Interim Results - Part 3

Aviva PLC 09 August 2007 Part 3 of 4 IFRS basis ----------------------------------------------------------------------------------------------------------------------- Page 46 Summarised consolidated income statement - IFRS basis For the six months to 30 June 2007 6 months 6 months 6 months Full year 2007 2007 2006 2006 Page â‚¬m Â£m Â£m Â£m Income 71,72 21,331 Premiums written net of reinsurance 14,505 13,707 27,234 (349) Net change in provision for unearned premiums (237) (222) 93 ---------------------------------------------------------------------------------------------------------------------- 20,982 Net earned premiums 14,268 13,485 27,327 1,351 Fee and commission income 919 905 1,870 10,068 Net investment income 6,846 2,854 15,473 (118) Share of (loss)/profit after tax of joint ventures and associates (80) 223 485 53 (7) (Loss)/profit on the disposal of subsidiaries and associates (5) 147 222 ----------------------------------------------------------------------------------------------------------------------- 32,276 21,948 17,614 45,377 ----------------------------------------------------------------------------------------------------------------------- Expenses (19,569) Claims and benefits paid, net of recoveries from reinsurers (13,307) (11,037) (23,444) (938) Change in insurance liabilities, net of reinsurance (638) 98 (2,620) (3,626) Change in investment contract provisions (2,466) (1,826) (6,002) 40 Change in unallocated divisible surplus 27 623 (558) (3,290) Fee and commission expense (2,237) (2,188) (5,043) (2,444) Other expenses (1,662) (1,540) (3,557) (656) Finance costs (446) (384) (830) ----------------------------------------------------------------------------------------------------------------------- (30,483) (20,729) (16,254) (42,054) ----------------------------------------------------------------------------------------------------------------------- 1,793 Profit before tax 1,219 1,360 3,323 (31) Tax attributable to policyholders' returns (21) (112) (346) ----------------------------------------------------------------------------------------------------------------------- 1,762 Profit before tax attributable to shareholders' profits 1,198 1,248 2,977 Tax expense (168) United Kingdom tax (114) (269) (479) (316) Overseas tax (215) (162) (455) ----- --------------------------- 59, 60 (484) (329) (431) (934) 31 Less: tax attributable to policyholders' returns 21 112 346 ----- ---------------------------- (453) Tax attributable to shareholders' profits (308) (319) (588) ----------------------------------------------------------------------------------------------------------------------- 1,309 Profit for the period 890 929 2,389 ======================================================================================================================= Attributable to: 1,187 Equity shareholders of Aviva plc 807 856 2,215 122 Minority interests 83 73 174 ----------------------------------------------------------------------------------------------------------------------- 1,309 890 929 2,389 ======================================================================================================================= All profit is from continuing operations. 6 months 6 months 6 months Full year Page 2007 2007 2006 2006 Earnings per share - IFRS basis 61 45.6c Basic (pence per share) 31.0p 35.3p 87.5p 62 45.1c Diluted (pence per share) 30.7p 35.0p 86.6p Subsequent to 30 June 2007, the directors proposed an interim dividend for 2007 of 11.90p (interim 2006: 10.82p) per ordinary share, amounting to Â£309 million (interim 2006: Â£275 million) in total. The dividend will be paid on 16 November 2007 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2007. During the six months to 30 June 2007, the directors declared a final dividend for 2006 of 19.18p per ordinary share (final 2005: 17.44p) totalling Â£492 million (6 months to 30 June 2006: Â£418 million). ----------------------------------------------------------------------------------------------------------------------- Page 47 Pro forma reconciliation of Group operating profit to profit before tax - IFRS basis For the six months to 30 June 2007 6 months 6 months 6 months Full year 2007 2007 2006 2006 Page â‚¬m Â£m Â£m Â£m IFRS operating profit before tax attributable to shareholders' profits 55 1,590 Long-term business 1,081 710 1,896 55 112 Fund management 76 61 155 56 824 General insurance and health 560 866 1,680 Other: 59 (106) Other operations (72) (11) (80) 59 (118) Corporate centre (80) (73) (160) 59 (280) Group debt costs and other interest (190) (177) (381) ---------------------------------------------------------------------------------------------------------------------- IFRS operating profit before adjusting items and tax 2,022 attributable to shareholders' profits 1,375 1,376 3,110 Adjusted for the following: 71 (4) Impairment of goodwill (3) - (94) (168) Amortisation of acquired value of in-force business (114) (33) (100) (76) Amortisation and impairment of intangibles (52) (19) (70) - Financial Services Compensation Scheme and other levies - 6 6 Short-term fluctuation in return on investments backing 56 54 general insurance and health business 37 (205) 149 53 (7) (Loss)/profit on the disposal of subsidiaries and associates (5) 147 222 54 (59) Integration and restructuring costs (40) (24) (246) ---------------------------------------------------------------------------------------------------------------------- 1,762 Profit before tax attributable to shareholders' profits 1,198 1,248 2,977 Tax attributable to shareholders' profits 59 (556) Operating profit (378) (370) (725) 59 103 Other activities 70 51 137 ----- ----------------------------- (453) (308) (319) (588) ----------------------------------------------------------------------------------------------------------------------- 1,309 Profit for the period 890 929 2,389 ======================================================================================================================= Page 6 months 6 months 6 months Full year 2007 2007 2006 2006 Earnings per share - IFRS operating profit basis 61 51.0c Basic (pence per share) 34.7p 38.5p 86.9p 62 50.6c Diluted (pence per share) 34.4p 38.1p 86.0p ----------------------------------------------------------------------------------------------------------------------- Page 48 Consolidated statement of recognised income and expense - IFRS basis For the six months to 30 June 2007 6 months 6 months 6 months Full year 2007 2007 2006 2006 â‚¬m Â£m Â£m Â£m Fair value gains/(losses) on AFS securities, owner-occupied 509 properties and hedging instruments 346 (159) 374 (172) Fair value gains transferred to profit (117) (4) (162) - Impairment losses on revalued assets - - (2) Share of fair value changes in investments held by joint ventures 12 and associates taken to equity 8 - - 1,097 Actuarial gains/(losses) on pension schemes (note 17) 746 473 (114) (74) Foreign exchange rate movements (50) (10) (346) (1) Aggregate tax effect - policyholder tax (1) 2 - (337) Aggregate tax effect - shareholder tax (229) (106) (5) ----------------------------------------------------------------------------------------------------------------------- 1,034 Net income recognised directly in equity 703 196 (255) 1,309 Profit for the period 890 929 2,389 ----------------------------------------------------------------------------------------------------------------------- 2,343 Total recognised income and expense for the period 1,593 1,125 2,134 ======================================================================================================================= Attributable to: 2,227 Equity shareholders of Aviva plc 1,514 1,050 1,978 116 Minority interests 79 75 156 ----------------------------------------------------------------------------------------------------------------------- 2,343 1,593 1,125 2,134 ======================================================================================================================= Reconciliation of movements in consolidated shareholders' equity - IFRS basis For the six months to 30 June 2007 6 Months 6 months 6 months Full year 2007 2007 2006 2006 â‚¬m Â£m Â£m Â£m 20,991 Balance at 1 January 14,064 11,092 11,092 2,378 Total recognised income and expense for the period 1,593 1,125 2,134 (748) Dividends and appropriations (note 15) (501) (427) (762) Issue of share capital for the acquisition of AmerUs Group Co. - net of transaction costs - - 892 45 Other issues of share capital, net of transaction costs 30 47 43 227 Shares issued in lieu of dividends 152 77 203 112 Capital contributions from minority shareholders 75 35 397 (94) Minority share of dividends declared in the period (63) (57) (75) 211 Minority interest in acquired/disposed subsidiaries 142 223 92 36 Reserves credit for equity compensation plans 24 5 48 ----------------------------------------------------------------------------------------------------------------------- 23,158 Total equity 15,516 12,120 14,064 (2,882) Minority interests (1,931) (1,404) (1,698) ----------------------------------------------------------------------------------------------------------------------- 20,276 Balance at 31 December 13,585 10,716 12,366 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Page 49 Summarised consolidated balance sheet - IFRS basis As at 30 June 2007 6 months 30 June 30 June 31 December 2007 2007 2006 2006 â‚¬m Â£m Â£m Â£m Assets 4,346 Goodwill 2,912 2,336 2,910 4,233 Acquired value of in-force business and intangible assets 2,836 1,004 2,728 3,816 Investments in joint ventures 2,557 2,420 2,795 1,330 Investments in associates 891 897 895 1,279 Property and equipment 857 883 904 23,406 Investment property 15,682 14,111 15,123 40,016 Loans 26,811 24,479 26,445 Financial investments 163,676 Debt securities 109,663 99,451 113,041 87,946 Equity securities 58,924 54,704 56,762 54,503 Other investments 36,517 30,782 33,050 11,690 Reinsurance assets 7,832 7,589 7,825 1,142 Deferred tax assets 765 655 1,199 400 Current tax assets 268 86 344 16,354 Receivables and other financial assets 10,957 8,660 8,098 5,864 Deferred acquisition costs and other assets 3,929 3,741 3,476 4,139 Prepayments and accrued income 2,773 2,993 2,585 22,575 Cash and cash equivalents 15,125 15,268 14,542 1,882 Assets of operations classified as held for sale 1,261 1,008 - --------------------------------------------------------------------------------------------------------------------- 448,597 Total assets 300,560 271,067 292,722 ===================================================================================================================== Equity 966 Ordinary share capital 647 604 641 6,693 Capital reserves 4,484 4,480 4,460 1,740 Other reserves 1,166 1,003 993 9,101 Retained earnings 6,098 3,439 5,082 --------------------------------------------------------------------------------------------------------------------- 18,500 Equity attributable to ordinary shareholders of Aviva plc 12,395 9,526 11,176 1,776 Preference share capital and direct capital instrument 1,190 1,190 1,190 2,882 Minority interests 1,931 1,404 1,698 --------------------------------------------------------------------------------------------------------------------- 23,158 Total equity 15,516 12,120 14,064 ===================================================================================================================== Liabilities 215,951 Gross insurance liabilities 144,687 133,068 144,230 137,464 Gross liabilities for investment contracts 92,101 82,856 88,358 14,163 Unallocated divisible surplus 9,489 8,235 9,465 5,955 Net asset value attributable to unitholders 3,990 3,080 3,810 2,881 Provisions 1,930 2,364 2,850 4,497 Deferred tax liabilities 3,013 2,323 3,077 1,727 Current tax liabilities 1,157 957 1,262 18,203 Borrowings 12,196 11,070 12,137 15,855 Payables and other financial liabilities 10,623 9,381 9,235 7,176 Other liabilities 4,808 4,785 4,234 1,567 Liabilities of operations classified as held for sale 1,050 828 - --------------------------------------------------------------------------------------------------------------------- 425,439 Total liabilities 285,044 258,947 278,658 ===================================================================================================================== --------------------------------------------------------------------------------------------------------------------- 448,597 Total equity and liabilities 300,560 271,067 292,722 ===================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- Page 50 Summarised consolidated cash flow statement - IFRS basis For the six months to 30 June 2007 The cash flows presented in this statement cover all the Group's activities and include flows from policyholder and shareholder activities. 