ST ANDREW'S LIFE ASSURANCE PLC

Transcription

1 Annual PRA Insurance Returns for the year ended 31 December 2013 IPRU(INS) Appendices 9.1, 9.3, 9.4, 9.6

2 Contents Balance Sheet and Profit and Loss Account 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 Form 17 Analysis of derivative contracts 15 Long Term Insurance Business: Revenue Account and Additional Information Form 40 Revenue account 16 Form 41 Analysis of premiums 17 Form 42 Analysis of claims 18 Form 43 Analysis of expenses 19 Form 44 Linked funds balance sheet 20 Form 45 Revenue account for internal linked funds 21 Form 46 Summary of new business 22 Form 47 Analysis of new business 23 Form 48 Assets not held to match linked liabilities 24 Form 50 Summary of mathematical reserves 25 Form 51 Valuation summary of non-linked contracts (other than 26 accumulating with-profits contracts) Form 53 Valuation summary of property linked contracts 29 Form 55 Unit prices for internal linked funds 31 Form 57 Analysis of valuation interest rate 33 Form 58 Distribution of surplus 34 Form 60 Long-term insurance capital requirement 35 Supplementary notes to the return 36 Additional information on derivative contracts 45 Additional information on controllers 46 Abstract of the Valuation Report 47 Directors' Certificate 58 Auditor's Report 59

3 :09:24:08 Form 2 Statement of solvency - long-term insurance business Global business Solo solvency calculation Company GL/ registration UK/ day month year Units number CM R GL 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 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) Guarantee fund Guarantee fund requirement Excess (deficiency) of available capital resources to cover guarantee fund requirement Minimum capital requirement (MCR) Long-term insurance capital requirement Resilience capital requirement Base capital resources requirement Individual minimum capital requirement Capital requirements of regulated related undertakings 35 Minimum capital requirement (34+35) Excess (deficiency) of available capital resources to cover 50% of MCR Excess (deficiency) of available capital resources to cover 75% of MCR Enhanced capital requirement With-profits insurance capital component 39 Enhanced capital requirement Capital resources requirement (CRR) Capital resources requirement (greater of 36 and 40) Excess (deficiency) of available capital resources to cover long-term insurance business CRR (13-41) Contingent liabilities Quantifiable contingent liabilities in respect of long-term insurance business as shown in a supplementary note to Form

4 :09:24:08 Form 2 Covering Sheet to Form 2 Global business A M Parsons Director T E Strauss Director C J Thornton Director Date 20 March

5 :09:24:08 Components of capital resources Form 3 (Sheet 1) Global business Company GL/ registration UK/ day month year Units number CM R GL 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 Permanent share capital Profit and loss account and other reserves Share premium account 13 Positive valuation differences Fund for future appropriations Core tier one capital in related undertakings Core tier one capital (sum of 11 to 16) Tier one waivers Unpaid share capital / unpaid initial funds and calls for supplementary contributions Implicit Items 22 Tier one waivers in related undertakings Total tier one waivers as restricted ( ) 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 Total tier one capital before deductions ( ) 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)

6 :09:24:08 Components of capital resources Form 3 (Sheet 2) Global business Tier two capital Company GL/ registration UK/ day month year Units number CM R GL 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 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 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 ( ) 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 ( )

7 :09:24:08 Components of capital resources Form 3 (Sheet 3) Global business Total capital resources Company GL/ registration UK/ day month year Units number CM R GL 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 Positive adjustments for regulated non-insurance related undertakings Total capital resources before deductions ( ) 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 ( ) 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 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 ( )

8 :09:24:08 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 R GL 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 Debts and loans Debts and loans Debts and loans Debts and loans Debts and loans Other financial investments Equity shares 41 Other shares and other variable yield participations 42 Holdings in collective investment schemes Rights under derivative contracts 44 Fixed interest securities Variable interest securities Approved Approved Other Other 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 Other loans Bank and approved credit & financial institution deposits Other financial investments 56 Deposits with ceding undertakings 57 Assets held to match linked liabilities One month or less withdrawal More than one month withdrawal Index linked Property linked

9 :09:24:08 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 R GL 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 Debtors and salvage Direct insurance business Salvage and subrogation recoveries Reinsurance Dependants Other Other 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 Tangible assets 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 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)

