52.3m
======== ========= =========
4. DIVIDENDS
The following dividends have been paid by the Group:
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
2003 final dividend - 1.50 pence per
ordinary share - 6.4 6.4
2004 interim dividend - 1.25 pence per
ordinary share - - 5.4
2004 final dividend - 1.60 pence per
ordinary share 6.9 - -
-------- --------- ---------
Total dividends paid 6.9 6.4 11.8
======== ========= =========
The directors have resolved to pay an interim dividend of 1.3 pence per share
(2004: 1.25 pence). This amounts to £5.8 million (2004: £5.4 million) and will
be paid on 19 September 2005 to shareholders on the register at 5 August 2005.
5. ASSETS HELD TO COVER LINKED LIABILITIES
Included within the balance sheet are the following assets and liabilities which
represent the net assets held to cover linked liabilities. The difference
between these assets and liabilities and those shown in the consolidated balance
sheet represents assets and liabilities held outside the unit-linked funds.
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Assets
Investment property 195.5 37.6 129.8
Investments
Equities 6,024.7 4,967.9 5,582.1
Fixed income securities 571.2 578.1 598.7
Investment in Collective
Investment Schemes 378.8 265.6 305.3
Currency forwards 4.0 5.3 0.2
Other receivables 44.7 25.5 37.3
Cash and cash equivalents 1,074.3 857.8 811.3
-------- --------- ---------
Total assets 8,293.2 6,737.8 7,464.7
Liabilities
Financial liabilities
Currency forwards 3.8 2.4 6.6
Deferred tax liabilities 36.9 9.2 21.7
Other payables 22.7 35.2 12.3
-------- --------- ---------
Total liabilities 63.4 46.8 40.6
Net assets held to cover linked
liabilities 8,229.8 6,691.0 7,424.1
======== ========= =========
6. DEFERRED ACQUISITION COSTS
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Life business - insurance DAC 32.0 38.1 35.0
Life business - investment DAC 225.1 204.8 214.6
Unit trust business - investment DAC 48.5 42.7 44.8
-------- --------- ---------
Total deferred acquisition costs 305.6 285.6 294.4
======== ========= =========
The movement on deferred acquisition costs is reflected in the fees, commission
and other acquisition costs line in the income statement.
7. DEFERRED TAX ASSET
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Life business - unrelieved expenses 7.3 - 7.3
Life business - deferred income 31.2 31.8 31.6
Unit trust business - deferred income 15.0 13.2 13.8
Other 2.7 1.1 2.2
-------- --------- ---------
Total deferred tax asset 56.2 46.1 54.9
======== ========= =========
8. OTHER PROVISIONS
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
At beginning of period 17.7 1.3 1.3
Movement in the period 1.8 (0.5) 16.4
-------- --------- ---------
At end of period 19.5 0.8 17.7
======== ========= =========
Other provisions at 30 June 2005 consist of £16.5 million to meet possible
claims under the transaction warranties and indemnities for the Group's
investment in LAHC, £1.8 million to meet obligations arising as a result of the
closure of offices, £1 million in respect of the policyholder costs of redress
for endowment business and £0.2 million in respect of the outstanding SJPC
obligation in connection with the Halifax acquisition of SJPC plc in June 2000.
9. DEFERRED TAX LIABILITY
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
On deferred acquisition costs 82.0 76.6 78.9
On purchased value of in-force business 20.5 21.4 21.0
Within unit-linked funds 36.9 9.2 21.7
Other 3.1 3.5 3.2
-------- --------- ---------
Total deferred tax liability 142.5 110.7 124.8
======== ========= =========
10. DEFERRED INCOME
30 June 30 June 31 December
2005 2004 2004
-------- --------- ---------
£' Million £' Million £' Million
Life business 187.5 184.0 185.8
Unit trust business 49.9 43.9 46.0
-------- --------- ---------
Total deferred income 237.4 227.9 231.8
======== ========= =========
11. SHARE CAPITAL
Number Nominal value
--------- ---------
£' Million
At 31 December 2004 439,324,746 65.9
Issue of shares 3,704,721 0.6
--------- ---------
At 30 June 2005 443,029,467 66.5
========= =========
12. CASH GENERATED FROM OPERATIONS
6 Months 6 Months 12 Months
Ended Ended Ended
30 June 30 June 31 December
2005 2004 2004
-------- -------- ---------
£' Million £' Million £' Million
Cash flows from operating activities
Profit for the period 13.1 8.2 39.0
Adjustments for:
Depreciation 1.4 1.5 2.9
Amortisation of acquired value of in
force 1.5 1.5 2.9
Fair value gains on non-operating
investments - - (0.1)
Interest expense - 0.7 1.2
Interest receipt (4.2) (2.1) (5.1)
P&L reserve credit in respect of share
option charges 1.8 0.7 2.3
Profit on sale of investment - - (28.0)
Deferred income tax expense 15.2 5.5 17.8
Changes in operating assets and liabilities
Increase in deferred acquisition costs (11.2) (9.5) (18.3)
Increase in deferred income 5.6 4.3 8.2
Increase in investments (510.4) (507.5) (1,242.4)
Increase in investment property (65.7) (37.6) (129.8)
(Increase)/decrease in reinsurance assets (11.2) (9.7) 8.8
Increase in insurance contract assets (0.7) - (4.0)
Increase in other receivables (6.4) (0.9) (4.5)
Increase in financial liabilities 747.3 583.0 1,324.2
Decrease in reinsurance liabilities - (0.7) (0.3)
Increase/(decrease) in insurance
contract liability provisions 86.3 (58.8) (60.2)
(Decrease)/increase in other payables (5.1) 18.9 (9.2)
Increase/(decrease) in provisions 1.8 (0.5) (0.1)
-------- -------- ---------
Cash generated from operations 259.1 (3.0) (94.7)
======== ======== =========
The cash generated from operations includes both policyholder and shareholder
cash flows. Policyholder cash and cash equivalents held within the unit linked
funds is set out in Note 5.
13. STATUTORY ACCOUNTS
The financial information shown in this publication is unaudited and does not
constitute statutory accounts. The comparative figures for the financial year
ended 31 December 2004 are not the Company's statutory account for the financial
year. Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies.
The report of the auditors was unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.
14. APPROVAL OF INTERIM REPORT
This interim report was approved by the Board of Directors on 25 July 2005.
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