6 months Full year 6 months 2007 2006 2006 ----------------------------------------------------------- Non-long- Long-term term business business operations operations Group Group Group Â£m Â£m Â£m Â£m Â£m Cash flows from operating activities Cash generated from operations 859 680 1,539 2,465 2,455 Tax paid (232) (68) (300) (363) (595) --------------------------------------------------------------------------------------------------------------------- Net cash from operating activities 627 612 1,239 2,102 1,860 --------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of subsidiaries, joint ventures and associates, net of cash acquired (283) (76) (359) (205) (1,889) Disposal of subsidiaries, joint ventures and associates, net of cash transferred 256 16 272 480 616 Net loans to joint ventures and associates 184 - 184 - (104) Purchases of property and equipment (13) (59) (72) (106) (295) Proceeds on sale of property and equipment 2 37 39 25 156 Purchases of intangible assets (3) (26) (29) (24) (58) --------------------------------------------------------------------------------------------------------------------- Net cash (used in) / from investing activities 143 (108) 35 170 (1,574) ---------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issue of ordinary shares, net of transaction costs - 30 30 47 935 Net drawdown of borrowings 27 180 207 66 901 Interest paid on borrowings (165) (281) (446) (384) (825) Preference dividends paid - (9) (9) (9) (17) Ordinary dividends paid - (340) (340) (341) (490) Coupon payments on direct capital instrument - - - - (52) Finance lease payments - (1) (1) (4) (22) Capital contributions from minority shareholders 75 - 75 35 304 Dividends paid to minority interests of subsidiaries (53) (10) (63) (57) (75) Non-trading cash flows between operations (412) 412 - - - -------------------------------------------------------------------------------------------------------------------- Net cash from /(used in)financing activities (528) (19) (547) (647) 659 -------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 242 485 727 1,625 945 Cash and cash equivalents at 1 January 10,420 3,426 13,846 13,067 13,067 Effect of exchange rate changes on cash and cash equivalents (13) 12 (1) 7 (166) -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at 30 June/31 December 10,649 3,923 14,572 14,699 13,846 ==================================================================================================================== Cash and cash equivalents at 30 June/31 December comprised: Cash at bank and in hand 3,215 1,602 4,817 3,853 4,087 Cash equivalents 7,637 2,744 10,381 11,532 10,455 -------------------------------------------------------------------------------------------------------------------- 10,852 4,346 15,198 15,385 14,542 Bank overdrafts (203) (423) (626) (686) (696) -------------------------------------------------------------------------------------------------------------------- 10,649 3,923 14,572 14,699 13,846 ==================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 51 1. Basis of preparation - IFRS a)The results for the six months to 30 June 2007 have been prepared on the basis of the accounting policies set out in Aviva plc's 2006 Annual Report and Accounts. The results for the six months to 30 June 2007 and 2006 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim results do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results for the full year 2006 have been taken from the Group's 2006 Annual Report and Accounts. The auditor has reported on the 2006 accounts and the report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The Group's 2006 Report and Accounts have been filed with the Registrar of Companies. b)Items included in the financial statements of each of the Group's entities are measured in the currency of the primary economic environment in which that entity operates (the 'functional currency'). The consolidated financial statements are stated in sterling, which is the Company's functional and presentation currency. Unless otherwise noted,the amounts shown in the financial statements are in millions of pounds sterling (Â£m). As supplementary information, consolidated financial information is also presented in euros. c)The results for the six months to 30 June 2007 are presented on a regional basis: United Kingdom, Europe, North America and Asia Pacific. i)The UK region includes the UK life and general insurance businesses, all of the business of Morley as well as the results of Aviva Re, the Group's captive reinsurance business; ii)Europe incorporates all European operations excluding the UK as set out above; iii)North America is made up of our life business in the United States and general insurance and fund management businesses in Canada; and iv) Asia Pacific includes all our Asian and Australian businesses. 2. Exchange rates The Group's principal overseas operations during the year were located within the Eurozone and the United States. The euro rates employed in this announcement are an average rate of 1 euro = Â£0.68 (6 months to 30 June 2006: 1 euro = Â£0.68; full year 2006: 1 euro = Â£0.68) and a closing rate of 1 euro = Â£0.67 (30 June 2006: 1 euro = Â£0.69; 31 December 2006: 1 euro = Â£0.67). The US dollar rates used for translation are an average of Â£1 = US$1.97 (6 months to 30 June 2006: Â£1 = US$1.79; full year 2006: Â£1 = US$1.84) and a closing rate of Â£1 = US$1.99 (30 June 2006: Â£1 = US$1.82; 31 December 2006: Â£1 = US$1.96). ----------------------------------------------------------------------------------------------------------------------- Page 52 3. Acquisitions (a) Erasmus Group On 26 March 2007, the Group's Dutch subsidiary, Delta Lloyd, acquired 100% of the shares in Erasmus Groep BV ('Erasmus')in the Netherlands. Erasmus writes both general insurance and long-term business, and the acquisition will further strengthen Delta Lloyd's position in the Dutch insurance market. The Erasmus acquisition has given rise to goodwill on acquisition of Â£5 million, calculated as follows: Purchase cost: Â£m Cash paid 47 Attributable costs 1 ---------------------------------------------------------------------------------------------------------------------- Total consideration 48 ====================================================================================================================== The assets and liabilities at the date of acquisition were: Fair value and accounting Book policy Fair value adjustments value ---------------------------------- Â£m Â£m Â£m Assets Acquired value of in-force business on insurance contracts - 13 13 Intangible assets 2 (1) 1 Investments 627 23 650 Other assets 122 - 122 ----------------------------------------------------------------------------------------------------------------------- Total assets 751 35 786 ======================================================================================================================= Liabilities Gross insurance liabilities (674) (20) (694) Other liabilities (41) (8) (49) ----------------------------------------------------------------------------------------------------------------------- Total liabilities (715) (28) (743) ======================================================================================================================= Total net assets acquired 36 7 43 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Goodwill arising on acquisition 5 ======================================================================================================================= The assets and liabilities as at the acquisition date in the table above are stated as provisional values and may be amended in the Group's full year financial statements in accordance with paragraph 62 of IFRS 3, Business Combinations. As disclosed in the EEV section on page 35, the embedded value of the long-term business acquired was Â£42 million, representing the net assets adjusted for other intangibles net of tax. (b) Bancassurance partnership with Cajamurcia On 6 June 2007, the Group announced that it had entered into a long-term bancassurance agreement with Spanish savings bank Caja de Ahorros de Murcia(Cajamurcia) that will enhance the Group's leading position in the Spanish life market. Cajamurcia will provide exclusive access to its network of branches to Cajamurcia Vida y Pensiones SA (Cajamurcia Vida) ,the newly-created life insurance company jointly-owned by the Group and Cajamurcia, to sell insurance and pension products. Regulatory approval to write new business is currently awaited for the new company. On signing the agreement, the Group acquired 5% of the share capital of Cajamurcia Vida and Cajamurcia granted the Group a call option over a further 45% of the shares in this company which may be exercised within five days from 14 March 2008. If it does not exercise this option during this period, the Group has granted a call option over its 5% holding to Cajamurcia. The Group paid Â£8 million for the initial 5% holding on completion on 6 June 2007 and has had management control over Cajamurcia Vida since that time. The Group has therefore consolidated its results and balance sheet since that date. Further consideration of Â£69 million would be payable on exercising the option, with additional amounts of up to Â£187 million payable, dependant on the performance of the new company. ----------------------------------------------------------------------------------------------------------------------- Page 53 3. Acquisitions (continued) (b) Bancassurance