10 :09:24:08 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 R GL 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) (3730) (3603) Amounts included in line 89 attributable to debts due from related insurers, other than those under contracts of insurance or reinsurance 103 8

11 :09:24:08 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 R GL 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 Debts and loans Debts and loans Debts and loans Debts and loans Debts and loans Other financial investments Equity shares 41 Other shares and other variable yield participations 42 Holdings in collective investment schemes Rights under derivative contracts Fixed interest securities Variable interest securities Approved Approved Other Other 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 Other loans Bank and approved credit & financial institution deposits Other financial investments 56 Deposits with ceding undertakings 57 Assets held to match linked liabilities One month or less withdrawal More than one month withdrawal Index linked Property linked

12 :09:24:08 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 R GL 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 Debtors and salvage Direct insurance business Salvage and subrogation recoveries Reinsurance Dependants Other Other 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 Tangible assets 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 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)

13 :09:24:08 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 R GL 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) Amounts included in line 89 attributable to debts due from related insurers, other than those under contracts of insurance or reinsurance

14 :09:24:08 Long term insurance business liabilities and margins Form 14 Global business Total business/sub fund LTBF Non Profit Units 000 As at end of As at end of this financial the previous year year 1 2 Mathematical reserves, after distribution of surplus Cash bonuses which had not been paid to policyholders prior to end of the financial year Balance of surplus/(valuation deficit) Long term insurance business fund carried forward (11 to 13) Claims outstanding Provisions 12 Gross Reinsurers' share 16 Net (15-16) Taxation 21 Other risks and charges 22 Deposits received from reinsurers 23 Creditors Debenture loans Direct insurance business Reinsurance accepted Reinsurance ceded Secured 34 Unsecured 35 Amounts owed to credit institutions 36 Creditors Taxation Other Accruals and deferred income 39 Provision for "reasonably foreseeable adverse variations" Total other insurance and non-insurance liabilities (17 to 41) Excess of the value of net admissible assets 51 Total liabilities and margins Amounts included in line 59 attributable to liabilities to related companies, other than those under contracts of insurance or reinsurance Amounts included in line 59 attributable to liabilities in respect of property linked benefits Total liabilities ( ) Increase to liabilities - DAC related Reinsurers' share of technical provisions Other adjustments to liabilities (may be negative) Capital and reserves and fund for future appropriations 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)

15 :09:24:08 Form 15 Liabilities (other than long term insurance business) Global business Company GL/ registration UK/ day month year Units number CM R GL 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 13 Equalisation provisions 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 Creditors Debenture loans Direct insurance business 41 Reinsurance accepted 42 Reinsurance ceded 43 Secured 44 Unsecured 45 Amounts owed to credit institutions 46 Creditors Taxation 47 Foreseeable dividend 48 Other 49 Accruals and deferred income 51 Total (19 to 51) 59 Provision for "reasonably foreseeable adverse variations" 61 Cumulative preference share capital 62 Subordinated loan capital 63 Total (59 to 63) 69 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 Total liabilities under insurance accounts rules or international accounting standards as applicable to the firm for the purpose of its external financial reporting ( )

16 :09:24:08 Form 16 Profit and loss account (non-technical account) Global business Company GL/ registration UK/ day month year Units number CM R GL This financial year Previous year 1 2 Transfer (to)/from the general insurance business technical account From Form Equalisation provisions 12 Transfer from the long term insurance business revenue account Income Value re-adjustments on Investment income 15 investments Gains on the realisation of investments Investment management charges, including interest Value re-adjustments on Investment charges investments Loss on the realisation of investments 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 ( ) Tax on profit or loss on ordinary activities Profit or loss on ordinary activities after tax (29-31) 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)) Dividends (paid or foreseeable) Profit or loss retained for the financial year (49-51)

