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MARKET CONSISTENT EMBEDDED VALUE BASIS SUPPLEMENTARY INFORMATION

 

For the year ended 31 December 2008

Statement of earnings on a Group Market Consistent Embedded Value basis
At
31 December
£m
2008
At
31 December
£m
2007
Europe
 Covered business
505
372
 Asset management
(13)
26
Banking
23
14
 
515
412
South Africa
 Covered business
463
359
 Asset management
102
98
 Banking
545
622
General insurance
76
89
 
1,186
1,168
United States
 Covered business
(644)
37
Asset management
97
162
 
(547)
199
Other
Asset management
(17)
2
 
(17)
2
Finance costs
(140)
(119)
Other shareholders' expenses
(19)
(31)
Adjusted operating Group MCEV earnings before tax*
978
1,631
Adjusting items**
(2,037)
21
Total Group MCEV earnings for the financial year before tax
(1,059)
1,652
Income tax attributable to shareholders
13
(423)
Total Group MCEV earnings after tax for the fi nancial year
(1,046)
1,229
 
Total Group MCEV earnings for the financial period attributable to:    
Equity holders of the parent
(1,284)
952
Minority interests
 Ordinary shares
184
227
Preferred securities
54
50
Total Group MCEV earnings after tax for the financial year
(1,046)
1,229

* For long-term business and general insurance businesses, adjusted operating MCEV earnings is based on short-term and long-term investment returns respectively, includes investment returns on life funds' investments in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defi ned as minority interests in accordance with IFRS. For all businesses, adjusted operating MCEV earnings excludes goodwill impairment, the impact of acquisition accounting, put revaluations related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profi t/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value (profi ts)/losses on certain Group debt movements.

**The breakdown of the adjusting items is detailed in note 5.

Total Group MCEV earnings per share
Year ended
31 December
£m
2008
Year ended
31 December
£m
2007
Basic total Group MCEV earnings per ordinary share
(25.7)
18.4
Weighted average number of shares - millions
4,995
5,176
 
Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holder
 
 
Adjusted operating Group MCEV earnings before tax
978
1,631
Tax on adjusted operating Group MCEV earnings
(135)
(414)
Adjusted operating Group MCEV earnings after tax
843
1,217
Minority interests
 Ordinary shares
(214)
(245)
Preferred securities
(54)
(50)
Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holders
575
922
 
 
 
Adjusted operating Group MCEV earnings per share* (pence)
11.0
17.0
Adjusted weighted average number of shares - millions
5,230
5,411

* Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings, but is stated after tax and minority interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Reconciliation of movements in Group Market Consistent Embedded Value (Group MCEV) (after tax)

Year ended 31 December
Covered
business
MCEV
£m
2008
Non-covered
business
IFRS
£m
2008
Total Group
MCEV
£m
2008
Covered
business
MCEV
£m
2007
Non-covered
business
IFRS
£m
2007
Total Group
MCEV
£m
2007
Opening Group MCEV*
6,349
1,010
7,359
6,145
594
6,739
Adjusted operating MCEV earnings
133
442
575
591
331
922
Non-operating MCEV earnings
(2,270)
411
(1,859)
(77)
107
30
Total Group MCEV earnings
(2,137)
853
(1,284)
514
438
952
Other movements in IFRS net equity
(29)
(784)
(813)
(310)
(22)
(332)
Closing Group MCEV
4,183
1,079
5,262
6,349
1,010
7,359

* The Opening Group MCEV for the year ended 31 December 2007 is gross minority interest of £29m in Skandia. During 2007 all minority interests were purchased.