partnership with Cajamurcia (continued) The acquisition of the initial 5% shareholding has given rise to goodwill on acquisition of Â£2 million, calculated as follows: Purchase cost: Â£m Cash paid 8 Attributable costs 1 ---------------------------------------------------------------------------------------------------------------------- Total consideration 9 ====================================================================================================================== The book and fair values of the assets and liabilities at the date of acquisition were: Â£m Assets Intangible assets 201 Other assets 6 ----------------------------------------------------------------------------------------------------------------------- Total assets 207 ======================================================================================================================= Liabilities Deferred tax on acquired assets (60) ----------------------------------------------------------------------------------------------------------------------- Total liabilities (60) ======================================================================================================================= Total net assets 147 ======================================================================================================================= Net assets acquired (initial 5% share) 7 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Goodwill arising on acquisition of this holding 2 ======================================================================================================================= In view of the recent completion date, the assets and liabilities as at the acquisition date in the table above are stated as provisional values, and may be amended in the Group's full year financial statements in accordance with paragraph 62 of IFRS 3, Business Combinations. The value of the agreement to distribute through Cajamurcia's branch network has been identified as a separate intangible asset with a value of Â£201 million, using estimated post-tax cash flows and discount rates. (c)Non-adjusting post-balance sheet event On 8 June 2007, the Group announced that it was entering the Malaysian long-term savings market through a joint venture with the CIMB Group, listed on Malaysia's stock exchange as Bumiputra-Commerce Holdings Berhad. Under the agreement, the Group will acquire a 49% interest in two of CIMB Group's subsidiaries, Commerce Life Assurance Berhad (Commerce Life) and Commerce Takaful Berhad (Commerce Takaful), for a total cash consideration of Â£74 million. The terms of the joint venture agreement have been agreed by Bank Negara, Malaysia's financial services regulator. In addition, Commerce Life and Commerce Takaful will enter into exclusive bancassurance agreements with CIMB Group's subsidiary, CIMB Bank, for the distribution of life and takaful insurance products through the bank's branches. Formal signing of agreements and completion took place on 2 July 2007. 4.(Loss)/profit on the disposal of subsidiaries and associates The (loss)/profit on the disposal of subsidiaries, joint ventures and associates comprises: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m ----------------------------------------------------------------------------------------------------------------------- United Kingdom (see below) (7) 66 69 Ireland - 87 86 France - - 79 Other small operations 2 (6) (12) ----------------------------------------------------------------------------------------------------------------------- (Loss)/profit on disposal before tax (5) 147 222 Tax on (loss)/profit on disposal 3 (11) 13 ----------------------------------------------------------------------------------------------------------------------- (Loss)/profit on disposal after tax (2) 136 235 ======================================================================================================================= In June 2007, the Group sold its holdings in its associate, The British Aviation Insurance Company Limited, to Berkshire Hathaway for Â£15 million, resulting in a loss on disposal of Â£7 million. ----------------------------------------------------------------------------------------------------------------------- Page 54 5.Integration and restructuring costs Â£40 million of integration and restructuring costs have been included in the results to 30 June 2007 (30 June 2006: Â£24 million; 31 December 2006: Â£246 million). Â£31 million relates to Norwich Union's restructuring to reduce duplication and improve efficiency. Other costs are attributable to activity to integrate Ark Life in Ireland and AmerUs in the US. Both businesses were acquired in 2006. 6. Operations classified as held for sale The assets and liabilities of operations classified as held for sale as at 30 June 2007 were as follows: 30 June 30 June 31 December 2007 2006 2006 Â£m Â£m Â£m Investments and property and equipment 52 354 - Receivables and other financial assets 1,062 506 - Deferred acquisition costs and other assets 74 31 - Cash and cash equivalents 73 117 - ---------------------------------------------------------------------------------------------------------------------- Total assets 1,261 1,008 - ---------------------------------------------------------------------------------------------------------------------- Gross insurance liabilities (871) (682) - Payables and financial liabilities (68) (48) - Other liabilities (111) (98) - ---------------------------------------------------------------------------------------------------------------------- Total liabilities (1,050) (828) - ---------------------------------------------------------------------------------------------------------------------- Net assets 211 180 - ====================================================================================================================== The RAC non-core businesses that were held for sale at 30 June 2006 were disposed of during the second half of that year. (a) Turkish life business On 8 June 2007, Aviva announced that it had signed an agreement with Aksigorta AS('Aksigorta'), the insurance company of the Sabanci Holding Group, to form a new Turkish life and pensions company. Under the terms of the agreement, Aviva's Turkish life and pensions business, Aviva Hayat ve Emeklilik A.S. ('Aviva HE') will merge with Ak Emeklilik A.S.('Ak E'), Aksigorta's life and pensions business. The joint venture will enter into an exclusive long-term bancassurance agreement with Akbank TAS, Turkey's second-largest privately-owned bank. The transaction is subject to regulatory approval and is expected to complete in the fourth quarter of 2007. Aviva and Sabanci will jointly control the joint venture through equal shareholdings. As a result, the relevant assets and liabilities of Aviva HE have been classified as held for sale, at their carrying values, in the consolidated balance sheet as at 30 June 2007. (b) Dutch health insurance business On 16 July 2007, the Group announced that its Dutch subsidiary, Delta Lloyd Group ('DL'), had reached an agreement to sell its health insurance business to OWM CZ Groep Zorgverkeraar UA ('CZ'), a mutual health insurer, and create a long-term alliance for the cross-selling of insurance products. Under the terms of the agreement, CZ will purchase the DL health insurance business and take on its underwriting risk and policy administration. DL will continue to market and distribute health insurance products from CZ to its existing customers, and to provide asset management for the transferred business. DL will also have exclusive rights to market life, general insurance and income protection products to CZ's customers. The transaction is expected to take effect on 1 January 2008, subject to regulatory, competition and other relevant approvals. The relevant assets and liabilities of the DL health insurance business have been classified as held for sale, at their carrying values, in the consolidated balance sheet as at 30 June 2007. On an EEV basis, assets held for sale include the value of internally-generated in-force business of Â£36 million in Turkey. Total assets in the consolidated balance sheet on an EEV basis for the Turkish and Dutch businesses held for sale are therefore Â£1,297 million. ----------------------------------------------------------------------------------------------------------------------- Page 55 7.Geographical analysis of long-term business IFRS operating profit 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m With-profit 85 68 147 Non-profit 218 145 536 United Kingdom 303 213 683 France 138 116 273 Ireland 40 31 60 Italy 41 28 79 Netherlands (including Belgium and Germany) 254 225 458 Poland 60 56 108 Spain 63 48 126 Other Europe (14) (7) (16) Europe 582 497 1,088 North America 165 (15) 71 Asia 5 (3) 10 Australia 26 18 44 Asia Pacific 31 15 54 ----------------------------------------------------------------------------------------------------------------------- Total 1,081 710 1,896 ======================================================================================================================= 8.Geographical analysis of fund management operating profit 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m UK business 33 23 62 International business 8 8 14 ----------------------------------------------------------------------------------------------------------------------- Morley 41 31 76 The Royal Bank of Scotland Group (4) (4) (7) Norwich Union investment funds - (1) 1 ----------------------------------------------------------------------------------------------------------------------- United Kingdom 37 26 70 France 16 16 33 Netherlands 11 13 37 Other Europe 2 1 3 Europe 29 30 73 North America 1 1 3 Asia Pacific 9 4 9 ---------------------------------------------------------------------------------------------------------------------- Total 76 61 155 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Page 56 9.Geographical analysis of general insurance and health (a)Operating result Operating profit Underwriting result ----------------------------- ----------------------------- 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom* 284 566 1,112 (46) 222 388 France 31 27 63 - (1) 6 Ireland 80 88 172 53 63 121 Netherlands 70 80 139 29 34 50 Other 22 19 43 6 3 12 Europe 203 214 417 88 99 189 North America 70 85 148 5 24 27 Asia Pacific 3 1 3 2 1 3 ----------------------------------------------------------------------------------------------------------------------- Total 560 866 1,680 49 346 607 ======================================================================================================================= Analysed by: General insurance 574 862 1,652 92 373 639 Health (14) 4 28 (43) (27) (32) ----------------------------------------------------------------------------------------------------------------------- Total 560 866 1,680 49 346 607 ======================================================================================================================= * The United Kingdom includes the operating profit of Aviva Re, previously shown in the 'International' segment which no longer exists. Comparatives have been