Annual FSA Insurance Returns for the year ended 31 December 2010 IPRU(INS) Appendices 9.1, 9.3, 9.4, 9.6
Balance Sheet and Profit and Loss Account Contents Form 2 Statement of solvency - long-term insurance business 1 Form 3 Components of capital resources 3 Form 13 Analysis of admissible assets 6 Form 14 Long term insurance business liabilities and margins 12 Form 15 Liabilities (other than long term insurance business) 13 Form 16 Profit and loss account (non-technical account) 14 Long Term Insurance Business: Revenue Account and Additional Information Form 40 Revenue account 15 Form 41 Analysis of premiums 16 Form 42 Analysis of claims 17 Form 43 Analysis of expenses 18 Form 44 Linked funds balance sheet 19 Form 45 Revenue account for internal linked funds 20 Form 46 Summary of new business 21 Form 47 Analysis of new business 22 Form 48 Assets not held to match linked liabilities 23 Form 50 Summary of mathematical reserves 24 Form 51 Valuation summary of non-linked contracts (other than 25 accumulating with-profits contracts) Form 53 Valuation summary of property linked contracts 27 Form 54 Valuation summary of index linked contracts 28 Form 55 Unit prices for internal linked funds 30 Form 58 Distribution of surplus 31 Form 60 Long-term insurance capital requirement 32 Supplementary notes to the return 33 Additional information on derivative contracts 40 Additional information on controllers 41 Abstract of the Valuation Report 42 Directors' Certificate 50 Auditor's Report 52
Form 2 Statement of solvency - long-term insurance business Global business Solo solvency calculation Company GL/ registration UK/ day month year Units number CM R2 45361 GL 31 12 2010 000 As at end of this financial year As at end of the previous year 1 2 Capital resources Capital resources arising within the long-term insurance fund 11 58 68 Capital resources allocated towards long-term insurance business arising outside the long-term insurance fund Capital resources available to cover long-term insurance business capital resources requirement (11+12) 12 4614 4592 13 4672 4660 Guarantee fund Guarantee fund requirement 21 3040 3128 Excess (deficiency) of available capital resources to cover guarantee fund requirement 22 1632 1532 Minimum capital requirement (MCR) Long-term insurance capital requirement 31 853 1090 Resilience capital requirement 32 9 Base capital resources requirement 33 3040 3128 Individual minimum capital requirement 34 3040 3128 Capital requirements of regulated related undertakings 35 Minimum capital requirement (34+35) 36 3040 3128 Excess (deficiency) of available capital resources to cover 50% of MCR 37 3152 3096 Excess (deficiency) of available capital resources to cover 75% of MCR 38 2392 2314 Enhanced capital requirement With-profits insurance capital component 39 Enhanced capital requirement 40 862 1090 Capital resources requirement (CRR) Capital resources requirement (greater of 36 and 40) 41 3040 3128 Excess (deficiency) of available capital resources to cover long-term insurance business CRR (13-41) 42 1632 1532 Contingent liabilities Quantifiable contingent liabilities in respect of long-term insurance business as shown in a supplementary note to Form 14 51 1
Form 2 Covering Sheet to Form 2 Global business K Luscombe Chairman D Buckley Director A J November Director Date 2
Components of capital resources Form 3 (Sheet 1) Global business Company GL/ registration UK/ day month year Units number CM R3 45361 GL 31 12 2010 000 Core tier one capital General Long-term Total as at Total as at insurance insurance the end of the end of business business this financial the previous year year 1 2 3 4 Permanent share capital 11 Profit and loss account and other reserves 12 4672 4672 4660 Share premium account 13 Positive valuation differences 14 Fund for future appropriations Core tier one capital in related undertakings 15 16 Core tier one capital (sum of 11 to 16) 19 4672 4672 4660 Tier one waivers Unpaid share capital / unpaid initial funds and calls for supplementary contributions 21 Implicit Items 22 Tier one waivers in related undertakings 23 Total tier one waivers as restricted (21+22+23) 24 Other tier one capital Perpetual non-cumulative preference shares as restricted Perpetual non-cumulative preference shares in related undertakings Innovative tier one capital as restricted Innovative tier one capital in related undertakings 25 26 27 28 Total tier one capital before deductions (19+24+25+26+27+28) Investments in own shares Intangible assets Amounts deducted from technical provisions for discounting Other negative valuation differences Deductions in related undertakings Deductions from tier one (32 to 36) Total tier one capital after deductions (31-37) 31 4672 4672 4660 32 33 34 35 36 37 39 4672 4672 4660 3
Components of capital resources Form 3 (Sheet 2) Global business Tier two capital Company GL/ registration UK/ day month year Units number CM R3 45361 GL 31 12 2010 000 General Long-term Total as at Total as at insurance insurance the end of the end of business business this financial the previous year year 1 2 3 4 Implicit items, (tier two waivers and amounts excluded from line 22) Perpetual non-cumulative preference shares excluded from line 25 Innovative tier one capital excluded from line 27 Tier two waivers, innovative tier one capital and perpetual noncumulative preference shares treated as tier two capital (41 to 43) Perpetual cumulative preference shares Perpetual subordinated debt and securities 41 42 43 44 45 46 Upper tier two capital in related undertakings 47 Upper tier two capital (44 to 47) 49 Fixed term preference shares 51 Other tier two instruments 52 Lower tier two capital in related undertakings 53 Lower tier two capital (51+52+53) 59 Total tier two capital before restrictions (49+59) 61 Excess tier two capital 62 Further excess lower tier two capital Total tier two capital after restrictions, before deductions (61-62-63) 63 69 4
