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International Financial Reporting Standards (IFRS) basis results

Condensed consolidated income statement

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    2016 £m   2015 £m
  Note Half year   Half year Full year
Earned premiums, net of reinsurance   17,394   17,884 35,506
Investment return   17,062   6,110 3,304
Other income   1,085   1,285 2,495
Total revenue, net of reinsurance   35,541   25,279 41,305
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance   (30,939)   (18,618) (29,656)
Acquisition costs and other expenditure B3 (3,563)   (4,505) (8,208)
Finance costs: interest on core structural borrowings of shareholder-financed operations   (169)   (148) (312)
Disposal of Japan life business – cumulative exchange loss recycled from other comprehensive income     (46) (46)
Total charges, net of reinsurance   (34,671)   (23,317) (38,222)
Share of profits from joint ventures and associates, net of related tax   86   122 238
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns)*   956   2,084 3,321
Less tax charge attributable to policyholders’ returns   (292)   (202) (173)
Profit before tax attributable to shareholders B1.1 664   1,882 3,148
Total tax charge attributable to policyholders and shareholders B5 (269)   (646) (742)
Adjustment to remove tax charge attributable to policyholders’ returns   292   202 173
Tax credit (charge) attributable to shareholders’ returns B5 23   (444) (569)
Profit for the period attributable to equity holders of the Company   687   1,438 2,579

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    2016   2015
Earnings per share (in pence) Note Half year   Half year Full year

* This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders.
This is because the corporate taxes of the Group include those on the income of consolidated with-profits and unit-linked funds that, through adjustments to benefits, are borne by policyholders. These amounts are required to be included in the tax charge of the Company under IAS 12. Consequently, the profit before all taxes measure (which is determined after deducting the cost of policyholder benefits and movements in the liability for unallocated surplus of the PAC with-profits fund after adjusting for taxes borne by policyholders) is not representative of pre-tax profits attributable to shareholders.

Based on profit attributable to the equity holders of the Company: B6        
Basic   26.9p   56.3p 101.0p
Diluted   26.8p   56.2p 100.9p
           
Dividends per share (in pence)          
Dividends relating to reporting period: B7        
First interim dividend/interim dividend for prior year   12.93p   12.31p 12.31p
Second interim dividend     26.47p
Special dividend     10.00p
Total   12.93p   12.31p 48.78p
Dividends declared and paid in reporting period: B7        
Current year interim dividend     12.31p
Second interim dividend/final dividend for prior year   26.47p   25.74p 25.74p
Special dividend   10.00p  
Total   36.47p   25.74p 38.05p

Condensed consolidated statement of comprehensive income

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    2016 £m   2015 £m
  Note Half year   Half year Full year
Profit for the period   687   1,438 2,579
           
Other comprehensive income (loss):          
Items that may be reclassified subsequently to profit or loss          
Exchange movements on foreign operations and net investment hedges:          
Exchange movements arising during the period   798   (165) 68
Cumulative exchange loss of Japan life business recycled through profit or loss     46 46
Related tax   8   (1) 4
    806   (120) 118
           
Net unrealised valuation movements on securities of US insurance operations classified as available-for-sale:          
Net unrealised holding gains (losses) arising during the period   2,023   (661) (1,256)
Add back net losses (deduct net gains) included in the income statement on disposal and impairment   95   (101) (49)
Total C3.3(b) 2,118   (762) (1,305)
Related change in amortisation of deferred acquisition costs C5.1(b) (435)   165 337
Related tax   (589)   209 339
    1,094   (388) (629)
Total   1,900   (508) (511)
           
Items that will not be reclassified to profit or loss          
Shareholders’ share of actuarial gains and losses on defined benefit pension schemes:          
Gross   11   (21) 27
Related tax   (2)   4 (5)
    9   (17) 22
           
Other comprehensive income (loss) for the period, net of related tax   1,909   (525) (489)
           
Total comprehensive income for the period attributable to the equity holders of the Company   2,596   913 2,090

Condensed consolidated statement of changes in equity

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    Period ended 30 June 2016 £m
  Note Share capital note C9 Share premium note C9 Retained earnings Translation reserve Available-for-sale securities reserves Share-holders’ equity   Non-controlling interests   Total equity
Reserves                      
Profit for the period   687 687     687
Other comprehensive income   9 806 1,094 1,909     1,909
Total comprehensive income for the period   696 806 1,094 2,596     2,596
                       
Dividends B7 (935) (935)     (935)
Reserve movements in respect of share-based payments   (54) (54)     (54)
                       