17 :09:24:08 Form 17 Analysis of derivative contracts Global business Category of assets Total long term insurance business assets Company GL/ Category registration UK/ day month year Units of number CM assets R GL Derivative contracts Value as at the end of this financial year Notional amount as at the end of this financial year Futures and contracts for differences In the money options Out of the money options 11 Interest rates 12 Inflation 13 Credit index / basket 14 Credit single name 15 Equity stock 17 Land 18 Currencies 19 Mortality 20 Other 21 Assets Liabilities Bought / Long Sold / Short Equity index calls 32 Equity stock calls 33 Equity index puts 34 Equity stock puts 35 Other 36 Swaptions 41 Equity index calls 42 Equity stock calls 43 Equity index puts Equity stock puts 45 Other 46 Total (11 to 46) Adjustment for variation margin Total ( ) Fixed-interest securities Equity index Swaptions 52 (49) THE NOTIONAL AMOUNTS IN COLUMNS 3 AND 4 ARE NOT A MEASURE OF EXPOSURE. Please see instructions 11 and 12 to this Form for the meaning of these figures. 15

18 :09:24:08 Long-term insurance business : Revenue account Form 40 Total business / subfund LTBF Non Profit Units 000 Financial year Previous year 1 2 Income Earned premiums 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 (37382) (17997) Other income Total income Expenditure Claims incurred Expenses payable Interest payable before the deduction of tax Taxation (575) 4571 Other expenditure 25 Transfer to (from) non technical account Total expenditure Business transfers - in Business transfers - out 32 Increase (decrease) in fund in financial year ( ) 39 (122230) (392789) Fund brought forward Fund carried forward (39+49)

19 :09:24:08 Long-term insurance business : Analysis of premiums Form 41 Total business / subfund LTBF Non Profit Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year Gross Regular premiums Single premiums Reinsurance - external Regular premiums Single premiums 14 Reinsurance - intra-group Regular premiums Single premiums 16 (3256) (3256) (2397) Net of reinsurance Regular premiums Single premiums Total Gross Reinsurance Net

20 :09:24:08 Long-term insurance business : Analysis of claims Form 42 Total business / subfund LTBF Non Profit Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year Gross Death or disability lump sums Disability periodic payments 12 Surrender or partial surrender Annuity payments Lump sums on maturity Total Reinsurance - external Death or disability lump sums Disability periodic payments 22 Surrender or partial surrender Annuity payments 24 Lump sums on maturity 25 Total Reinsurance - intra-group Death or disability lump sums Disability periodic payments 32 Surrender or partial surrender Annuity payments 34 Lump sums on maturity Total Net of reinsurance Death or disability lump sums Disability periodic payments 42 Surrender or partial surrender Annuity payments Lump sums on maturity Total

21 :09:24:08 Long-term insurance business : Analysis of expenses Form 43 Total business / subfund LTBF Non Profit Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year Gross Commission - acquisition Commission - other Management - acquisition Management - maintenance Management - other 15 Total 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 (86) (86) (186) Management - other 35 Total 36 (86) (86) (186) Net of reinsurance Commission - acquisition Commission - other Management - acquisition Management - maintenance Management - other 45 Total

22 :09:24:08 Long-term insurance business : Linked funds balance sheet Form 44 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) ( ) Provision for tax on unrealised capital gains 15 (28080) Secured and unsecured loans 16 Other liabilities Total net assets ( ) Directly held linked assets Value of directly held linked assets 21 Total Value of directly held linked assets and units held (18+21) Surplus units Deficit units Net unit liability ( )

23 :09:24:08 Long-term insurance business : Revenue account for internal linked funds Form 45 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 Total income 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 (10325) Total expenditure Increase (decrease) in funds in financial year (19-29) Internal linked fund brought forward Internal linked funds carried forward (39+49) 39 (89116) (339048)

24 :09:24:08 Long-term insurance business : Summary of new business Form 46 Total business Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year Number of new policyholders/ scheme members for direct insurance business Regular premium business Single premium business Total Amount of new regular premiums Direct insurance business External reinsurance 22 Intra-group reinsurance 23 Total Amount of new single premiums Direct insurance business External reinsurance 26 Intra-group reinsurance 27 Total

25 :09:24:08 Form 47 Long-term insurance business : Analysis of new business Total business Units 000 UK Life / Direct Insurance Business Product code number Product description Regular premium business Number of policyholders / scheme members Amount of premiums Number of policyholders / scheme members Amount of premiums Regular premium non-profit WL/EA OB Single premium business 700 Life property linked single premium 17665

26 :09:24:08 Long-term insurance business : Assets not held to match linked liabilities Form 48 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 Assets backing non-profit liabilities and non-profit capital requirements Land and buildings 11 Approved fixed interest securities Other fixed interest securities Variable interest securities UK listed equity shares Non-UK listed equity shares 16 Unlisted equity shares 17 Other assets Total 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 24