Components of capital resources Form 3 (Sheet 3) Global business Total capital resources Company GL/ registration UK/ day month year Units number CM R3 45361 GL 31 12 2010 000 General Long-term Total as at Total as at insurance insurance the end of the end of business business this financial the previous year year 1 2 3 4 Positive adjustments for regulated non-insurance related undertakings Total capital resources before deductions (39+69+71) Inadmissible assets other than intangibles and own shares Assets in excess of market risk and counterparty limits Deductions for related ancillary services undertakings Deductions for regulated non-insurance related undertakings Deductions of ineligible surplus capital Total capital resources after deductions (72-73-74-75-76-77) 71 72 4672 4672 4660 73 74 75 76 77 79 4672 4672 4660 Available capital resources for GENPRU/INSPRU tests Available capital resources for guarantee fund requirement Available capital resources for 50% MCR requirement Available capital resources for 75% MCR requirement 81 4672 4672 4660 82 4672 4672 4660 83 4672 4672 4660 Financial engineering adjustments Implicit items Financial reinsurance - ceded Financial reinsurance - accepted Outstanding contingent loans Any other charges on future profits Sum of financial engineering adjustments (91+92-93+94+95) 91 92 93 94 95 96 5
Analysis of admissible assets Form 13 (Sheet 1) Global business Category of assets Total other than long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 1 As at end of this financial year As at end of the previous year 1 2 Land and buildings 11 Investments in group undertakings and participating interests UK insurance dependants Other insurance dependants Non-insurance dependants Other group undertakings Participating interests Shares Shares Shares Shares Shares 21 23 25 27 29 Debts and loans Debts and loans Debts and loans Debts and loans Debts and loans 22 24 26 28 30 Other financial investments Equity shares 41 Other shares and other variable yield participations 42 Holdings in collective investment schemes 43 4629 4601 Rights under derivative contracts 44 Fixed interest securities Variable interest securities Approved Approved 45 47 Other Other 46 48 Participation in investment pools 49 Loans secured by mortgages 50 Loans to public or local authorities and nationalised industries or undertakings 51 Loans secured by policies of insurance issued by the company 52 Other loans 53 Bank and approved credit & financial institution deposits One month or less withdrawal More than one month withdrawal 54 55 Other financial investments 56 Deposits with ceding undertakings 57 Assets held to match linked liabilities Index linked 58 Property linked 59 6
Analysis of admissible assets Form 13 (Sheet 2) Global business Category of assets Total other than long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 1 As at end of this financial year As at end of the previous year Reinsurers' share of technical provisions 1 2 Provision for unearned premiums Claims outstanding Provision for unexpired risks Other 60 61 62 63 Debtors and salvage Direct insurance business Salvage and subrogation recoveries Reinsurance Dependants Other Other assets Tangible assets Policyholders Intermediaries Accepted Ceded due in 12 months or less due in more than 12 months due in 12 months or less due in more than 12 months 71 72 73 74 75 76 77 78 79 80 Deposits not subject to time restriction on withdrawal with approved institutions Cash in hand Other assets (particulars to be specified by way of supplementary note) Accrued interest and rent Deferred acquisition costs (general business only) Other prepayments and accrued income 81 82 83 84 85 86 3 2 Deductions from the aggregate value of assets 87 Grand total of admissible assets after deduction of admissible assets in excess of market risk and counterparty limits (11 to 86 less 87) 89 4632 4603 7
Analysis of admissible assets Form 13 (Sheet 3) Global business Category of assets Total other than long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 1 As at end of this financial year As at end of the previous year 1 2 Reconciliation to asset values determined in accordance with the insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting Total admissible assets after deduction of admissible assets in excess of market risk and counterparty limits (as per line 89 above) Admissible assets in excess of market and counterparty limits Inadmissible assets directly held Capital resources requirement deduction of regulated related undertakings Ineligible surplus capital and restricted assets in regulated related insurance undertakings Inadmissible assets of regulated related undertakings Book value of related ancillary services undertakings Other differences in the valuation of assets (other than for assets not valued above) Deferred acquisition costs excluded from line 89 Reinsurers' share of technical provisions excluded from line 89 Other asset adjustments (may be negative) Total assets determined in accordance with the insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting (91 to 101) 91 4632 4603 92 93 94 95 96 97 98 99 100 101 102 4632 4603 Amounts included in line 89 attributable to debts due from related insurers, other than those under contracts of insurance or reinsurance 103 8
Analysis of admissible assets Form 13 (Sheet 1) Global business Category of assets Total long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 10 As at end of this financial year As at end of the previous year 1 2 Land and buildings 11 Investments in group undertakings and participating interests UK insurance dependants Other insurance dependants Non-insurance dependants Other group undertakings Participating interests Shares Shares Shares Shares Shares 21 23 25 27 29 Debts and loans Debts and loans Debts and loans Debts and loans Debts and loans 22 24 26 28 30 Other financial investments Equity shares 41 Other shares and other variable yield participations 42 Holdings in collective investment schemes 43 100 100 Rights under derivative contracts 44 Fixed interest securities Variable interest securities Approved Approved 45 47 Other Other 46 48 Participation in investment pools 49 Loans secured by mortgages 50 Loans to public or local authorities and nationalised industries or undertakings 51 Loans secured by policies of insurance issued by the company 52 Other loans 53 Bank and approved credit & financial institution deposits One month or less withdrawal More than one month withdrawal 54 55 Other financial investments 56 Deposits with ceding undertakings 57 Assets held to match linked liabilities Index linked 58 Property linked 59 2286002 2185541 9
