GOVERNANCE
FINANCIAL STATEMENTS
strategic report
NEW BUSINESS OPERATING PROFIT 1 – £233M New business operating profit represents the profit generated from new business written in the year after allowing for the establishment of prudent reserves for future expected annuity payments and maintenance expenses and for acquisition expenses. Acquisition expenses include the commission and trading costs, plus overhead costs, associated with writing new business. New business operating profit is reconciled to IFRS profit before tax in the Business Review.
ADJUSTED OPERATING PROFIT BEFORE TAX 1 – £336M
Adjusted operating profit before tax is the sum of the new business operating profit and in-force operating profit together with the impact of one-off assumption changes, experience variances, results of the other Group companies and financing costs. The Board believes that adjusted operating profit, which excludes the effects of short- term economic and investment changes, provides a better view of the longer-term performance and development of the business and aligns with the longer-term nature of the products. Adjusted operating profit is reconciled to IFRS profit before tax on page 36.
336
233
2022
2022
2021
225
2021
238 239
199
2020
2020
LINK TO STRATEGIC PRIORITIES 1,3
LINK TO STRATEGIC PRIORITIES 1,3
IFRS (LOSS)/PROFIT BEFORE TAX – £(317)M IFRS (loss)/profit before tax represents the (loss)/profit before tax attributable to equity holders. The Group experienced investment and economic losses of £639m in 2022 driven by £510m of losses from the increase in risk-free rates during the period. The Group takes an active approach to hedging its interest rate exposure. In the second half of 2021 and across 2022, as rates rose and our solvency position strengthened, we gradually reduced the interest rate hedging to a broadly economically neutral position. A reconciliation of the operating profit to statutory IFRS results is shown on page 26 in the Business Review.
MANAGEMENT EXPENSES 1 – £153M Management expenses are the business as usual costs incurred and include all operational overheads. They are calculated as other operating expenses excluding investment expenses and charges and reassurance management fees, which are largely driven by strategic decisions, and amortisation of acquired intangible assets as these relate to merger and acquisition activity. The use of this metric provides the Board with a better view of the Group’s cost base and how they support both development and transformation and business as usual activities, ensuring that they are able to be carefully monitored and controlled. Other operating expenses continue to be a useful measure alongside management expenses. Management expenses are reconciled to IFRS other operating expenses in note 4 on page 147.
(317)
153
2022
2022
(21)
2021
2021
147
159
2020
2020
237
LINK TO STRATEGIC PRIORITIES 1,2
LINK TO STRATEGIC PRIORITIES 1,3
SOLVENCY II CAPITAL COVERAGE RATIO 2 – 199% (ESTIMATED)
IFRS NET ASSETS – £2,178M IFRS net assets represents the net assets attributable to equity holders.
Solvency II capital is the regulatory capital measure and is focused on by the Board in capital planning and business planning. It expresses the regulatory view of the available capital as a percentage of the required capital.
199
2022
2022
2,178
164
2021
2021
2,440
2,490
2020
2020
156
LINK TO STRATEGIC PRIORITIES 1
LINK TO STRATEGIC PRIORITIES 1
21
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