Setting new standards - Friends Life

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FINANCIAL STATEMENTS IFRS FINANCIAL STATEMENTS EEV SUPPLEMENTARY INFORMATION Notes to the EEV results continued 2. Segmental analysis continued (iii) Intra-group long-term debt is analysed as follows: Debt Interest payable 2006 2005 2006 2005 £m £m £m £m Due from F&C to FPLP - 205 12 12 Due from FPLP to Friends Provident plc 795 795 46 30 (e) Life & Pensions net assets segmental information by business segment 2006 2005 UK International Total UK International Total £m £m £m £m £m £m Life & Pensions net assets 1,147 50 1,197 1,028 22 1,050 Value of in-force Life & Pensions business 1,491 540 2,031 1,538 481 2,019 2,638 590 3,228 2,566 503 3,069 174 Friends Provident Annual Report & Accounts 2006
PARENT COMPANY ACCOUNTS ABBREVIATIONS AND DEFINITIONS Notes to the EEV results continued 3. Life & Pensions EEV profit (a) Contribution from new business The contribution from new business is calculated using economic assumptions at the beginning of the period. The contribution from new business using end-of-period economic assumptions was £196m (2005: £143m). Derived risk discount rates for new business have been based on end-of-period economic assumptions. The contribution from new business is quoted after cost of required capital and share incentives. The table below gives the contribution before cost of capital and share based payments. 2006 2005 £m £m Contribution from new business before cost of capital and share based payments 212 152 Cost of share based payments (2) (2) Cost of capital (6) (6) Contribution from new business 204 144 (b) Profit from existing business – Life & Pensions Profit from existing Life & Pensions business comprises the expected return on the value of in-force business at the start of the period plus the impact of any changes in the assumptions regarding future operating experience, changes in the reserving basis (other than economic assumption changes) and profits and losses caused by differences between the actual experience for the period and the assumptions used to calculate the embedded value at the end of the period. The expected return on the value of in-force business is the difference between the expected return on the assets backing the liabilities and the expected change in the market-consistent value of the liabilities. Effectively, this approach is similar to applying an unwind in the risk discount rate to the value of the in-force business at the beginning of the year. However, the risk discount rate to be used is a rate appropriate over the period of return only, which is not necessarily equal to the overall in-force risk discount rate averaged across all future durations above. (c) Development costs – Life & Pensions Development costs represent investments made to improve future EEV profits, for example by reducing expenses or increasing future new business volumes. In particular, the Life & Pensions costs represent investment in developing advanced electronic trading systems, e-commerce related activities, and new business service automation and improvement. (d) Expected return on shareholders’ net assets The expected return on shareholders’ net assets held within the Life & Pensions business comprises the return on the shareholders’ net assets held by the life assurance companies within that business, using the investment return assumptions used to calculate the embedded value at the beginning of the period. The expected return on corporate net assets is the expected investment return on assets held by Friends Provident plc and its non-life subsidiaries. It excludes the expected return on the net pension liability and the result of the F&C business, which are shown separately in the summary consolidated income statement. Friends Provident Annual Report & Accounts 2006 175
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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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