27 :09:24:08 Long-term insurance business : Summary of mathematical reserves Form 50 Total business / subfund LTBF Non Profit Units 000 UK Life UK Pension Overseas Total Financial year Total Previous year Gross Form 51 - with-profits 11 Form 51 - non-profit Form Form 53 - linked Form 53 - non-linked Form 54 - linked 16 Form 54 - non-linked 17 Total Reinsurance - external Form 51 - with-profits 21 Form 51 - non-profit Form Form 53 - linked 24 Form 53 - non-linked 25 Form 54 - linked 26 Form 54 - non-linked 27 Total Reinsurance - intra-group Form 51 - with-profits 31 Form 51 - non-profit 32 Form Form 53 - linked Form 53 - non-linked 35 Form 54 - linked 36 Form 54 - non-linked 37 Total Net of reinsurance Form 51 - with-profits 41 Form 51 - non-profit Form Form 53 - linked Form 53 - non-linked Form 54 - linked 46 Form 54 - non-linked 47 Total

28 :09:24:08 Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) Form 51 Total business / subfund LTBF Non Profit Units 000 UK Life / 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 300 Regular premium non-profit WL/EA OB Level term assurance Decreasing term assurance (3403) 360 Income protection non-profit (guaranteed premiums) Annuity non-profit (PLA) Additional reserves non-profit OB 2633

29 :09:24:08 Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) Form 51 Total business / subfund LTBF Non Profit Units 000 UK Life / Reinsurance ceded external 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 300 Regular premium non-profit WL/EA OB Level term assurance Decreasing term assurance Income protection non-profit (guaranteed premiums) (4640) Additional reserves non-profit OB

30 :09:24:08 Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) Form 51 Total business / subfund LTBF Non Profit Units 000 Overseas / 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 325 Level term assurance Decreasing term assurance Income protection non-profit (guaranteed premiums)

31 :09:24:08 Long-term insurance business : Valuation summary of property linked contracts Form 53 Total business / subfund LTBF Non Profit Units 000 UK Life / 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 700 Life property linked single premium Life property linked whole life regular premium Life property linked endowment regular premium - savings Life property linked endowment regular premium - target cash Miscellaneous property linked

32 :09:24:08 Long-term insurance business : Valuation summary of property linked contracts Form 53 Total business / subfund LTBF Non Profit Units 000 UK Life / 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 700 Life property linked single premium Life property linked endowment regular premium - target cash

33 :09:24:08 Long-term insurance business : Unit prices for internal linked funds (Sheet 1) 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 Change in price during year Life Balanced 02 - life - balanced managed fund Life Balanced Series Life Foundation 02 - life - balanced managed fund Life Foundation Series Life Opportunity 01 - life - stock market managed fund Life Opportunity Series Pelican Life SP Fund 05 - life - UK equity Pelican Life SP Series High Income Life SP Fund 05 - life - UK equity High Income Life SP Series All Share Tracker Life SP Fund 01 - life - stock market managed fund All Share Tracker Life SP Series International Growth Life SP Fund 06 - life - overseas equity International Growth Life SP Series Cautious Managed Life Fund 03 - life - defensive managed fund Cautious Managed Life Series Money Life SP Fund 04 - life - other managed fund Money Life SP fund Series (1.06) Managed Income Fund 04 - life - other managed fund Managed Income Fund Series Gilt and Fixed Interest Life 04 - life - other managed fund Gilt and Fixed Interest Life SP Series (4.77) Index Linked Life SP Fund 04 - life - other managed fund Index Linked Life SP Series (0.23) Gaur Inv Plan December 08 Life 04 - life - other managed fund GIP December 08 Life SP Fund Series Gaur Inv Plan March 09 Life 04 - life - other managed fund GIP March 09 Life SP Fund Series Gaur Inv Plan June 09 Life 04 - life - other managed fund GIP June 09 Life SP fund Series Gaur Inv Plan September 09 Life 04 - life - other managed fund GIP September 09 Life SP Fund Series Cautious Growth Life 03 - life - defensive managed fund Cautious Growth Life Series Balanced Growth Life 02 - life - balanced managed fund Balanced Growth Life Series