Analysis of admissible assets Form 13 (Sheet 2) Global business Category of assets Total long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 10 As at end of this financial year As at end of the previous year Reinsurers' share of technical provisions 1 2 Provision for unearned premiums Claims outstanding Provision for unexpired risks Other 60 61 62 63 Debtors and salvage Direct insurance business Salvage and subrogation recoveries Reinsurance Dependants Other Other assets Tangible assets Policyholders Intermediaries Accepted Ceded due in 12 months or less due in more than 12 months due in 12 months or less due in more than 12 months 71 72 73 74 75 76 77 78 16 11 79 80 Deposits not subject to time restriction on withdrawal with approved institutions Cash in hand Other assets (particulars to be specified by way of supplementary note) Accrued interest and rent Deferred acquisition costs (general business only) Other prepayments and accrued income 81 82 83 84 85 86 Deductions from the aggregate value of assets 87 Grand total of admissible assets after deduction of admissible assets in excess of market risk and counterparty limits (11 to 86 less 87) 89 2286118 2185652 10
Analysis of admissible assets Form 13 (Sheet 3) Global business Category of assets Total long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R13 45361 GL 31 12 2010 000 10 As at end of this financial year As at end of the previous year 1 2 Reconciliation to asset values determined in accordance with the insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting Total admissible assets after deduction of admissible assets in excess of market risk and counterparty limits (as per line 89 above) Admissible assets in excess of market and counterparty limits Inadmissible assets directly held Capital resources requirement deduction of regulated related undertakings Ineligible surplus capital and restricted assets in regulated related insurance undertakings Inadmissible assets of regulated related undertakings Book value of related ancillary services undertakings Other differences in the valuation of assets (other than for assets not valued above) Deferred acquisition costs excluded from line 89 Reinsurers' share of technical provisions excluded from line 89 Other asset adjustments (may be negative) Total assets determined in accordance with the insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting (91 to 101) 91 2286118 2185652 92 93 94 95 96 97 98 99 100 5304 8565 101 27763 4985 102 2319185 2199202 Amounts included in line 89 attributable to debts due from related insurers, other than those under contracts of insurance or reinsurance 103 11
Long term insurance business liabilities and margins Form 14 Global business Total business/sub fund long term insurance business Units 000 As at end of As at end of this financial the previous year year 1 2 Mathematical reserves, after distribution of surplus 11 2286010 2185535 Cash bonuses which had not been paid to policyholders prior to end of the financial year 12 Balance of surplus/(valuation deficit) 13 58 68 Long term insurance business fund carried forward (11 to 13) 14 2286068 2185603 Gross 15 Claims outstanding Reinsurers' share 16 Net (15-16) 17 Provisions Taxation 21 Other risks and charges 22 Deposits received from reinsurers 23 Direct insurance business 31 Creditors Reinsurance accepted 32 Reinsurance ceded 33 Debenture loans Secured 34 Unsecured 35 50 50 Amounts owed to credit institutions Creditors 36 Taxation 37 Other 38 Accruals and deferred income 39 Provision for "reasonably foreseeable adverse variations" 41 Total other insurance and non-insurance liabilities (17 to 41) 49 50 50 Excess of the value of net admissible assets 51 Total liabilities and margins 59 2286118 2185653 Amounts included in line 59 attributable to liabilities to related companies, other than those under contracts of insurance or reinsurance 61 50 50 Amounts included in line 59 attributable to liabilities in respect of property linked benefits 62 2285952 2185491 Total liabilities (11+12+49) 71 2286060 2185585 Increase to liabilities - DAC related 72 Reinsurers' share of technical provisions 73 5304 8565 Other adjustments to liabilities (may be negative) 74 27763 4985 Capital and reserves and fund for future appropriations 75 58 68 Total liabilities under insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting (71 to 75) 76 2319185 2199203 12
Form 15 Liabilities (other than long term insurance business) Global business Company GL/ registration UK/ day month year Units number CM R15 45361 GL 31 12 2010 000 Technical provisions (gross amount) As at end of As at end of this financial the previous year year 1 2 Provisions for unearned premiums 11 Claims outstanding 12 Provision for unexpired risks Equalisation provisions 13 Credit business 14 Other than credit business 15 Other technical provisions 16 Total gross technical provisions (11 to 16) 19 Provisions and creditors Provisions Taxation 21 Other risks and charges 22 Deposits received from reinsurers 31 Direct insurance business 41 Creditors Reinsurance accepted 42 Reinsurance ceded 43 Debenture Secured 44 loans Unsecured 45 Amounts owed to credit institutions 46 Taxation 47 18 11 Creditors Foreseeable dividend 48 Other 49 Accruals and deferred income 51 Total (19 to 51) 59 18 11 Provision for "reasonably foreseeable adverse variations" 61 Cumulative preference share capital 62 Subordinated loan capital 63 Total (59 to 63) 69 18 11 Amounts included in line 69 attributable to liabilities to related insurers, other than those under contracts of insurance or reinsurance 71 Amounts deducted from technical provisions for discounting 82 Other adjustments (may be negative) 83 Capital and reserves 84 4614 4592 Total liabilities under insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting (69-82+83+84) 85 4632 4603 13
