REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2014 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 11
18/03/2015 07:01
- Part 11: For the preceding part double click ID:nRSR7166Hj
£m
Net premiums written from:
External customers (811) - - - - (811)
Fees from:
External customers 94 26 - - (26) 94
Other segment - 38 - (38) - -
94 64 - (38) (26) 94
Net investment income:
Recurring 6,027 - 5 - - 6,032
Non-recurring - (6) 2 - 6 2
6,027 (6) 7 - 6 6,034
Other operating income:
Recurring 9 - - - - 9
Gain on transfer of business:
Non-recurring (18) - 129 - (107) 4
Net income 5,301 58 136 (38) (127) 5,330
Net policyholder claims and benefits incurred:
Recurring (3,733) - - - - (3,733)
Impairment and amortisation:
Amortisation of acquired in-force business (98) - - - - (98)
Amortisation of customer relationships and other intangibles (15) - - - - (15)
(113) - - - - (113)
Other operating expenses:
Recurring (888) (47) (32) 38 47 (882)
Non-recurring (38) - 57 - - 19
(926) (47) 25 38 47 (863)
Total operating expense (4,772) (47) 25 38 47 (4,709)
Profit/(loss) before finance costs and tax 529 11 161 - (80) 621
Finance costs (91) - (65) - - (156)
Profit/(loss) before tax 438 11 96 - (80) 465
Tax attributable to policyholders' returns (129) - - - - (129)
Segmental result before the tax attributable to owners 309 11 96 - (80) 336
2013 Restated
Phoenix Life Ignis Unallocated Eliminations Discontinued Total
£m £m Group £m operations £m
£m eliminations
£m
Net premiums written from:
External customers 1,344 - - - - 1,344
Fees from:
External customers 93 48 - - (48) 93
Other segment - 102 - (102) - -
93 150 - (102) (48) 93
Net investment income:
Recurring 2,787 - (1) - - 2,786
Non-recurring - 7 - - (7) -
2,787 7 (1) - (7) 2,786
Other operating income:
Recurring 7 - - - - 7
Gain on transfer of business:
Non-recurring 42 - - - - 42
Net income 4,273 157 (1) (102) (55) 4,272
Net policyholder claims and benefits incurred:
Recurring (1,742) - - - - (1,742)
Depreciation, impairment and amortisation:
Depreciation of property, plant and equipment - (3) - - 3 -
Amortisation of acquired in-force business (111) - - - - (111)
Amortisation of customer relationships and other intangibles (16) (3) - - 3 (16)
(127) (6) - - 6 (127)
Other operating expenses:
Recurring (2,010) (98) 13 102 98 (1,895)
Non-recurring (11) (2) (26) - 2 (37)
(2,021) (100) (13) 102 100 (1,932)
Total operating expense (3,890) (106) (13) 102 106 (3,801)
Profit/(loss) before finance costs and tax 383 51 (14) - 51 471
Finance costs
Recurring (95) - (114) - - (209)
Non-recurring - - (21) - - (21)
(95) - (135) - - (230)
Profit/(loss) before tax 288 51 (149) - 51 241
Tax attributable to policyholders' returns 27 - - - - 27
Segmental result before the tax attributable to owners 315 51 (149) - 51 268
5.2 RECONCILIATION OF OPERATING PROFIT BEFORE ADJUSTING ITEMS TO THE SEGMENTAL RESULT
2014
Phoenix Life Ignis Unallocated Group Total
£m £m £m £m
Operating profit/(loss) before adjusting items 487 17 (21) 483
Investment return variances and economic assumption changes 12 - - 12
on long-term business
Variance on owners' funds (8) - (6) (14)
Amortisation of acquired in-force business (88) - - (88)
Amortisation of customer relationships (15) - - (15)
Non-recurring items (56) (6) 188 126
Financing costs attributable to owners (23) - (65) (88)
Segmental result before the tax attributable to owners 309 11 96 416
Adjust for:
Profit before the tax attributable to owners from discontinued operations (80)
(see note 4.1.1)
Profit before tax attributable to owners from continuing operations 336
Non-recurring items include:
- income received in relation to the close-out of the PGL Pension Scheme longevity agreement with the with-profit funds of
£68 million (see note 30.2);
- the profit arising as a result of the divestment of Ignis of £107 million (see note 4.1);
- costs associated with external regulatory changes, including the cap on workplace pension charges of £17 million;
- corporate project costs of £15 million; and
- net other one-off items (including Solvency II implementation and systems transformation costs) totalling a cost of £17
million.
2013
Phoenix Life Ignis Unallocated Group Total
£m £m £m £m
Operating profit/(loss) before adjusting items 414 49 (24) 439
Investment return variances and economic assumption changes 64 - - 64
on long-term business
Variance on owners' funds (67) - 36 (31)
Amortisation of acquired in-force business (99) - - (99)
Amortisation of customer relationships (16) (3) - (19)
Non-recurring items 31 5 (47) (11)
Financing costs attributable to owners (12) - (114) (126)
Segmental result before the tax attributable to owners 315 51 (149) 217
Adjust for:
Loss before the tax attributable to owners from discontinued operations 51
(see note 4.1.1)
Profit before tax attributable to owners from discontinued operations 268
Non-recurring items include:
- arrangement and structuring fees of £21 million associated with the extinguishment and re-terming of the Impala loan
facility;
- gain on transfer of business of £42 million (see note 4.3);
- regulatory change and systems transformation costs of £25 million;
- net settlement cost of pension liability management initiatives of £9 million (see note 30); and
- net other items of positive £2 million includes a gain on the reinsurance agreement with Guardian offset by corporate
project costs.
6. INVESTMENT RETURN VARIANCES AND ECONOMIC ASSUMPTION CHANGES
The long-term nature of much of the Group's operations means that, for internal performance management, the effects of
short-term economic volatility are treated as non-operating items. The Group focuses instead on an operating profit measure
that incorporates an expected return on investments supporting its long-term business. The accounting policy adopted in the
calculation of operating profit is detailed in note 1(v) and the methodology is explained below.
6.1 LIFE ASSURANCE BUSINESS
Operating profit for life assurance business is based on expected investment returns on financial investments backing
owners' and policyholder funds over the reporting period, with consistent allowance for the corresponding expected
movements in liabilities. Operating profit includes the effect of variance in experience for non-economic items, for
example mortality, persistency and expenses, and the effect of changes in non-economic assumptions. Changes due to economic
items, for example market value movements and interest rate changes, which give rise to variances between actual and
expected investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed separately
outside operating profit.
The movement in liabilities included in operating profit reflects both the change in liabilities due to the expected return
on investments and the impact of experience variances and assumption changes for non-economic items.
The effect of differences between actual and expected economic experience on liabilities, and changes to economic
assumptions used to value liabilities, are taken outside operating profit. For many types of long-term business, including
unit-linked and with-profit funds, movements in asset values are offset by corresponding changes in liabilities, limiting
the net impact on profit. For other long-term business the profit impact of economic volatility depends on the degree of
matching of assets and liabilities, and exposure to financial options and guarantees.
The investment variances and economic assumption changes excluded from the long-term business operating profit are as
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