34 :09:24:08 Long-term insurance business : Unit prices for internal linked funds (Sheet 2) 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 Change in price during year Halifax Balanced Investment 02 - life - balanced managed fund Halifax Balanced Investment Series

35 :09:24:08 Long-term insurance business: Analysis of valuation interest rate Form 57 Total business LTBF Non Profit Units 000 Product group 1 Net mathematical reserves Net valuation interest rate Gross valuation interest rate Risk adjusted yield on matching assets UK Life NP Form UK Life NP Form Misc 2633 Total

36 :09:24:08 Long-term insurance business : Distribution of surplus Form 58 Total business / subfund LTBF Non Profit Units 000 Financial year Previous year 1 2 Valuation result Fund carried forward Bonus payments in anticipation of a surplus 12 Transfer to non-technical account Transfer to other funds / parts of funds 14 Subtotal (11 to 14) Mathematical reserves Surplus including contingency and other reserves held towards the capital requirements (deficiency) (15-21) Composition of surplus Balance brought forward Transfer from non-technical account 32 Transfer from other funds / parts of fund 33 Surplus arising since the last valuation Total 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 Total distributed surplus (46+47) Surplus carried forward Total (48+49) Percentage of distributed surplus allocated to policyholders Current year 61 Current year Current year Current year

37 :09:24:08 Long-term insurance capital requirement Global business Units 000 LTICR factor Insurance death risk capital component Life protection reinsurance % Gross reserves / capital at risk Net reserves / capital at risk Reinsurance factor LTICR Financial year Form 60 LTICR Previous year Classes I (other), II and IX % Classes I (other), II and IX % Classes I (other), II and IX % Classes III, VII and VIII % Total Insurance health risk and life protection reinsurance capital component Class IV supplementary classes 1 and 2 and life protection reinsurance Insurance expense risk capital component Life protection and permanent 31 0% health reinsurance Classes I (other), II and IX 32 1% Classes III, VII and VIII (investment risk) Classes III, VII and VIII (expenses fixed 5 yrs +) Classes III, VII and VIII (other) 33 1% % 35 25% Class IV (other) 36 1% Class V 37 1% Class VI 38 1% Total Insurance market risk capital component Life protection and permanent 41 0% health reinsurance Classes I (other), II and IX 42 3% Classes III, VII and VIII (investment risk) Classes III, VII and VIII (expenses fixed 5 yrs +) Classes III, VII and VIII (other) 43 3% % 45 0% Class IV (other) 46 3% Class V 47 0% Class VI 48 3% Total Long term insurance capital requirement

38 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS *0201* Waiver and modification rules The FSA, on the application of the firm, made a direction under section 148 of the Financial Services and Markets Act 2000 in October The effect of the direction is to modify the provisions of INSPRU R and IPRU(INS) Appendix 9.3 so that a more appropriate rate of interest is used for assets taken in combination The FSA, on the application of the firm, made a direction under section 148 of the Financial Services and Markets Act 2000 in December The effect of the direction is to modify the provisions of INSPRU R and IPRU(INS) Appendix 9.3 so that a more appropriate rate of interest is used for assets taken in combination." *0301* Form 3 reconciliation of net admissible assets to total capital resources after deductions Total of admissible assets - other than long term business assets Form 13 Line 89 Total of admissible assets - long term business assets Form 13 Line 89 Less: Mathematical reserves, after distribution of surplus Form 14 Line 11 Total other insurance and non-insurance liabilities Form 14 Line 49 Total liabilities - other than long term insurance business Form 15 Line 69 Net admissible assets / total capital resources after deductions Form 3 Line ,188 10,261,009 (9,970,569) (220,846) - 590,782 *0310* Details of positive and negative valuation differences '000 Adjustments for Deferred Tax 26,328 26,328 Positive valuation difference in respect of adjustment for Deferred Tax relates to the Deferred Tax Liability on the Deferred Acquisition Costs. 36