Form 16 Profit and loss account (non-technical account) Global business Company GL/ registration UK/ day month year Units number CM R16 45361 GL 31 12 2010 000 This financial year Previous year 1 2 Transfer (to)/from the general insurance business technical account From Form 20 11 Equalisation provisions 12 Transfer from the long term insurance business revenue account Income 13 (100) 14 28 44 Investment income Value re-adjustments on investments Gains on the realisation of investments Investment management charges, including interest 15 16 17 Investment charges Value re-adjustments on investments Loss on the realisation of investments 18 19 Allocated investment return transferred to the general insurance business technical account Other income and charges (particulars to be specified by way of supplementary note) Profit or loss on ordinary activities before tax (11+12+13+14+15+16-17-18-19-20+21) 20 21 29 28 (56) Tax on profit or loss on ordinary activities 31 6 11 Profit or loss on ordinary activities after tax (29-31) 39 22 (67) Extraordinary profit or loss (particulars to be specified by way of supplementary note) 41 Tax on extraordinary profit or loss 42 Other taxes not shown under the preceding items 43 Profit or loss for the financial year (39+41-(42+43)) 49 22 (67) Dividends (paid or foreseeable) 51 Profit or loss retained for the financial year (49-51) 59 22 (67) 14
Form 40 Long-term insurance business : Revenue account Total business / subfund long term insurance business Units 000 Financial year Previous year 1 2 Income Earned premiums 11 154126 146237 Investment income receivable before deduction of tax Increase (decrease) in the value of non-linked assets brought into account Increase (decrease) in the value of linked assets 12 68798 70566 13 14 178485 206988 Other income 15 Total income 19 401409 423791 Expenditure Claims incurred 21 291397 253879 Expenses payable Interest payable before the deduction of tax Taxation 22 8498 8625 23 8 12 24 1040 1201 Other expenditure 25 Transfer to (from) non technical account 26 (100) Total expenditure 29 300943 263617 Business transfers - in 31 Business transfers - out 32 Increase (decrease) in fund in financial year (19-29+31-32) 39 100466 160174 Fund brought forward 49 2185602 2025428 Fund carried forward (39+49) 59 2286068 2185602 15
Form 41 Long-term insurance business : Analysis of premiums Total business / subfund long term insurance business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year 1 2 3 4 5 Gross Regular premiums 11 135001 135001 128434 Single premiums 12 19125 19125 17803 Reinsurance - external Regular premiums 13 Single premiums 14 Reinsurance - intra-group Regular premiums 15 Single premiums 16 Net of reinsurance Regular premiums 17 135001 135001 128434 Single premiums 18 19125 19125 17803 Total Gross 19 154126 154126 146237 Reinsurance 20 Net 21 154126 154126 146237 16
Form 42 Long-term insurance business : Analysis of claims Total business / subfund long term insurance business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year 1 2 3 4 5 Gross Death or disability lump sums 11 Disability periodic payments 12 Surrender or partial surrender 13 207004 207004 167949 Annuity payments 14 85154 85154 86829 Lump sums on maturity 15 Total 16 292158 292158 254778 Reinsurance - external Death or disability lump sums 21 Disability periodic payments 22 Surrender or partial surrender 23 Annuity payments 24 Lump sums on maturity 25 Total 26 Reinsurance - intra-group Death or disability lump sums 31 Disability periodic payments 32 Surrender or partial surrender 33 Annuity payments 34 761 761 899 Lump sums on maturity 35 Total 36 761 761 899 Net of reinsurance Death or disability lump sums 41 Disability periodic payments 42 Surrender or partial surrender 43 207004 207004 167949 Annuity payments 44 84393 84393 85930 Lump sums on maturity 45 Total 46 291397 291397 253879 17
Form 43 Long-term insurance business : Analysis of expenses Total business / subfund long term insurance business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year 1 2 3 4 5 Gross Commission - acquisition 11 Commission - other 12 Management - acquisition 13 Management - maintenance 14 8498 8498 8625 Management - other 15 Total 16 8498 8498 8625 Reinsurance - external Commission - acquisition 21 Commission - other 22 Management - acquisition 23 Management - maintenance 24 Management - other 25 Total 26 Reinsurance - intra-group Commission - acquisition 31 Commission - other 32 Management - acquisition 33 Management - maintenance 34 Management - other 35 Total 36 Net of reinsurance Commission - acquisition 41 Commission - other 42 Management - acquisition 43 Management - maintenance 44 8498 8498 8625 Management - other 45 Total 46 8498 8498 8625 18
Form 44 Long-term insurance business : Linked funds balance sheet Total business Units 000 Financial year Previous year 1 2 Internal linked funds (excluding cross investment) Directly held assets (excluding collective investment schemes) Directly held assets in collective investment schemes of connected companies Directly held assets in other collective investment schemes Total assets (excluding cross investment) (11+12+ 13) 11 1931386 1873633 12 377186 316911 13 5254 14 2313826 2190544 Provision for tax on unrealised capital gains 15 Secured and unsecured loans 16 50 50 Other liabilities 17 27825 5004 Total net assets (14-15-16-17) 18 2285951 2185490 Directly held linked assets Value of directly held linked assets 21 Total Value of directly held linked assets and units held (18+21) 31 2285951 2185490 Surplus units 32 Deficit units 33 Net unit liability (31-32+33) 34 2285951 2185490 19
