Setting new standards - Friends Life

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FINANCIAL STATEMENTS IFRS FINANCIAL STATEMENTS EEV SUPPLEMENTARY INFORMATION Consolidated income statement For the year ended 31 December 2006 Revenue 2006 2005 Notes £m £m Gross earned premiums 4 980 977 Premiums ceded to reinsurers 4 (84) (56) Net earned premiums 4 896 921 Fee and commission income and income from service activities 565 483 Investment income 5 3,697 6,287 Total revenue 5,158 7,691 Claims, benefits and expenses Gross claims and benefits paid 6 1,587 1,569 Amounts receivable from reinsurers 6 (43) (37) Net claims and benefits paid 1,544 1,532 Insurance contracts liabilities 27 (764) 514 Investment contracts liabilities 31 2,620 3,822 Transfer to fund for future appropriations 19 187 Movement in net assets attributable to unit holders 33 131 136 Movement in policyholder liabilities 2,006 4,659 Acquisition expenses 7 412 285 Administrative and other expenses 8 618 759 Finance costs 12 88 89 Total claims, benefits and expenses 4,668 7,324 Share of profit of associates and joint venture 20 1 - Profit before tax from continuing operations 491 367 Policyholder tax 13 (124) (218) Profit before shareholder tax from continuing operations 367 149 Total tax expense 13 (70) (178) Policyholder tax 13 124 218 Shareholder tax 13 54 40 Profit after tax from continuing operations 421 189 Profit after tax from discontinued operations 42 - 8 Profit for the year 421 197 Attributable to: Equity holders of the parent: (i) Ordinary shareholders 276 132 Other equity holders 52 37 328 169 Minority interest 93 28 Profit for the year 421 197 Earnings per share Basic earnings per share from continuing operations (pence) 15 13.1 6.3 Diluted basic earnings per share from continuing operations (pence) 15 12.8 6.3 (i) All profit attributable to equity holders of the parent is from continuing operations. 70 Friends Provident Annual Report & Accounts 2006
PARENT COMPANY ACCOUNTS ABBREVIATIONS AND DEFINITIONS Consolidated underlying profit For the year ended 31 December 2006 2006 2005 Notes £m £m Profit before tax from continuing operations* 491 367 Policyholder tax 13 (124) (218) Returns on Group-controlled funds attributable to third parties (104) (57) Profit before tax excluding profit generated within policyholder funds 263 92 Non-recurring items 3 17 59 Amortisation of Asset Management acquired intangible assets 16 43 56 Amortisation of acquired present value of in-force business 16 25 28 Amortisation of Life & Pensions acquired intangible assets 16 7 7 Impairment of Asset Management acquired intangible assets 16 58 112 Interest payable on Step-up Tier one Insurance Capital Securities (STICS) 39 (52) (37) Short-term fluctuations in investment return 5 39 (102) Variation in value of option on convertible debt 32 - 9 Underlying profit before tax* 400 224 Tax on underlying profit 6 (5) Minority interest in underlying profit (29) (36) Underlying profit after tax attributable to ordinary shareholders of the parent 377 183 Earnings per share Underlying earnings per share (pence) 15 17.9 8.8 IFRS 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 IFRS results. IFRS underlying profit is based on longer-term investment return and excludes: (i) policyholder tax, (ii) returns attributable to minority interests in policyholder funds, (iii) non-recurring items, (iv) amortisation and impairment of acquired intangible assets and present value of acquired in-force business; and is stated after deducting interest payable on STICS. * Included in profit before tax from continuing operations, and underlying profit before tax, are one-off items relating to basis changes and the partial adoption of FSA Policy Statement PS06/14 Prudential Changes for Insurers which have increased profit by £156m in 2006. Further details of these items are set out in note 2(h). Friends Provident Annual Report & Accounts 2006 71
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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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Friends Provident plc Pixham End Do
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