restated accordingly (see page 51). (b)Investment return information Actual investment return Longer-term investment credited to income return ------------------------------ ----------------------------- 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 302 294 651 330 344 724 France 17 17 35 31 28 57 Ireland 23 22 41 27 25 51 Netherlands 37 37 72 41 46 89 Other 10 9 17 16 16 31 Europe 87 85 165 115 115 228 North America 55 50 98 65 61 121 Asia Pacific - - 1 1 - - ----------------------------------------------------------------------------------------------------------------------- Total longer-term investment return 511 520 1,073 =============================== Total actual investment income 444 429 915 Realised gains 160 110 281 Unrealised (losses)/gains (56) (224) 26 --------------------------------------------------------------------------------------- Total actual investment return 548 315 1,222 ======================================================================================= The total short-term favourable fluctuation in investment return of Â£37 million (six months 30 June 2006: Â£205 million adverse; full year 2006: Â£149 million favourable) is the difference between the total actual investment return of Â£548 million (six months 30 June 2006: Â£315 million; full year 2006: Â£1,222 million) and the total longer-term investment return of Â£511 million (six months 30 June 2006: Â£520 million; full year 2006: Â£1,073 million). Actual income and longer-term investment return both contain the amortisation of the discount/premium arising on the acquisition of fixed income securities. The longer-term investment return is calculated separately for each principal general insurance and health business unit. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the period, by the longer-term rate of investment return. The longer-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return. The allocated longer-term return for other investments is the actual income receivable for the period. ----------------------------------------------------------------------------------------------------------------------- Page 57 9. Geographical analysis of general insurance and health (continued) (b) Investment return information (continued) The Group has calculated the longer-term investment return for its general insurance and health business using the same start of year economic assumptions for equities and properties as those used for EEV reporting as shown on page 40 of this announcement. The principal assumptions underlying the calculation of the longer-term investment return are: Longer-term rates of return Longer-term rates of return Equities Properties --------------------------- --------------------------- 2007 2006 2007 2006 % % % % United Kingdom 7.6% 7.1% 6.6% 6.1% France 7.0% 6.3% 6.0% 5.3% Ireland 7.0% 6.3% 6.0% 5.3% Netherlands 7.0% 6.3% 6.0% 5.3% Canada 7.1% 7.0% 6.1% 6.0% ----------------------------------------------------------------------------------------------------------------------- The table below shows the sensitivity of the Group's general insurance and health operating profit before tax to changes in the longer-term rates of return: 6 months 6 months 2007 2006 Â£m Â£m Movement in investment return for By Change in By By Equities 1% higher/lower Group operating profit 32 31 Properties 1% higher/lower Group operating profit 3 3 ----------------------------------------------------------------------------------------------------------------------- General insurance business only: geographical analysis (c)Analysis of operating profit Operating profit Longer-term investment return Underwriting result ----------------------------- ----------------------------- ----------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 286 572 1,111 327 342 720 (41) 230 391 France 27 23 47 25 22 45 2 1 2 Ireland 80 88 172 27 25 51 53 63 121 Netherlands 86 74 128 21 23 45 65 51 83 Other Europe 22 19 43 16 16 31 6 3 12 Europe 215 204 390 89 86 172 126 118 218 North America 70 85 148 65 61 121 5 24 27 Asia Pacific 3 1 3 1 - - 2 1 3 ---------------------------------------------------------------------------------------------------------------------- Total 574 862 1,652 482 489 1,013 92 373 639 ====================================================================================================================== (d)Combined operating ratio analysis - geographical basis - general insurance business only Claims ratio Expense ratio Combined operating ratio ------------------------------- ----------------------------- ----------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 % % % % % % % % % United Kingdom 64.5% 58.5% 58.7% 13.6% 11.9% 13.9% 102% 92% 95% France 73.4% 72.6% 73.0% 8.9% 9.5% 10.4% 97% 98% 99% Ireland 54.5% 52.6% 55.8% 12.5% 11.6% 11.2% 78% 74% 77% Netherlands 41.8% 50.2% 51.5% 14.1% 11.1% 17.8% 76% 82% 89% Canada 67.2% 65.0% 66.7% 13.2% 12.6% 12.4% 99% 96% 98% ----------------------------------------------------------------------------------------------------------------------- Total 63.1% 60.1% 60.3% 12.9% 11.6% 13.7% 97% 92% 94% ======================================================================================================================= Ratios are measured in local currency. The total Group ratios are based on average exchange rates applying to the respective periods. Definitions: Claims ratio - Incurred claims expressed as a percentage of net earned premiums. Expense ratio - Written expenses excluding commissions expressed as a percentage of net written premiums. Commission ratio - Written commissions expressed as a percentage of net written premiums. Combined operating ratio - Aggregate of claims ratio, expense ratio and commission ratio. ----------------------------------------------------------------------------------------------------------------------- Page 58 9. Geographical analysis of general insurance and health (continued) (e)General insurance business only: class of business analyses (i) United Kingdom (excluding Group reinsurance) Net written premiums Underwriting result Combined operating ratio ------------------------------ ----------------------------- ------------------------------------ 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m % % % Personal Motor 706 889 1,631 (12) (33) (39) 103% 105% 104% Homeowner 625 629 1,262 (177) 88 23 126% 87% 98% Other 355 348 694 18 9 50 101% 98% 100% ---------------------------------------------------------------------------------------------------------------------- 1,686 1,866 3,587 (171) 64 34 111% 97% 102% ---------------------------------------------------------------------------------------------------------------------- Commercial Motor 338 341 638 43 19 40 85% 94% 94% Property 403 434 826 2 113 194 100% 76% 79% Other 272 257 532 79 37 115 70% 86% 78% ---------------------------------------------------------------------------------------------------------------------- 1,013 1,032 1,996 124 169 349 86% 84% 83% ---------------------------------------------------------------------------------------------------------------------- Total 2,699 2,898 5,583 (47) 233 383 102% 92% 95% ====================================================================================================================== During the six months to 30 June 2007, annualised rating increases were as follows: personal motor 8%; homeowner 5% (including indexation); commercial motor 2% decrease; commercial property 2% decrease; commercial liability 6% decrease. (ii) France Net written premiums Underwriting result Combined operating ratio ------------------------------ ----------------------------- ------------------------------------ 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m % % % Motor 147 144 256 (2) (10) - 99% 104% 99% Property and other 189 197 308 4 11 2 96% 93% 97% ---------------------------------------------------------------------------------------------------------------------- Total 336 341 564 2 1 2 97% 98% 99% ====================================================================================================================== (iii) Netherlands Net written premiums Underwriting result Combined operating ratio ------------------------------ ----------------------------- ------------------------------------ 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m % % % Motor 131 102 238 19 17 13 83% 82% 96% Property 138 140 252 7 21 29 89% 79% 88% Liability 34 58 67 3 - 2 82% 98% 97% Other 142 111 176 36 13 39 52% 77% 76% ---------------------------------------------------------------------------------------------------------------------- Total 445 411 733 65 51 83 76% 82% 89% ====================================================================================================================== (iv) Canada Net written premiums Underwriting result Combined operating ratio ------------------------------ ----------------------------- ------------------------------------ 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m % % % Motor 376 448 821 1 6 11 100% 98% 99% Property 204 197 413 3 11 6 98% 96% 98% Liability 73 68 133 (2) 1 3 97% 98% 98% Other 12 11 22 3 6 7 68% 63% 60% ---------------------------------------------------------------------------------------------------------------------- Total 665 724 1,389 5 24 27 99% 96% 98% ====================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- Page 59 10.Analysis of other operations' operating result 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m RAC 6 20 45 UK Life - Norwich Union Life Services (20) (42) (50) - Lifetime and SIPP (18) (6) (29) Other (40) 17 (46) ----------------------------------------------------------------------------------------------------------------------- Total (72) (11) (80) ======================================================================================================================= 11.Corporate Centre 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Staff profit share and other incentive schemes (12) (7) (17) Central costs (68) (66) (143) ---------------------------------------------------------------------------------------------------------------------- Total (80) (73) (160) ======================================================================================================================= 12.Group debt costs and other interest 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m External Subordinated debt (88) (84) (169) Other (41) (25) (61) Internal (93) (106) (228) Net finance income on pension schemes 32 38 77 ----------------------------------------------------------------------------------------------------------------------- Total (190) (177) (381) ======================================================================================================================= 13.Tax (a)Tax charged to the income statement 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Current tax: For the period 329 417 1,022 Prior year adjustments (77) (118) (287) ----------------------------------------------------------------------------------------------------------------------- Total current tax 252 299 735 ------------------------------------------------------------------------------------------------------------------------ Deferred tax: Origination and reversal of temporary differences 145 132 221 Changes in tax rates or tax laws (99) - (7) Write down of deferred tax assets 31 - (15) ----------------------------------------------------------------------------------------------------------------------- Total deferred tax 77 132 199 ----------------------------------------------------------------------------------------------------------------------- Total tax charged to income statement 329 431 934 ======================================================================================================================= Analysed between: Tax charge attributable to policyholders' returns 21 112 346 Tax charge on IFRS operating profit before tax attributable to shareholders' profits from continuing operations 378 370 725 Tax credit on profit on other activities (70) (51) (137) ----------------------------------------------------------------------------------------------------------------------- 329 431 934 ======================================================================================================================= The Group, as a proxy for policyholders in the UK, Ireland and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish and Australian life insurance policyholder returns is included in the tax charge. ----------------------------------------------------------------------------------------------------------------------- Page 60 13. Tax (continued) (b) Tax charged to equity (i) The total tax charge/(credit) comprises: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Current tax credit (1) - (9) Deferred tax charge 231 104 14 ----------------------------------------------------------------------------------------------------------------------- Total tax charged to equity 230 104 5 ======================================================================================================================= (ii) The tax expense attributable to policyholders' returns included in the charge above is Â£1 million (six months to 30 June 2006: Â£2 million credit; full year 2006: nil). (c) Tax reconciliation The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Profit before tax 1,219 1,360 3,323 ====================================================================================================================== Tax calculated at standard UK corporation tax rate of 30% (2006:30%) 366 408 997 Different basis of tax for UK life insurance - 78 209 Adjustment to tax charge in respect of prior years (77) (125) (287) Non-assessable dividends (61) (26) (55) Non-taxable profit on sale of subsidiaries and associates (2) (33) (80) Disallowable expenses 17 24 46 Different local basis of tax on overseas profits 53 204 201 Reduction in future UK tax rate (net of movement in unallocated divisible surplus) (69) - - Deferred tax valuation difference 108 (91) (60) Other (6) (8) (37) ----------------------------------------------------------------------------------------------------------------------- Tax charged to the income statement 329 431 934 ======================================================================================================================= 14.Earnings per share (a)Basic earnings per share (i)The profit attributable to ordinary shareholders is: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Profit for the period 890 929 2,389 Amount attributable to minority interests (83) (73) (174) Cumulative preference dividends for the period (9) (9) (17) Coupon payments on direct capital instrument net of tax - - (37) ----------------------------------------------------------------------------------------------------------------------- Profit attributable to ordinary shareholders 798 847 2,161 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Page 61 14. Earnings per share (continued) (a) Basic earnings per share (continued) (ii) Basic earnings per share is calculated as follows: 6 months 2007 6 months 2006 Full year 2006 ----------------------------- --------------------------- --------------------------- Net of tax, Net of tax, Net of tax, minorities minorities minorities and and and preference preference preference dividends dividends dividends Before and DCI Per Before and DCI Per Before and DCI Per tax appropriation share tax appropriation share tax appropriation share Â£m Â£m p Â£m Â£m p Â£m Â£m p Operating profit attributable to ordinary shareholders 1,375 893 34.7 1,376 924 38.5 3,110 2,146 86.9 Adjusted for the following: - Impairment of goodwill (3) (3) (0.1) - - - (94) (94) (3.8) - Amortisation and net impairment of acquired value of in-force business (114) (82) (3.2) (33) (33) (1.4) (100) (83) (3.4) - Amortisation and net impairment of intangibles (52) (34) (1.3) (19) (16) (0.7) (70) (48) (1.9) - Financial Services Compensation Scheme and other levies - - - 6 4 0.2 6 4 0.2 - Short-term fluctuation on return on investments backing general insurance and health business 37 53 2.1 (205) (147) (6.1) 149 189 7.7 - (Loss)/profit on the disposal of subsidiaries and associates (5) (2) (0.1) 147 136 5.7 222 235 9.5 - Integration and restructuring costs (40) (27) (1.1) (24) (21) (0.9) (246) (188) (7.7) ----------------------------------------------------------------------------------------------------------------------- Profit attributable to ordinary shareholders 1,198 798 31.0 1,248 847 35.3 2,977 2,161 87.5 ======================================================================================================================= Earnings per share has been calculated based on the operating profit before impairment of goodwill and other non-operating items, after tax, attributable to ordinary shareholders, as well as on the profit attributable to ordinary shareholders. The directors believe the former earnings per share figures provide a better indication of operating performance. The calculation of basic earnings per share uses a weighted average of 2,571 million (six months 30 June 2006: 2,401 million; full year 2006: 2,469 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 30 June 2007 was 2,595 million (30 June 2006: 2,415 million; 31 December 2006: 2,566 million). ----------------------------------------------------------------------------------------------------------------------- Page 62 14. Earnings per share (continued) (b) Diluted earnings per share Diluted earnings per share is calculated as follows: 6 months 2007 6 months 2006 Full year 2006 ------------------------- ----------------------- ------------------------- Weighted Weighted Weighted average average average number of Per number of Per number of Per Total shares share Total shares share Total shares share Â£m m p Â£m m p Â£m m p Profit attributable to ordinary shareholders 798 2,571 31.0 847 2,401 35.3 2,161 2,469 87.5 Dilutive effect of share awards and options - 27 (0.3) - 22 (0.3) - 27 (0.9) ----------------------------------------------------------------------------------------------------------------------- Diluted earnings per share 798 2,598 30.7 847 2,423 35.0 2,161 2,496 86.6 ======================================================================================================================= Diluted earnings per share on an operating profit attributable to ordinary shareholders is 34.4 pence (six months 30 June 2006: 38.1 pence; full year 2006: 86.0 pence). 15.Dividends and appropriations 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Ordinary dividends declared and charged to equity in the year Final 2005 - 17.44 pence per share, paid on 17 May 2006 - 418 418 Interim 2006 - 10.82 pence per share, paid on 17 November 2006 - - 275 Final 2006 - 19.18 pence per share, paid on 18 May 2007 492 - - ---------------------------------------------------------------------------------------------------------------------- 492 418 693 Preference dividends declared and charged to equity in the year 9 9 17 Coupon payments on direct capital instrument - gross of tax - - 52 ---------------------------------------------------------------------------------------------------------------------- 501 427 762 ====================================================================================================================== Subsequent to 30 June 2007, the directors proposed an interim dividend for 2007 of 11.90 pence per ordinary share (six months 30 June 2006: 10.82 pence), amounting to Â£309 million (six months 30 June 2006: Â£275 million) in total. The dividend will be paid on 16 November 2007 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2007. Interest on the direct capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. Tax relief will be obtained at a rate of 30%. Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 8 August 2007. 16.Segmental information (a)Segmental results - primary reporting format - business segments The principal activity of the Group is financial services, which is managed using the following reportable segments: long-term business, fund management, general insurance and health. Long-term business Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries including managed pension fund business and our share of the other life and related business written in our associates and joint ventures, as well as the Lifetime mortgage business written in the United Kingdom. Fund management activities Our fund management business invests policyholders' and shareholders' funds, provides investment management services for institutional pension fund mandates and manages a range of retail investment products, including investment funds, unit trusts, OEICs and ISAs. Clients include Aviva group businesses and third-party financial institutions, pension funds, public sector organisations, investment professionals and private investors. ----------------------------------------------------------------------------------------------------------------------- Page 63 16. Segmental information (continued) (a) Segmental results - primary reporting format - business segments (continued) General insurance and health Our general insurance and health business provides insurance cover to individuals and to small and medium-sized businesses, for risks associated mainly with motor vehicles, property and liability, such as employers' liability and professional indemnity liability, and medical expenses. Other Other activities not related to the core business segments or which are not reportable segments due to their immateriality, such as the RAC non-insurance operations, our banking businesses and service companies are included as 'Other' in the following tables. Head office expenses, such as Group treasury and finance functions are also reported as 'Other', together with eliminations and any other reconciling items. Certain financing costs and taxes are not allocated among the segments. The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are on normal commercial terms and market conditions. