Britannic Group
Interim results presentation
Half year ended 30 June 2004
7 September 2004
Agenda
Introduction Harold Cottam
Overview Paul Thompson
Financials Graham Singleton
Questions and answers
2
Overview
Paul Thompson
Group Chief Executive
3
Overview
Good results
Consolidation of refocused business
BAM management changed. Business repositioned as multi-specialist
Closed funds integrated into one division
Active review of closed fund opportunities
4
Financial highlights £41m operating achieved profit before tax
(HY03: £38m*)
£36m operating MSB profit before tax
(HY03: £17m restated)
£1,029m shareholders’ funds, 523p per share
(FY03: 517p)
Interim dividend 5.45p per share
(HY03: nil)
Free asset ratio 11.3%, ICA ratio 232%
(FY03: 10.8%, 213%)
5
* Adjusted to exclude a net one-off of £6m, primarily the benefit of a reduction in the risk discount margin from 1% to 0.5%
Britannic Assurance
£3m new business profit
Good progress towards service company structure
Process re-engineering
Costs to date under budget
6
Britannic Retirement Solutions
Relocation completed
Performing in line with expectations
7
Alba Life
Continued proactive risk management and mitigation
Reassurance of £350m deferred annuities
Improving free asset ratio
8
Closed funds review
9
Due diligence completed confirms: operational model reasonableness of target return validity of strategy
Transactions occurring in the sector
Optimistic on prospects
Britannic Asset Management
Repositioned as multi-specialist
Retail sales £102m
Institutional sales £84m
Solid half year performance
New products scheduled for launch second half
10
Financials
Graham Singleton
Group Finance Director
11
Summary Group achieved profits£m HY04 HY03 FY03 Britannic Assurance 40 44* 82 Britannic Retirement Solutions 2 4 13 Britannic Asset Management 5 4 9 Britannic Money - (1) (1) Group income and charges (2) (3) (4) Interest on loan finance (4) (4) (8) Operating profit before exceptional items
41 44 91
Exceptional items - (4) (20) Total operating profit before tax 41 40 71 * includes a net one-off of £6m, primarily the benefit of a reduction in the risk discount margin from 1% to 0.5%
12
Summary Group achieved profits
£m HY04 HY03 FY03
Total operating profit before tax 41 40 71
Loss on disposal of Britannic Money - (25) (25) Fluctuations in investment return (4) 11 34 Investment variance on in-force (8) (7) 4 Other assumption changes 5 (21) (22)
Pre tax profit/(loss) 34 (2) 62 Tax (10) 3 (13) Profit after tax 24 1 49 Dividends (11) - (20)
Retained profit 13 1 29
13
Britannic Assurance achieved profits
£m HY04 HY03 FY03 New business profit 3 6 12 In-force profit 18 23 34 Cost of closure to new business - (4) (4) Longer term return on: - SRC 15 14 29 - other shareholder investments 4 5 10 General insurance 1 1 3 Other income and charges (1) (1) (2) Total operating profit 40 44 82
14
Britannic Retirement Solutionsachieved profits
£m HY04 HY03 FY03 Sales n/a 174 302
New business profit after expense overrun
- 2 7
In-force profit 2 1 5
Longer term return on shareholder investments
- 1 1
Operating profit 2 4 13
Closure costs - - (16)
15
Britannic Asset Management
£m HY04 HY03 FY03 Income 19 18 37 Expenses (15) (14) (29) Interest receivable 1 - 1 Operating profit before tax 5 4 9 Cost/income ratio 79% 78% 78% Funds under management
£13.6bn
£14.3bn
£14.3bn
16
Summary Group MSB profits
£m HY04 HY03* FY03
Britannic Assurance
- With profit 7 7 15
- Non profit and unit linked 7 - 8
- Cost of closure to new business - (3) (3)
- Longer term return on SRC 15 14 29
- Other 4 5 11
33 23 60
Britannic Retirement Solutions 4 (2) 8
Britannic Asset Management 5 4 9
Britannic Money - (1) (1)
Group income and charges (2) (3) (4)
Interest on loan finance (4) (4) (8) Total operating profit before exceptional items 36 17 64
Exceptional items - (4) (13)
Total operating profit before tax 36 13 51
Loss on disposal of Britannic Money - (25) (25)
Fluctuations in investment return (4) 11 34
Pre tax profit/(loss) 32 (1) 60 * restated
17
SRC - achieved profits basis
£m (net of tax) 3rd party assets
BRS Total
Opening position 459 62 521
Longer term return
11 11
Investment variance (2) (2)
Results for the period 9 3 12
Non profit movement 7 - 7
Closing position 475 65 540
18
Group balance sheet - achieved profits basis
£m
Tangible capital
Present value of in-force
Goodwill
Total
Britannic Assurance - assurance business 164 233 - 397 - SRC 507 33 - 540 BAM 35 - 168 203 Group 24 - - 24 Group borrowings (135) - - (135) 595 266 168 1,029
Amount per share 303p 135p 85p 523p
19
Capital positionRealistic
Statutory
Free asset ratio: 11.3% excluding implicit items
Shareholders’ funds£140m
Shareholders’ retained capital – 3rd party assets
£475m
Realistic with profit estate£197m
Excess capital£374m
Internal capitalassessment
£350m
Required capitalmargin £235m
Prudent 25% margin £88m
ICA ratio of 232%
20
Questions and answers
21
Britannic Group
Interim results presentation
Half year ended 30 June 2004
7 September 2004
22
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