Form 45 Long-term insurance business : Revenue account for internal linked funds Total business Units 000 Financial year Previous year 1 2 Income Value of total creation of units Investment income attributable to the funds before deduction of tax Increase (decrease) in the value of investments in the financial year Other income 11 282345 223206 12 68798 70566 13 178485 206988 14 Total income 19 529628 500760 Expenditure Value of total cancellation of units Charges for management Charges in respect of tax on investment income Taxation on realised capital gains Increase (decrease) in amount set aside for tax on capital gains not yet realised Other expenditure 21 422295 333725 22 5058 5071 23 1043 1213 24 25 26 770 689 Total expenditure 29 429166 340698 Increase (decrease) in funds in financial year (19-29) Internal linked fund brought forward Internal linked funds carried forward (39+49) 39 100462 160062 49 2185490 2025428 59 2285952 2185490 20
Form 46 Long-term insurance business : Summary of new business Total business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year 1 2 3 4 5 Number of new policyholders/ scheme members for direct insurance business Regular premium business 11 Single premium business 12 Total 13 Amount of new regular premiums Direct insurance business 21 5339 5339 1628 External reinsurance 22 Intra-group reinsurance 23 Total 24 5339 5339 1628 Amount of new single premiums Direct insurance business 25 7002 7002 1292 External reinsurance 26 Intra-group reinsurance 27 Total 28 7002 7002 1292 21
Form 47 Long-term insurance business : Analysis of new business Total business Units 000 UK Pension / Direct Insurance Business Product code number Product description Regular premium business Number of policyholders / Amount of premiums scheme members Single premium business Number of policyholders / scheme members Amount of premiums 1 2 3 4 5 6 765 Group managed fund 5339 7002 22
Form 48 Long-term insurance business : Assets not held to match linked liabilities Category of assets 10 Total long term insurance business assets Units 000 Unadjusted assets Economic exposure Expected income from assets in column 2 Yield before adjustment Return on assets in financial year 1 2 3 4 5 Assets backing non-profit liabilities and non-profit capital requirements Land and buildings 11 Approved fixed interest securities 12 Other fixed interest securities 13 Variable interest securities 14 UK listed equity shares 15 Non-UK listed equity shares 16 Unlisted equity shares 17 Other assets 18 116 116 1 0.59 Total 19 116 116 1 0.59 Assets backing with-profits liabilities and with-profits capital requirements Land and buildings 21 Approved fixed interest securities 22 Other fixed interest securities 23 Variable interest securities 24 UK listed equity shares 25 Non-UK listed equity shares 26 Unlisted equity shares 27 Other assets 28 Total 29 Overall return on with-profits assets Post investment costs but pre-tax 31 Return allocated to non taxable 'asset shares' 32 Return allocated to taxable 'asset shares' 33 23
Form 50 Long-term insurance business : Summary of mathematical reserves Total business / subfund long term insurance business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year 1 2 3 4 5 Gross Form 51 - with-profits 11 Form 51 - non-profit 12 5357 5357 8569 Form 52 13 Form 53 - linked 14 2285952 2285952 2185491 Form 53 - non-linked 15 Form 54 - linked 16 5 5 39 Form 54 - non-linked 17 1 Total 18 2291314 2291314 2194100 Reinsurance - external Form 51 - with-profits 21 Form 51 - non-profit 22 Form 52 23 Form 53 - linked 24 Form 53 - non-linked 25 Form 54 - linked 26 Form 54 - non-linked 27 Total 28 Reinsurance - intra-group Form 51 - with-profits 31 Form 51 - non-profit 32 5299 5299 8525 Form 52 33 Form 53 - linked 34 Form 53 - non-linked 35 Form 54 - linked 36 5 5 39 Form 54 - non-linked 37 1 Total 38 5304 5304 8565 Net of reinsurance Form 51 - with-profits 41 Form 51 - non-profit 42 58 58 44 Form 52 43 Form 53 - linked 44 2285952 2285952 2185491 Form 53 - non-linked 45 Form 54 - linked 46 Form 54 - non-linked 47 Total 48 2286010 2286010 2185535 24
Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) Form 51 Total business / subfund long term insurance business Units 000 UK Pension / Gross Product code number Product description Number of policyholders / scheme members Amount of benefit Amount of annual office premiums Nominal value of units Discounted value of units Other liabilities Amount of mathematical reserves 1 2 3 4 5 6 7 8 9 400 Annuity non-profit (CPA) 256 719 5299 25 435 Miscellaneous non-profit 58
Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) Form 51 Total business / subfund long term insurance business Units 000 UK Pension / Reinsurance ceded intra-group Product code number Product description Number of policyholders / scheme members Amount of benefit Amount of annual office premiums Nominal value of units Discounted value of units Other liabilities Amount of mathematical reserves 1 2 3 4 5 6 7 8 9 400 Annuity non-profit (CPA) 719 5299 26
Long-term insurance business : Valuation summary of property linked contracts Form 53 Total business / subfund long term insurance business Units 000 UK Pension / Gross Product code number Product description Number of policyholders / scheme members Amount of benefit Amount of annual office premiums Nominal value of units Discounted value of units Other liabilities Amount of mathematical reserves 1 2 3 4 5 6 7 8 9 765 Group managed fund 2285952 2285952 2285952 27
Long-term insurance business : Valuation summary of index linked contracts Form 54 Total business / subfund long term insurance business Units 000 UK Pension / Gross Product code number Product description Number of policyholders / scheme members Amount of benefit Amount of annual office premiums Nominal value of units Discounted value of units Other liabilities Amount of mathematical reserves 1 2 3 4 5 6 7 8 9 905 Index linked annuity(cpa) 1 6 5 5 28
Long-term insurance business : Valuation summary of index linked contracts Form 54 Total business / subfund long term insurance business Units 000 UK Pension / Reinsurance ceded intra-group Product code number Product description Number of policyholders / scheme members Amount of benefit Amount of annual office premiums Nominal value of units Discounted value of units Other liabilities Amount of mathematical reserves 1 2 3 4 5 6 7 8 9 905 Index linked annuity(cpa) 6 5 5 29