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet but excluding items such as tax and certain borrowings. (b)Segmental results of the income statement - primary reporting format - business segments for the six months ended 30 June 2007 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment income from external customers: Net written premiums 9,007 - 5,498 - 14,505 Net change in provision for unearned premiums - - (237) - (237) ---------------------------------------------------------------------------------------------------------------------- Net earned premiums 9,007 - 5,261 - 14,268 Fee and commission income 382 228 89 220 919 ---------------------------------------------------------------------------------------------------------------------- 9,389 228 5,350 220 15,187 Net investment income 6,098 11 538 199 6,846 Inter-segment revenue - 74 - - 74 (Loss)/profit on the disposal of subsidiaries and associates - - (7) 2 (5) ---------------------------------------------------------------------------------------------------------------------- Segment income 15,487 313 5,881 421 22,102 ====================================================================================================================== Claims and benefits paid, net of recoveries from reinsurers (9,690) - (3,617) - (13,307) Change in insurance liabilities, net of reinsurance (708) - 70 - (638) Change in investment contract provisions (2,466) - - - (2,466) Change in unallocated divisible surplus 27 - - - 27 Fee and commission expense (704) (64) (1,437) (32) (2,237) Other operating expenses Depreciation (5) (1) (4) (41) (51) Amortisation of acquired value of in-force business (108) - - - (108) Amortisation and net impairment of intangible assets (31) (2) (11) (8) (52) Impairment of goodwill - (3) - - (3) Other impairment losses recognised in the income statement (19) - - (2) (21) Inter-segment expense (70) - (4) - (74) Other expenses (521) (168) (330) (408) (1,427) Finance costs (165) - - (152) (317) ---------------------------------------------------------------------------------------------------------------------- Segment expenses (14,460) (238) (5,333) (643) (20,674) ====================================================================================================================== Segment result before share of profit/(loss) of joint ventures and associates 1,027 75 548 (222) 1,428 Share of profit/(loss) of joint ventures and associates (78) (4) 3 (1) (80) ---------------------------------------------------------------------------------------------------------------------- Segmental result before tax 949 71 551 (223) 1,348 ---------------------------------------------------------------------------------------------------------------- Unallocated costs: Finance costs on central borrowings (129) Tax attributable to policyholders' returns (21) Tax attributable to shareholders' profits (308) ----------------------------------------------------------------------------------------------------------------------- Total unallocated expenses (458) ----------------------------------------------------------------------------------------------------------------------- Profit for the period 890 ====================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- Page 64 16. Segmental information (continued) (b) Segmental results of the income statement - primary reporting format - business segments for the six months ended 30 June 2007 (continued) Finance costs on central borrowings comprise interest payable on borrowings by holding companies within the Group which are not allocated to operating companies. Pro forma reconciliation to operating profit before tax attributable to shareholders' profits General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment result before tax 949 71 551 (223) 1,348 Finance costs on central borrowings - - (1) (128) (129) Adjusted for the following items: Impairment of goodwill - 3 - - 3 Amortisation and impairment of acquired value of in-force business 114 - - - 114 Amortisation and impairment of intangible assets 31 2 11 8 52 Short-term fluctuation in return on investments backing general insurance and health business - - (37) - (37) Loss/(profit) on the disposal of subsidiaries and associates - - 7 (2) 5 Integration and restructuring costs 8 - 26 6 40 Group debt costs, other interest and corporate centre reallocation - - 3 (3) - ---------------------------------------------------------------------------------------------------------------------- 1,102 76 560 (342) 1,396 Less: Tax attributable to policyholders' returns (21) - - - (21) ----------------------------------------------------------------------------------------------------------------------- Operating profit before tax attributable to shareholders' profits 1,081 76 560 (342) 1,375 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Page 65 16. Segmental information (continued) (c) Segmental results of the income statement - primary reporting format - business segments for the six months ended 30 June 2006 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment income from external customers: Net written premiums 8,057 - 5,650 - 13,707 Net change in provision for unearned premiums - - (222) - (222) ----------------------------------------------------------------------------------------------------------------------- Net earned premiums 8,057 - 5,428 - 13,485 Fee and commission income 318 170 87 330 905 ----------------------------------------------------------------------------------------------------------------------- 8,375 170 5,515 330 14,390 Net investment income 2,383 6 349 116 2,854 Inter-segment revenue - 85 - - 85 (Loss)/profit on the disposal of subsidiaries and associates (3) - 90 60 147 ----------------------------------------------------------------------------------------------------------------------- Segment income 10,755 261 5,954 506 17,476 ======================================================================================================================= Claims and benefits paid, net of recoveries from reinsurers (7,659) - (3,378) - (11,037) Change in insurance liabilities, net of reinsurance 197 - (99) - 98 Change in investment contract provisions (1,826) - - - (1,826) Change in unallocated divisible surplus 623 - - - 623 Fee and commission expense (788) (50) (1,337) (13) (2,188) Other operating expenses Depreciation (7) (2) (11) (41) (61) Amortisation of acquired value of in-force business (16) - - - (16) Net impairment of acquired value of in-force business (10) - - - (10) Amortisation and net impairment of intangible assets (9) - (6) (4) (19) Inter-segment expense (69) - (4) (12) (85) Other expenses (505) (144) (364) (421) (1,434) Finance costs (126) - (3) (146) (275) ----------------------------------------------------------------------------------------------------------------------- Segment expenses (10,195) (196) (5,202) (637) (16,230) ======================================================================================================================= Segment result before share of profit/(loss) of joint ventures and associates 560 65 752 (131) 1,246 Share of profit/(loss) of joint ventures and associates 213 (4) - 14 223 ----------------------------------------------------------------------------------------------------------------------- Segmental result before tax 773 61 752 (117) 1,469 -------------------------------------------------------------------------------------------------------------- Unallocated costs: Finance costs on central borrowings (109) Tax attributable to policyholders' returns (112) Tax attributable to shareholders' profits (319) ----------------------------------------------------------------------------------------------------------------------- Total unallocated costs (540) ----------------------------------------------------------------------------------------------------------------------- Profit for the period 929 ======================================================================================================================= Finance costs on central borrowings comprise interest payable on borrowings by holding companies within the Group which are not allocated to operating companies. ----------------------------------------------------------------------------------------------------------------------- Page 66 16. Segmental information (continued) (c) Segmental results of the income statement - primary reporting format - business segments for the six months ended 30 June 2006 (continued) Pro forma reconciliation to operating profit before tax attributable to shareholders' profits General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment result before tax 773 61 752 (117) 1,469 Finance costs on central borrowings - - - (109) (109) Adjusted for the following items: Amortisation and impairment of acquired value of in-force business 33 - - - 33 Amortisation and impairment of intangible assets 9 - 6 4 19 Short-term fluctuation in return on investments backing general insurance and health business - - 205 - 205 Loss/(profit) on the disposal of subsidiaries and associates 3 - (90) (60) (147) Financial Services Compensation Scheme levy - - (6) - (6) Integration and restructuring costs 3 - 2 19 24 Group debt costs, other interest and corporate centre reallocation 1 - (3) 2 - ---------------------------------------------------------------------------------------------------------------------- 822 61 866 (261) 1,488 Less: Tax attributable to policyholders' returns (112) - - - (112) ---------------------------------------------------------------------------------------------------------------------- Operating profit before tax attributable to shareholders' profits 710 61 866 (261) 1,376 ====================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- Page 67 16. Segmental information (continued) (d) Segmental results of the income statement - primary reporting format - business segments for the year ended 31 December 2006 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment income from external customers: Net written premiums 16,532 - 10,702 - 27,234 Net change in provision for unearned premiums - - 93 - 93 ----------------------------------------------------------------------------------------------------------------------- Net earned premiums 16,532 - 10,795 - 27,327 Fee and commission income 630 452 172 616 1,870 ----------------------------------------------------------------------------------------------------------------------- 17,162 452 10,967 616 29,197 Net investment income 13,928 17 1,299 229 15,473 Inter-segment revenue - 199 - - 199 Profit on the disposal of subsidiaries and associates 12 - 88 122 222 ----------------------------------------------------------------------------------------------------------------------- Segment income 31,102 668 12,354 967 45,091 ======================================================================================================================= Claims and benefits paid, net of recoveries from reinsurers (16,523) - (6,921) - (23,444) Change in insurance liabilities, net of reinsurance (2,594) - (26) - (2,620) Change in investment contract provisions (6,002) - - - (6,002) Change in unallocated divisible surplus (558) - - - (558) Fee and commission expense (2,125) (111) (2,742) (65) (5,043) Other