Share capital and share premium                      
New share capital subscribed C9 6 6     6
                       
Treasury shares                      
Movement in own shares in respect of share-based payment plans   22 22     22
Movement in own shares purchased by funds consolidated under IFRS   15 15     15
Net increase (decrease) in equity   6 (256) 806 1,094 1,650     1,650
At beginning of period   128 1,915 10,436 149 327 12,955   1   12,956
At end of period   128 1,921 10,180 955 1,421 14,605   1   14,606

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    Period ended 30 June 2015 £m
  Note Share capital note C9 Share premium note C9 Retained earnings Translation reserve Available-for-sale securities reserves Share-holders’ equity   Non-controlling interests   Total equity
Reserves                      
Profit for the period   1,438 1,438     1,438
Other comprehensive loss   (17) (120) (388) (525)     (525)
Total comprehensive income (loss) for the period   1,421 (120) (388) 913     913
                       
Dividends B7 (659) (659)     (659)
Reserve movements in respect of share-based payments   66 66     66
                       
Share capital and share premium                      
New share capital subscribed C9 2 2     2
                       
Treasury shares                      
Movement in own shares in respect of share-based payment plans   (40) (40)     (40)
Movement in own shares purchased by funds consolidated under IFRS   11 11     11
Net increase (decrease) in equity   2 799 (120) (388) 293     293
At beginning of period   128 1,908 8,788 31 956 11,811   1   11,812
At end of period   128 1,910 9,587 (89) 568 12,104   1   12,105

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    Year ended 31 December 2015 £m
  Note Share capital note C9 Share premium note C9 Retained earnings Translation reserve Available-for-sale securities reserves Share-holders’ equity   Non-controlling interests   Total equity
Reserves                      
Profit for the year   2,579 2,579     2,579
Other comprehensive income (loss)   22 118 (629) (489)     (489)
Total comprehensive income (loss) for the year   2,601 118 (629) 2,090     2,090
                       
Dividends B7 (974) (974)     (974)
Reserve movements in respect of share-based payments   39 39     39
                       
Share capital and share premium                      
New share capital subscribed C9 7 7     7
                       
Treasury shares                      
Movement in own shares in respect of share-based payment plans   (38) (38)     (38)
Movement in own shares purchased by funds consolidated under IFRS   20 20     20
Net increase (decrease) in equity   7 1,648 118 (629) 1,144     1,144
At beginning of year   128 1,908 8,788 31 956 11,811   1   11,812
At end of year   128 1,915 10,436 149 327 12,955   1   12,956

Condensed consolidated statement of financial position

Assets

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    2016 £m   2015 £m
  Note 30 Jun   30 Jun 31 Dec

* Included within financial investments are £8,162 million of lent securities as at 30 June 2016 (30 June 2015: £3,599 million; 31 December 2015: £5,995 million).

Intangible assets attributable to shareholders:          
Goodwill C5.1(a) 1,488   1,461 1,463
Deferred acquisition costs and other intangible assets C5.1(b) 9,549   7,310 8,422
Total   11,037   8,771 9,885
           
Intangible assets attributable to with-profits funds:          
Goodwill in respect of acquired subsidiaries for venture fund and other investment purposes   189   184 185
Deferred acquisition costs and other intangible assets   45   49 50
Total   234   233 235
Total intangible assets   11,271   9,004 10,120
           
Other non-investment and non-cash assets:          
Property, plant and equipment C1.1 1,214   984 1,197
Reinsurers’ share of insurance contract liabilities   9,470   7,259 7,903
Deferred tax assets C7 3,771   2,820 2,819
Current tax recoverable   554   220 477
Accrued investment income   2,764   2,575 2,751
Other debtors   3,505   3,626 1,955
Total   21,278   17,484 17,102
           
Investments of long-term business and other operations:          
Investment properties   13,940   13,259 13,422
Investment in joint ventures and associates accounted for using the equity method   1,135   962 1,034
Financial investments*:          
Loans C3.4 14,215   12,578 12,958
Equity securities and portfolio holdings in unit trusts   176,037   155,253 157,453
Debt securities C3.3 168,367   142,307 147,671
Other investments   10,340   7,713 7,353
Deposits   14,181   11,043 12,088
Total   398,215   343,115 351,979
           
Assets held for sale   30   2
Cash and cash equivalents   8,530   8,298 7,782
Total assets C1,C3.1 439,324   377,901 386,985

Equity and liabilities

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    2016 £m   2015 £m
  Note 30 Jun   30 Jun 31 Dec
Equity          
Shareholders’ equity   14,605   12,104 12,955
Non-controlling interests   1   1 1
Total equity   14,606   12,105 12,956
           