Long-term insurance business : Unit prices for internal linked funds Form 55 Total business Units 000 Fund name Type of fund Net assets Main series Unit management charge Price at previous valuation date Price at current valuation date 1 2 3 4 5 6 7 8 Change in price during year Managed 22 - group managed fund - balanced managed fund 566822 Type 1 0.35 74.5811 84.0300 12.67 UK Equity 25 - group managed fund - UK equity 188260 Type 2-1.8045 2.0497 13.59 Overseas Equity 26 - group managed fund - overseas equity 254236 Type 2-1.9913 2.2658 13.78 30 International Equity 26 - group managed fund - overseas equity 140341 Type 2-1.3967 1.5942 14.15 UK Select 25 - group managed fund - UK equity 108242 Type 2-1.4898 1.7119 14.91 UK Capped Equity 25 - group managed fund - UK equity 186267 Type 2-1.0588 1.2267 15.85
Form 58 Long-term insurance business : Distribution of surplus Total business / subfund long term insurance business Units 000 Financial year Previous year 1 2 Valuation result Fund carried forward 11 2286068 2185603 Bonus payments in anticipation of a surplus 12 Transfer to non-technical account 13 Transfer to other funds / parts of funds 14 Subtotal (11 to 14) 15 2286068 2185603 Mathematical reserves 21 2286010 2185535 Surplus including contingency and other reserves held towards the capital requirements (deficiency) (15-21) 29 58 68 Composition of surplus Balance brought forward 31 68 Transfer from non-technical account 32 100 Transfer from other funds / parts of fund 33 Surplus arising since the last valuation 34 (10) (32) Total 39 58 68 Distribution of surplus Bonus paid in anticipation of a surplus 41 Cash bonuses 42 Reversionary bonuses 43 Other bonuses 44 Premium reductions 45 Total allocated to policyholders (41 to 45) 46 Net transfer out of fund / part of fund 47 Total distributed surplus (46+47) 48 Surplus carried forward 49 58 68 Total (48+49) 59 58 68 Percentage of distributed surplus allocated to policyholders Current year 61 Current year - 1 62 Current year - 2 63 Current year - 3 64 31
Long-term insurance capital requirement Global business Units 000 Insurance death risk capital component LTICR factor Life protection reinsurance 11 0.0% Classes I (other), II and IX 12 0.1% Classes I (other), II and IX 13 0.15% Classes I (other), II and IX 14 0.3% Classes III, VII and VIII 15 0.3% Total 16 Gross reserves / capital at risk Net reserves / capital at risk Insurance health risk and life protection reinsurance capital component Class IV supplementary classes 1 and 2 and life 21 protection reinsurance Reinsurance factor LTICR Financial year Form 60 LTICR Previous year 1 2 3 4 5 6 Insurance expense risk capital component Life protection and permanent health reinsurance 31 0% Classes I (other), II and IX 32 1% Classes III, VII and VIII (investment risk) 33 1% 5362 58 0.85 46 73 Classes III, VII and VIII (expenses fixed 5 yrs +) 34 1% 126 126 1.00 1 78 Classes III, VII and VIII (other) 35 25% 670 719 Class IV (other) 36 1% Class V 37 1% Class VI 38 1% Total 39 716 870 Insurance market risk capital component Life protection and permanent health reinsurance 41 0% Classes I (other), II and IX 42 3% Classes III, VII and VIII (investment risk) 43 3% 5362 58 0.85 137 220 Classes III, VII and VIII (expenses fixed 5 yrs +) 44 0% 126 126 Classes III, VII and VIII (other) 45 0% 2285826 2285826 Class IV (other) 46 3% Class V 47 0% Class VI 48 3% Total 49 2291314 2286010 137 220 Long term insurance capital requirement 51 853 1090 32
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *0201* Waiver and modification of rules There is a waiver in force at 31 December 2010. However, this is no longer required following the change in permitted links rules which became effective in 2007. *0301* Reconciliation of net admissible assets to total capital resources Net admissible assets Form 13 Line 89 (other than long-term business) 4,632 Form 13 Line 89 (long term business) 2,286,118 2,290,750 Form 14 Line 11 (2,286,010) Form 14 Line 49 (50) Form 15 Line 59 (18) (2,286,078) Total Net admissible assets 4,672 Form 3 Line 79 4,672 *0313* Profit and loss account and other reserves Profit and loss account and other reserves (F3 L12 C4) b/f 4,660 Profit and loss account and other reserves (F3 L12 C3) c/f 4,672 Movement in reserves 12 Profit for the year (F16 L59 C1) 22 Surplus for the year (F58 L34 C1) (10) 12 The above table provides a reconciliation of the profit per F16 to the change in reserves during the year ended 31 December 2010 as set out in F3. *1100* Form omitted from the Return *1200* Form omitted from the Return There are no contracts falling in long-term insurance business class IV. *1304* Offsetting - other than long term business There has not been any offsetting of amounts in F13. 33
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *1310* Offsetting Long term business funds Certain amounts shown in Forms 13 and 14 have been calculated by netting amounts due to any one person against amounts due from that person to the extent permitted by generally accepted accounting principles. *1305* Counterparty limits *1311* Counterparty limits Other than for approved securities and investments in collective investment schemes falling under the UCITS directive, the maximum counterparty limit permitted by the insurer s investment guidelines at 31 December 2010 in respect of assets other than property linked assets was 20% of the long-term insurance business amount. The maximum counterparty limit permitted for exposures other than with approved counterparties was 5%. Both limits apply to long term business assets and other than long term business assets combined. There were no occasions during the financial year when either of those limits was exceeded. *1306* Exposure to large counterparties other than long term business Other than in respect of investments in schemes falling under the UCITS directive there were no such exposures at the year end. *1312* Exposure to large counterparties long term business Other than assets held within the property linked funds, there were no such exposures at the year end. *1318* Other asset adjustments Long term business The balance on Form 13 line 101 relates to liabilities held within the property linked funds. Such amounts are shown within liabilities in the Companies Act accounts but are netted within Form 13 line 59. *1401* Provision for adverse changes No provision has been made for adverse changes. Assets held within the long term fund are valued on a mark to market basis. Where this is not possible, mark to model or director valuations are calculated on a prudent basis and incorporate all necessary valuation adjustments including those set out in GENPRU 1.3.30R to GENPRU 1.3.33R or INSPRU 3.2.17R to INSPRU 3.2.18R. Variation margin payments in respect of index futures are settled daily on a mark to market basis. No other obligations to pay a monetary amount existed at 31 December 2010. The long term fund has not transacted in any non-approved derivative or quasi-derivative transactions during the period to 31 December 2010. 34
