Setting new standards - Friends Life

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FINANCIAL STATEMENTS IFRS FINANCIAL STATEMENTS EEV SUPPLEMENTARY INFORMATION Summary consolidated income statement on an EEV basis For the year ended 31 December 2006 Life & Pensions 2006 2005 Notes £m £m Contribution from new business 2(b), 3(a) 204 144 Profit from existing business: Expected return 207 196 Experience variances 7 22 Operating assumption changes (9) 16 Development costs (26) (25) Expected return on shareholders’ net assets within the Life & Pensions business 51 81 Life & Pensions underlying profit 2(a) 434 434 Asset Management underlying profit 89 108 Expected return on net pension liability 9 (2) Expected return on corporate net assets (10) (7) Corporate costs (13) (12) Operating assumption changes for corporate costs - 3 Underlying profit before tax 509 524 Investment return variances (174) 550 Effect of economic assumption changes 181 (238) Non-recurring items 4 (17) (59) Amortisation of Asset Management acquired intangible assets (43) (56) Impairment of Asset Management acquired intangible assets (58) (112) Variation in value of option on convertible debt - (9) Profit before tax 398 600 Tax (101) (196) Profit after tax 297 404 Attributable to: Ordinary shareholders of the parent 308 441 Minority interest (11) (37) Profit after tax 297 404 2006 2005 Earnings per share Notes pence pence Basic earnings per share 5 14.6 21.2 Diluted basic earnings per share 5 14.2 21.0 Underlying earnings per share 5 16.4 16.3 EEV underlying profit is a measure of profit which excludes profit generated within policyholder funds that is not allocated to shareholders. Management consider that underlying profit better reflects the performance of the Group and focus on this measure of profit in its internal monitoring of the Group’s EEV results. EEV underlying profit is based on expected investment return and excludes: (i) amortisation and impairment of Asset Management acquired intangible assets (ii) effect of economic assumption changes (iii) non-recurring items; and is stated after deducting interest payable on STICS. 166 Friends Provident Annual Report & Accounts 2006
PARENT COMPANY ACCOUNTS ABBREVIATIONS AND DEFINITIONS Consolidated statement of recognised income and expense on an EEV basis For the year ended 31 December 2006 2006 2005 £m £m Actuarial losses on defined benefit plans net of tax (8) (28) Foreign exchange adjustments (2) (9) Net loss recognised directly in equity (10) (37) Profit after tax 297 404 Total recognised income and expense for the year 287 367 Attributable to: Ordinary shareholders of the parent 300 417 Minority interest (13) (50) Total recognised income and expense for the year 287 367 Consolidated movement in ordinary shareholders’ equity on an EEV basis For the year ended 31 December 2006 2006 2005 £m £m Total recognised income and expense for the year attributable to ordinary shareholders of the parent 300 417 Dividends on equity shares (164) (157) Share based payments (impact on EEV reserves) 12 14 Earn-out payments (87) - Conversion option on convertible bond - 51 Increase in EEV reserves for the year 61 325 Increase as a result of business combinations - 148 Share based payments (impact on share capital and share premium) 13 5 Net addition to ordinary shareholders’ equity 74 478 At 1 January 3,446 2,968 At 31 December 3,520 3,446 Friends Provident Annual Report & Accounts 2006 167
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Setting new standards Friends Provi
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ANNUAL REVIEW CORPORATE GOVERNANCE
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Group financial highlights Group
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INTERNATIONAL LIFE & PENSIONS ASSET
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DIRECTORS’ REPORT CORPORATE GOVER
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FINANCIAL STATEMENTS Independent Au
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PARENT COMPANY ACCOUNTS ABBREVIATIO
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