Liabilities          
Policyholder liabilities and unallocated surplus of with-profits funds:          
Contract liabilities (including amounts in respect of contracts classified as investment contracts under IFRS 4)   362,510   313,620 322,518
Unallocated surplus of with-profits funds   13,597   12,768 13,096
Total C4.1(a) 376,107   326,388 335,614
           
Core structural borrowings of shareholder-financed operations:          
Subordinated debt   4,956   3,897 4,018
Other   1,010   983 993
Total C6.1 5,966   4,880 5,011
           
Other borrowings:          
Operational borrowings attributable to shareholder-financed operations C6.2(a) 2,798   2,504 1,960
Borrowings attributable to with-profits operations C6.2(b) 1,427   1,089 1,332
           
Other non-insurance liabilities:          
Obligations under funding, securities lending and sale and repurchase agreements   4,963   3,296 3,765
Net asset value attributable to unit holders of consolidated unit trusts and similar funds   8,770   10,007 7,873
Deferred tax liabilities C7 5,397   4,325 4,010
Current tax liabilities   566   393 325
Accruals and deferred income   912   750 952
Other creditors   6,520   5,515 4,876
Provisions   467   546 604
Derivative liabilities   5,342   1,758 3,119
Other liabilities   5,483   4,345 4,588
Total   38,420   30,935 30,112
Total liabilities C1,C3.1 424,718   365,796 374,029
Total equity and liabilities   439,324   377,901 386,985

Condensed consolidated statement of cash flows

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    2016 £m   2015 £m
  Note Half year   Half year Full year

Notes

  1. This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders.
  2. The adjusting items to profit before tax included within non-cash movements in operating assets and liabilities reflected in profit before tax are as follows:

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      2016 £m   2015 £m
      Half year   Half year Full year
    Other non-investment and non-cash assets (2,660)   (2,004) (1,063)
    Investments (21,280)   (8,431) (6,814)
    Policyholder liabilities (including unallocated surplus) 19,548   6,795 6,067
    Other liabilities (including operational borrowings) 3,836   4,344 1,761
    Non-cash movements in operating assets and liabilities reflected in profit before tax (556)   704 (49)
  3. The adjusting items to profit before tax included within other items are adjustments in respect of non-cash items together with operational interest receipts and payments, dividend receipts and tax paid.
  4. Net cash flows for corporate transactions are for distribution rights and the acquisition and disposal of businesses.
  5. Structural borrowings of shareholder-financed operations exclude borrowings to support short-term fixed income securities programmes, non-recourse borrowings of investment subsidiaries of shareholder-financed operations and other borrowings of shareholder-financed operations. Cash flows in respect of these borrowings are included within cash flows from operating activities.
  6. Interest paid on structural borrowings of with-profits operations relate solely to the £100 million 8.5 per cent undated subordinated guaranteed bonds, which contribute to the solvency base of the Scottish Amicable Insurance Fund (SAIF), a ring-fenced sub-fund of the PAC with-profits fund. Cash flows in respect of other borrowings of with-profits funds, which principally relate to consolidated investment funds, are included within cash flows from operating activities.
Cash flows from operating activities          
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns)note (i)   956   2,084 3,321
Non-cash movements in operating assets and liabilities reflected in profit before taxnote (ii)   (556)   704 (49)
Other itemsnote (iii)   403   (389) (739)
Net cash flows from operating activities   803   2,399 2,533
Cash flows from investing activities          
Net cash outflows from purchases and disposals of property, plant and equipment   (32)   (90) (226)
Net cash (outflows) inflows from corporate transactionsnote (iv)   (302)   34 (243)
Net cash flows from investing activities   (334)   (56) (469)
Cash flows from financing activities          
Structural borrowings of the Group:          
Shareholder-financed operations:note (v) C6.1        
Issue of subordinated debt, net of costs   681   590 590
Interest paid   (160)   (144) (288)
With-profits operations:note (vi) C6.2        
Interest paid   (4)   (4) (9)
Equity capital:          
Issues of ordinary share capital   6   2 7
Dividends paid   (935)   (659) (974)
Net cash flows from financing activities   (412)   (215) (674)
Net increase in cash and cash equivalents   57   2,128 1,390
Cash and cash equivalents at beginning of period   7,782   6,409 6,409
Effect of exchange rate changes on cash and cash equivalents   691   (239) (17)
Cash and cash equivalents at end of period   8,530   8,298 7,782

Section 3

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Notes on the IFRS basis results

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