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *1402* Other (a) No charge has been made on the assets of the company to secure the liabilities of any other person. (b) No liability to capital gains tax exists as the company only writes pension business. (c) At the balance sheet date there were no contingent liabilities other than liabilities arising under a contract of insurance. (d) At the balance sheet date the company had not provided any guarantees and indemnities or entered into any contractual commitments other than in the course of its insurance business. (e) There are no other fundamental uncertainties. *1405* Other adjustments to liabilities The balance on Form 14 line 74 liabilities held within the property linked funds. Such amounts are shown within liabilities in the Companies Act accounts but are netted within Form 13 line 59. *1501* Provision for adverse changes Assets held within the other than long term fund are valued on a mark to market basis. Where this is not possible, mark to model or director valuations are calculated on a prudent basis and incorporate all necessary valuation adjustments including those set out in GENPRU 1.3.30R to GENPRU 1.3.33R or INSPRU 3.2.17R to INSPRU 3.2.18R. As no derivatives contracts are held by the Reserve Fund no provision has been made for adverse changes. *1502* Other With regard to the Reserve Fund there are no charges over assets, potential capital gains tax liabilities, contingent liabilities, guarantees, indemnities, other contractual commitments, or any other fundamental uncertainties to report. *1601* Foreign currency translation Assets and liabilities in foreign currencies are translated into sterling at the exchange rates ruling at the Balance Sheet date. Revenue transactions and those relating to the acquisition and realisation of investments have been translated at rates of exchange ruling at the time of the respective transactions. 35
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *1700* Form omitted from the Return The ordinary long term fund only holds derivatives for matching liabilities under propertylinked benefits. The Reserve Fund holds no derivatives. *1800* Form omitted from Return *1900* Form omitted from Return No with-profits business is written by the company. *4008* Management services Arrangements are in force under which Scottish Widows Investment Partnership Limited provides investment management and marketing services, under which Scottish Widows Services Limited provides management and administration services and under which Scottish Widows Administration Services Limited provide unit pricing and investment accounting services to Pensions Management (S.W.F.) Limited. *4009* Material connected-party transactions During the year the Company entered into the following material transactions with connected parties: a) The Company invests in Open Ended Investment Companies (OEICs) operated by Scottish Widows Investment Partnership Limited, an OEIC management company and fellow group company. The Company incurs Annual Management Charges (AMCs) in relation to these investments, an aggregate amount of 5,058k in the year. The Company receives a partial rebate relating to these AMCs of 1,884k in the year. b) The Company invests in OEICs operated by Scottish Widows Unit Trust Managers Limited, an OEIC management company and a fellow subsidiary of the Company s intermediate holding company, Scottish Widows plc. The Company incurs AMCs in relation to these investments, an aggregate amount of 293k in the year. The Company receives a corresponding rebate relating to these AMCs, also of 293k in the year. c) The Company pays administration charges relating to the processing of premiums received and claims paid by funds. These charges are paid to its fellow group company, Scottish Widows Services Limited. The aggregate amount of administration charges paid during the year was 2,679k. d) The Company receives dividends in respect of OEIC funds from Scottish Widows Unit Trust Managers Limited and SWIP Fund Management Limited. The aggregate 36
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 amounts of dividends received during the year were 2,460k and 1,435k respectively. e) The Company receives interest from Scottish Widows Investment Partnership Limited through its investment in the Global Liquidity Fund. The aggregate amount of interest received during the year was 790k. f) The Company receives rental income and subsequently pays these amounts under an agency agreement to Scottish Widows Unit Funds Limited. The aggregate amount paid during the year was 1,310k. g) The Company receives amounts under reinsurance agreements from Scottish Widows Annuities Limited. The aggregate amount of received during the year was 761k. *4010* Switches The amounts disclosed in F40 L11 and F40 L21 are presented net of switches (which represent transfers of money between the linked funds of the business, rather than new business premiums or outwards claims). The amounts presented in F45 L11 and F45 L21 include all creations and cancellations for the year, without netting, and therefore include all switches effected in the year. *4401* Asset valuation Stock Exchange securities have been valued at the bid prices at the date of the Balance sheet. Units in Collective Investment Schemes have been valued on a Bid basis. Assets have been valued using quoted prices where possible. Where this is not possible, mark to model or director valuations are calculated on a prudent basis and incorporate all necessary valuation adjustments including those set out in GENPRU 1.3.30R to GENPRU 1.3.33R or INSPRU 3.2.17R to INSPRU 3.2.18R. Property is shown at open market value as assessed by independent qualified valuer at the Balance sheet date. Other assets have been valued at cost. *4402* Derivative contracts The aggregate value of rights under derivative contracts, gross and net of variation margin, as at 31 December 2010 are as follows: Assets 000 s Liabilities 000 s Value gross of variation margin 690 (423) Variation margin (185) 65 Value net of variation margin 505 (358) 37
