STRATEGIC REPORT
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The sector analysis of the Group’s financial investments portfolio at 31 December 2019 is shown below and continues to be well balanced across a variety of industry sectors. 31 December 2019 £m 31 December 2019 % 31 December 2018 £m 31 December 2018 % Basic materials 329.8 1.5 272.4 1.4 Communications 1,148.2 5.3 963.8 5.0 Auto manufacturers 446.6 2.1 319.4 1.7 Consumer 1,122.1 5.2 878.3 4.6 Energy 422.7 2.0 313.1 1.6 Banks 1,859.7 8.5 1,855.7 9.5 Derivatives and collateral 381.9 1.8 230.6 1.2 Insurance 724.2 3.4 733.9 3.8 Financial – other 876.7 4.1 936.3 4.9 Government 1,128.9 5.2 1,253.3 6.5 Industrial 628.6 2.9 447.4 2.3 Utilities 1,708.2 7.9 1,512.1 7.9 Liquidity funds 1,384.0 6.4 882.5 4.6 Lifetime mortgages 7,980.5 36.9 7,191.5 37.4 Commercial mortgages 494.5 2.3 392.3 2.0 Infrastructure loans 892.9 4.1 858.9 4.5 Other 76.5 0.4 211.0 1.1 Total 21,606.0 100.0 19,252.5 100.0
Insurance liabilities Insurance liabilities increased from £17.3bn at 31 December 2018 to £19.0bn at 31 December 2019. The increase in liabilities arose mainly as a result of new insurance business written less claims paid and the impact of changes to the valuation interest rate as a result of the fall in risk-free rates during the year. Other financial liabilities Other financial liabilities decreased from £4.1bn at 31 December 2018 to £3.7bn at 31 December 2019. These liabilities are mainly reinsurance related and include deposits received from reinsurers, reinsurance financing and other reinsurance-related balances. The change in the financial liability balance mainly reflects the reduction in deposits received from reinsurers, due to the reinsurance recaptures made in the year. Insurance and other payables Insurance and other payables decreased from £78.3m at 31 December 2018 to £72.6m at 31 December 2019. Other liabilities Other liability balances decreased from £866.6m at 31 December 2018 to £817.6m at 31 December 2019. Other liabilities includes £12.4m in relation to lease liabilities which has been recognised upon adoption of IFRS 16, Leases, and which relates to the Group’s leasehold buildings. A related right-of-use asset of £11.9m is included within property, plant and equipment.
IFRS net assets The Group’s total equity at 31 December 2019 was £2,321.0m, compared to £1,663.8m at 31 December 2018. Total equity includes the Restricted Tier 1 notes of £294m (after issue costs) issued by the Group in March 2019. Total equity attributable to ordinary shareholders increased from £1,664.4m to £2,027.8m resulting in net asset value (“NAV”) per ordinary share of 196p (2018: 177p). DIVIDENDS Whilst the Group continues to build its capital position following the significant regulatory changes relating to equity release mortgages the Board considers it appropriate not to pay a final dividend for 2019 (total 2018 dividend: nil).
ANDY PARSONS Group Chief Financial Officer
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