operating expenses Depreciation (12) (3) (19) (89) (123) Amortisation of acquired value of in-force business (58) - - - (58) Net impairment of acquired value of in-force business (28) - - - (28) Amortisation and net impairment of intangible assets (32) (1) (18) (19) (70) Impairment of goodwill - - - (94) (94) Other impairment losses recognised in the income statement 6 - (5) (1) - Inter-segment expense (190) - (8) (1) (199) Other expenses (990) (392) (806) (996) (3,184) Finance costs (367) - (3) (230) (600) ----------------------------------------------------------------------------------------------------------------------- Segment expenses (29,473) (507) (10,548) (1,495) (42,023) ======================================================================================================================= Segment result before share of profit/(loss) of joint ventures and associates 1,629 161 1,806 (528) 3,068 Share of profit/(loss) of joint ventures and associates 471 (7) 5 16 485 ----------------------------------------------------------------------------------------------------------------------- Segmental result before tax 2,100 154 1,811 (512) 3,553 ------------------------------------------------------------------------------------------------------------- Unallocated costs: Finance costs on central borrowings (230) Tax attributable to policyholders' returns (346) Tax attributable to shareholders' profits (588) ----------------------------------------------------------------------------------------------------------------------- Total unallocated costs (1,164) ----------------------------------------------------------------------------------------------------------------------- Profit for the period 2,389 ======================================================================================================================= Finance costs on central borrowings comprise interest payable on borrowings by holding companies within the Group which are not allocated to operating companies. ----------------------------------------------------------------------------------------------------------------------- Page 68 16. Segmental information (continued) (d)Segmental results of the income statement - primary reporting format - business segments for the year ended 31 December 2006 (continued) Pro-forma reconciliation to operating profit before tax attributable to shareholders' profits General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Segment result before tax 2,100 154 1,811 (512) 3,553 Finance costs on central borrowings - - (2) (228) (230) Adjusted for the following items: Impairment of goodwill - - - 94 94 Amortisation and impairment of acquired value of in-force business 100 - - - 100 Amortisation and impairment of intangible assets 32 1 18 19 70 Financial Services Compensation Scheme levy - - (6) - (6) Short-term fluctuation in return on assets backing general insurance and health business - - (149) - (149) Profit on the disposal of subsidiaries and associates (12) - (88) (122) (222) Integration and restructuring costs 21 - 95 130 246 Group debt costs, other interest and corporate centre reallocation 1 - 1 (2) - ---------------------------------------------------------------------------------------------------------------------- 2,242 155 1,680 (621) 3,456 Less: Tax attributable to policyholders' returns (346) - - - (346) ---------------------------------------------------------------------------------------------------------------------- Operating profit before tax attributable to shareholders' profits 1,896 155 1,680 (621) 3,110 ====================================================================================================================== (e) Segmental balance sheet - primary reporting format - business segments as at 30 June 2007 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Goodwill 1,309 6 398 1,199 2,912 Acquired value of in-force business and intangible assets 2,404 16 276 140 2,836 Investments in joint ventures and associates 3,304 49 - 95 3,448 Property and equipment 396 6 65 390 857 Investment property 15,317 - 340 25 15,682 Loans 18,929 - 685 7,197 26,811 Financial investments Debt securities 100,062 3 7,532 2,066 109,663 Equity securities 55,151 32 2,745 996 58,924 Other investments 35,822 8 474 213 36,517 Other assets 28,187 500 11,642 1,548 41,877 ---------------------------------------------------------------------------------------------------------------------- Segment assets 260,881 620 24,157 13,869 299,527 --------------------------------------------------------------------------------------------------------------- Unallocated assets - tax assets 1,033 ---------------------------------------------------------------------------------------------------------------------- Total assets 300,560 ====================================================================================================================== Insurance liabilities 126,943 - 17,744 - 144,687 Liability for investment contracts 92,101 - - - 92,101 Unallocated divisible surplus 9,489 - - - 9,489 Net asset value attributable to unitholders 3,935 5 50 - 3,990 External borrowings 3,797 - 11 4,182 7,990 Other liabilities, including inter-segment liabilities 9,146 280 351 8,634 18,411 ---------------------------------------------------------------------------------------------------------------------- Segment liabilities 245,411 285 18,156 12,816 276,668 --------------------------------------------------------------------------------------------------------------- Unallocated liabilities Central borrowings 4,206 Tax liabilities 4,170 ---------------------------------------------------------------------------------------------------------------------- Total liabilities 285,044 Total equity 15,516 ---------------------------------------------------------------------------------------------------------------------- Total equity and liabilities 300,560 ====================================================================================================================== Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies. ---------------------------------------------------------------------------------------------------------------------- Page 69 16. Segmental information (continued) (f)Segmental balance sheet - primary reporting format - business segments as at 30 June 2006 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Goodwill 661 8 400 1,267 2,336 Acquired value of in-force business and intangible assets 590 19 286 109 1,004 Investments in joint ventures and associates 3,138 45 39 95 3,317 Property and equipment 386 3 126 368 883 Investment property 13,725 - 348 38 14,111 Loans 17,720 - 637 6,122 24,479 Financial investments Debt securities 89,195 1 7,776 2,479 99,451 Equity securities 50,852 12 2,810 1,030 54,704 Other investments 30,262 7 451 62 30,782 Other assets 24,871 445 11,163 2,780 39,259 ---------------------------------------------------------------------------------------------------------------------- Segment assets 231,400 540 24,036 14,350 270,326 ------------------------------------------------------------------------------------------------------------- Unallocated assets - tax assets 741 ---------------------------------------------------------------------------------------------------------------------- Total assets 271,067 ====================================================================================================================== Insurance liabilities 114,934 - 18,134 - 133,068 Liability for investment contracts 82,856 - - - 82,856 Unallocated divisible surplus 8,235 - - - 8,235 Net asset value attributable to unitholders 3,080 - - - 3,080 External borrowings 3,951 - (1) 3,494 7,444 Other liabilities, including inter-segment liabilities 6,876 297 (58) 10,243 17,358 ---------------------------------------------------------------------------------------------------------------------- Segment liabilities 219,932 297 18,075 13,737 252,041 ------------------------------------------------------------------------------------------------------------- Unallocated liabilities Central borrowings 3,626 Tax liabilities 3,280 ---------------------------------------------------------------------------------------------------------------------- Total liabilities 258,947 Total equity 12,120 ---------------------------------------------------------------------------------------------------------------------- Total equity and liabilities 271,067 ======================================================================================================================= Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies. ----------------------------------------------------------------------------------------------------------------------- Page 70 16. Segmental information (continued) (g)Segmental balance sheet - primary reporting format - business segments as at 31 December 2006 General Long-term Fund insurance business management and health Other Total Â£m Â£m Â£m Â£m Â£m Goodwill 1,316 9 390 1,195 2,910 Acquired value of in-force business and intangible assets 2,301 18 287 122 2,728 Investments in joint ventures and associates 3,526 44 39 81 3,690 Property and equipment 416 4 94 390 904 Investment property 14,714 - 384 25 15,123 Loans 18,805 - 735 6,905 26,445 Financial investments Debt securities 102,815 3 7,933 2,290 113,041 Equity securities 52,782 19 2,858 1,103 56,762 Other investments 32,453 8 457 132 33,050 Other assets 24,383 534 9,755 1,854 36,526 ---------------------------------------------------------------------------------------------------------------------- Segment assets 253,511 639 22,932 14,097 291,179 ------------------------------------------------------------------------------------------------------------- Unallocated assets - tax assets 1,543 ---------------------------------------------------------------------------------------------------------------------- Total assets 292,722 ====================================================================================================================== Insurance liabilities 126,224 - 18,006 - 144,230 Liability for investment contracts 88,358 - - - 88,358 Unallocated divisible surplus 9,465 - - - 9,465 Net asset value attributable to unitholders 3,786 1 23 - 3,810 External borrowings 3,894 - 11 4,037 7,942 Other liabilities, including inter-segment liabilities 6,999 313 (712) 9,719 16,319 ---------------------------------------------------------------------------------------------------------------------- Segment liabilities 238,726 314 17,328 13,756 270,124 -------------------------------------------------------------------------------------------------------------- Unallocated liabilities Central borrowings 4,195 Tax liabilities 4,339 ---------------------------------------------------------------------------------------------------------------------- Total liabilities 278,658 Total equity 14,064 ---------------------------------------------------------------------------------------------------------------------- Total equity and liabilities 292,722 ====================================================================================================================== Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies. (h)Assets under management Life and related General business business and other Group Group 30 June 2007 30 June 2007 30 June 2007 31 December 2006 Â£m Â£m Â£m Â£m Total IFRS assets included in the balance sheet 261,591 38,969 300,560 292,722 Additional value of in-force long-term business 7,219 - 7,219 6,794 ---------------------------------------------------------------------------------------------------------------------- Total EEV assets included in the balance sheet 268,810 38,969 307,779 299,516 Third party funds under management: Unit trusts,Oeics, Peps and Isas 22,637 20,574 Segregated funds 46,184 43,672 ---------------------------------------------------------------------------------------------------------------------- Total assets under management 376,600 363,762 ====================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- Page 71 16. Segmental information (continued) (i) Goodwill allocation and impairment testing IFRS requires formal impairment testing to be carried out annually. For impairment testing, goodwill and intangibles with indefinite useful lives have been allocated to cash-generating units by geographical reporting unit and business segment. The carrying amount of goodwill and intangible assets with indefinite useful lives is reviewed at least annually or when circumstances or events indicate there may be uncertainty over this value. A small impairment charge of Â£3 million (2006: Â£nil) was booked in the first half of the year. (j)Long-term business summary analysis by geographical segment (i) Income statement Net written premiums Fee and commission income Profit before tax ---------------------------- ---------------------------- ---------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 2,427 2,309 5,300 105 81 140 302 312 970 France 1,780 2,015 3,573 100 90 179 131 109 259 Ireland 171 182 397 34 26 64 37 10 52 Italy 568 1,053 1,919 38 32 69 40 27 76 Netherlands (including Belgium and Germany) 1,173 1,153 2,079 15 15 21 249 223 453 Poland 224 205 395 31 26 55 59 56 108 Spain 816 610 1,266 31 25 56 58 41 113 Other Europe 99 74 159 2 3 3 (13) (7) (16) Europe 4,831 5,292 9,788 251 217 447 561 459 1,045 North America 1,473 275 932 5 - 4 52 (15) 17 Asia Pacific 276 181 512 21 20 39 34 17 68 ---------------------------------------------------------------------------------------------------------------------- Total 9,007 8,057 16,532 382 318 630 949 773 2,100 ======================================================================================================================= The following analysis shows the net written premiums from associates and joint ventures on insurance and participating investment contracts which are not included in the analysis above. 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m RBSG 124 133 236 India 25 16 31 China 39 13 38 ---------------------------------------------------------------------------------------------------------------------- 188 162 305 ======================================================================================================================= ----------------------------------------------------------------------------------------------------------------------- Page 72 16. Segmental information (continued) (j) Long-term business summary analysis by geographical segment (continued) (ii) Balance sheet Segmental total assets Segmental net assets ----------------------------- --------------------------- 30 June 30 June 31 December 30 June 30 June 31 December 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 125,983 118,278 123,974 4,737 4,316 4,809 France 48,283 46,303 46,547 1,414 1,324 1,355 Ireland 11,275 10,524 10,951 1,061 1,033 1,040 Italy 11,854 11,322 11,828 607 563 613 Netherlands (including Belgium and Germany) 29,452 28,840 28,340 3,308 2,513 2,922 Poland 2,627 1,840 2,232 220 160 216 Spain 7,043 6,458 6,641 1,087 826 862 Other Europe 492 480 483 57 58 65 Europe 111,026 105,767 107,022 7,754 6,477 7,073 North America 19,610 3,816 18,828 2,495 295 2,470 Asia Pacific 4,262 3,539 3,687 484 380 433 ---------------------------------------------------------------------------------------------------------------------- Total 260,881 231,400 253,511 15,470 11,468 14,785 ====================================================================================================================== (k) General insurance and health business summary analysis by geographical segment (i) Income statement Net written premiums Fee and commission income Profit before tax ---------------------------- ---------------------------- ---------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2007 2006 2006 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 2,950 3,132 6,000 81 66 157 314 502 1,130 France 421 435 735 - - - 37 9 77 Ireland 245 251 519 1 - 1 90 181 297 Netherlands 1,055 955 1,755 - 15 - 60 11 107 Other Europe 148 142 278 2 2 3 2 8 26 Europe 1,869 1,783 3,287 3 17 4 189 209 507 North America 665 724 1,389 4 4 10 48 40 169 Asia Pacific 14 11 26 1 - 1 - 1 5 ---------------------------------------------------------------------------------------------------------------------- Total 5,498 5,650 10,702 89 87 172 551 752 1,811 ====================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- Page 73 16. Segmental information (continued) (k) General insurance and health business summary analysis by geographical segment (continued) (ii) Balance sheet Segmental total assets Segmental net assets ----------------------------- --------------------------- 30 June 30 June 31 December 30 June 30 June 31 December 2007 2006 2006 2007 2006 2006 Â£m Â£m Â£m Â£m Â£m Â£m United Kingdom 12,960 13,043 12,548 3,568 3,623 3,216 France 1,796 1,774 1,731 312 355 376 Ireland 1,823 1,863 1,765 523 504 444 Netherlands 3,274 2,991 2,775 655 514 630 Other Europe 810 835 803 265 275 266 Europe 7,703 7,463 7,074 1,755 1,648 1,716 North America 3,446 3,469 3,250 649 668 647 Asia Pacific 48 61 60 29 22 25 ---------------------------------------------------------------------------------------------------------------------- Total 24,157 24,036 22,932 6,001 5,961 5,604 ====================================================================================================================== 17. Pension schemes (a) Pension scheme deficits in consolidated balance sheet On the consolidated balance sheet, the amount described as Provisions includes the pension scheme deficits and comprises: 30 June 30 June 31 December 2007 2006 2006 Â£m Â£m Â£m Deficits in the staff pension schemes 131 784 1,029 Other obligations to staff pension schemes - Insurance policies issued by Group companies 1,117 1,057 1,086 ---------------------------------------------------------------------------------------------------------------------- Total IAS 19 obligations to staff pension schemes 1,248 1,841 2,115 Restructuring provisions 172 21 234 Other provisions 510 502 501 ---------------------------------------------------------------------------------------------------------------------- Total provisions 1,930 2,364 2,850 ====================================================================================================================== (b)Movements in the pension schemes' deficits comprise: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Deficits in the schemes at 1 January (973) (1,471) (1,471) Employer contributions 166 241 554 Charge to net operating expenses (see (c) below) (107) (70) (160) Credit to investment income 44 38 77 Actuarial gains 824 459 3 Acquisitions (9) - (1) Buy-outs and other transfers - 18 18 Exchange rate movements in foreign plans (3) 1 7 ----------------------------------------------------------------------------------------------------------------------- Deficits in the schemes at 30 June/31 December (58) (784) (973) ======================================================================================================================= The current year surplus in the Irish schemes of Â£73 million (full year 2006: Â£56 million) is included in Other assets whilst the deficits in the other schemes of Â£131 million (full year 2006: Â£1,029 million) are included in provisions. ----------------------------------------------------------------------------------------------------------------------- Page 74 17. Pension schemes (continued) (c) The pension expense for these schemes comprises: 6 months 6 months Full year 2007 2006 2006 Â£m Â£m Â£m Current service cost 87 97 196 Past service cost 3 2 3 Loss/(gain) on curtailments 17 (29) (39) ----------------------------------------------------------------------------------------------------------------------- Charge to net operating expenses 107 70 160 ----------------------------------------------------------------------------------------------------------------------- Expected return on scheme assets (300) (265) (530) Less: income accounted for elsewhere 24 - 40 ----------------------------------------------------------------------------------------------------------------------- (276) (265) (490) Interest charge on scheme liabilities 256 227 453 ----------------------------------------------------------------------------------------------------------------------- Credit to investment income (20) (38) (37) ----------------------------------------------------------------------------------------------------------------------- Total charge to income 87 32 123 ======================================================================================================================= Expected return on scheme assets 300 265 530 Actual return on these assets (319) (133) (800) ----------------------------------------------------------------------------------------------------------------------- Actuarial (gains)/losses on scheme assets (19) 132 (270) Less: (losses)/gains accounted for elsewhere (15) - 19 Experience (gains)/losses arising on scheme liabilities 8 22 (63) Changes in assumptions underlying the present value of the scheme liabilities (813) (613) 430 Loss on acquisitions 9 - 1 ----------------------------------------------------------------------------------------------------------------------- Actuarial (gains)/losses on the pension schemes (830) (459) 117 Less: Recoveries from unallocated divisible surplus and other movements 84 (14) (3) ----------------------------------------------------------------------------------------------------------------------- Actuarial (gains)/losses recognised in the statement of recognised income and expense (746) (473) 114 ======================================================================================================================= The cumulative amount of actuarial gains and losses on the pension schemes recognised in the statement of recognised income and expenses since 1 January 2004 (the date of transition to IFRS) is a gain of Â£21 million at 30 June 2007 (31 December 2006: loss of Â£809 million). End of part 3 of 4. ----------------------------------------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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