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *4403* Netting arrangements All derivative contracts entered into allow the company to net off amounts outstanding. *4502* Other expenditure Other expenditure consists of custody fees, overdraft interest, debenture interest, property maintenance, property service costs and property service charges. *4701* Columns 3 and 5 There were 9 new schemes in 2010; all are within product code 765. *4804* Weighted Average Yield Holding Value 000 Yield (%) AAA Global Liquidity Fund 100 0.68 Other debtors 16 0.00 Total 116 0.59 *4900* Forms omitted from the Return Admissible assets of the ordinary long term fund are held to match liabilities under property-linked benefits, with the exception of 116k as set out in note *4804*. *5200* Form omitted from the Return Accumulating with-profits benefits are not available under the linked contracts issued by the company. *5301* Number of group schemes There are 407 schemes at 31/12/2010; all are within product code 765. *5305* Amount of benefit Unit liabilities are held at a scheme level. No benefits are payable on the death of a scheme member. 38
Returns under Insurance Companies Legislation PENSIONS MANAGEMENT (S.W.F.) LIMITED Supplementary notes to appendices 9.1, 9.3 and 9.4 *5501* Unit management charges Unit management charges applicable to both unit types. Unit Type 1 Unit Type 2 Managed 0.35% N/A UK Equity 0.40% 0.00% Overseas Equity 0.40% 0.00% International Equity 0.55% 0.00% UK Capped Equity 0.55% 0.00% UK Select 0.55% 0.00% *5600* Form omitted from the Return All index-linked benefits were wholly reinsured with Scottish Widows Annuities Limited. *5700* Form omitted from the Return Mathematical reserves for non-linked business do not exceed 100m. *5900* Form omitted from the Return No with-profits business is written by the company. 39
Pensions Management (S.W.F.) Limited Financial Year ended 31 December 2010 Statement required by Rule 9.29 of the Interim Prudential Sourcebook for Insurers: Additional Information on Derivative Contracts (a) Investment Managers work to written authorities in respect of derivative transactions, approved, initially, by the Scottish Widows Group Board. Controls are applied to ensure that the authorities delegated to the investment managers are not exceeded. The use of derivatives is approved for hedging the investment portfolio against adverse movements in underlying markets or effecting policy switches between markets without trading the underlying securities. The use of derivatives is also allowed for the purpose of efficient portfolio management provided their substance would otherwise be permitted as a series of direct transactions. (b) (c) (d) (e) Written authorities do not prohibit entry into derivative contracts which were not, at the time of entry, reasonably likely to be exercised. This is in order to ensure that investment managers are not prevented from entering into contracts that could enhance efficient portfolio management. There were however no such transactions entered into during 2010. See (b) above. At no time during the year did the company enter into a derivative or quasiderivative contract which required a significant provision to be made for it under INSPRU 3.2.17R or did not fall within the definition of a permitted derivatives contract. No consideration was received by the insurer during the financial year in return for granting rights under derivative or quasi-derivative contracts. 40
PENSIONS MANAGEMENT (S.W.F.) LIMITED Financial period ended 31 December 2010 Statement required by Rule 9.30 of the Interim Prudential Sourcebook for Insurers : Additional Information on Shareholder Controllers The immediate shareholder controller of the company during the financial year was Scottish Widows plc. Scottish Widows plc is a wholly owned and controlled subsidiary of Scottish Widows Financial Services Holdings. Scottish Widows Financial Services Holdings is a wholly owned and controlled subsidiary of Scottish Widows Group Limited. Scottish Widows Group Limited is a wholly owned and controlled subsidiary of Lloyds TSB Bank plc. Lloyds TSB Bank plc is a wholly owned and controlled subsidiary of Lloyds Banking Group plc, which was the ultimate shareholder controller of the insurer during the financial period. 41
PENSIONS MANAGEMENT (S.W.F.) LIMITED 1 INTRODUCTION (1) The investigation relates to 31 December 2010. (2) The previous investigation related to 31 December 2009. (3) Not applicable. 2 PRODUCT RANGE There have been no significant changes to products during 2010. The company does not transact with-profits business. 3 DISCRETIONARY CHARGES AND BENEFITS (1)-(3) Not applicable. (4) A charge is made to unit-linked pension schemes for processing annuity payments to scheme members. This charge increased by 2.6% per pensioner and 2.6% per payment. There were no changes to charges made by the Company on units in property-linked funds. Charges are made to policyholders (pension scheme trustees) for actuarial, legal and other specialist services. Charges depend on the individual arrangement with the policyholder and the service provided. It is therefore not appropriate to disclose percentage changes for these charges. (5) Not applicable. (6) Not applicable. (7) Internal linked funds There are two unit types for this company; type 1 units have an annual management charge applied to its pricing, whereas type 2 units have no annual management charge applied to the price. 42