39 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *0313* Reconciliation of profit and loss and other reserves to Form 16 Profit and Loss Account and other reserves as at 31 December 2012 Form 3 Line 12 Column 4 Profit and Loss Account and other reserves as at 31 December 2013 Form 3 Line 12 Column , ,996 Movement in Profit and Loss Account and Other Reserves 26,756 Reporting basis difference 6,171 Less Long Term Business Fund loss/ (profit) retained for the financial year 20,457 Profit retained for the financial year - Form 16 Line 59 53,384 *1100* Form has been omitted on account of de minimis limits as per IPRU(INS)Rule *1200* Form has been omitted on account of de minimis limits as per IPRU(INS)Rule *1301* & *1308* Aggregate value of certain securities The company held no investments meeting the specified criteria. *1304* & *1310* Set off of amounts Amounts have been set off to the extent permitted by generally accepted accounting principles. 37

40 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *1305* & *1319* Maximum Counterparty Limit The Company s investment guidelines set maximum counterparty limits in order to maintain the admissibility of assets in accordance with INSPRU Shareholder and Non-profit funds have mandates which are reviewed annually. The maximum approved counterparty limits for the SWIP Defensive Gilt fund (0-5 year Gilts) and SWIP GLF (stable NAV cash fund) are 1bn and 6bn respectively across the Lloyds Banking Group Insurance Division as a whole. The table below considers the remaining Shareholder and Non Profit fund limits for approved and unapproved counterparties. The amount limits apply in aggregate across all mandates that are treated as Group Reportable Balances. Credit rating of bond AAA Approved (AAA externally rated and guaranteed by a sovereign/supranational) Maximum percentage of Fund 7.50% 600m Maximum absolute amount AAA 4.00% 325m AA+ 3.00% 250m AA 2.50% 200m AA- 2.00% 175m A+ 1.75% 150m A 1.50% 125m A- 1.25% 100m BBB+ 1.00% 75m BBB 0.75% 75m BBB- 0.75% 50m BB+ and below 0.50% 40m Where an asset is unrated, SWIP will assign an appropriate rating and this must be signed off by the Investment Office. The total of all unrated assets for the Fund shall not exceed 5%. There were no breaches of counterparty limits during the year. 38

41 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *1306* & *1312* Amount and nature of exposure at the year end to large counterparties At 31st December 2013 there were two exposures to a counterparty greater than 5% of the base capital resources requirement and long term insurance business liabilities, excluding property linked liabilities and net of reinsurance ceded. Counterparty Nature of assets 000 Lloyds Banking Group plc Direct insurance business 51,396 intermediary debtors Corporate bonds 150,031 Royal Bank of Scotland plc Collateral 76,161 *1318 SH* Details of other adjustments to assets 000 Other interfund adjustment (3,730) Other adjustments to assets Form 13 Line 101 (3,730) *1318 * Details of other adjustments to assets Reclassification of unit linked liabilities included in Net Asset Value of unit linked funds on Form 13 Line ,009 Balances held as liabilities in the Company accounts (49,547) Other adjustments to assets Form 13 Line ,463 *1401* Provision for adverse changes No provision for adverse changes under either GENPRU R to GENPRU R or INSPRU R and INSPRU R has been made. The Company considers asset valuations in the context of the requirements of GENPRU R to GENPRU R. The need for a provision for adverse variation is also considered by the Actuarial Function Holder. The Company's mark to model valuations are formally reviewed and signed off to provide additional comfort over robustness. The Company reviews any potential liquidity issues on assets on a regular basis and incorporates valuation adjustments if required. The Company reviews its investments to identify whether any provisions are required pursuant to INSPRU R and INSPRU R. Sufficient cover is held for all positions to match reasonably foreseeable adverse variations and no non-approved derivatives or quasi-derivatives are held. 39

42 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *1402* Details of contingencies and commitments: a) Charges over assets There are no charges over assets. b) Potential capital gains tax liability There is no potential capital gains tax liability should the Company dispose of its assets, based on asset values as at 31 st December c) Contingent liabilities There are no contingent liabilities. d) Guarantees, indemnities or other contractual commitments affected other than in the ordinary course of insurance business and in respect of related companies. There are no such items. e) Other fundamental uncertainties There are no other uncertainties which it is necessary to disclose. *1405* Details of other adjustments to liabilities 000 Reclassification of unit linked liabilities included in Net Asset Value of unit 68,009 linked funds on Form 13 Line 59 Balances held as assets in the Company accounts (53,173) Other adjustments to liabilities Form 14 Line 74 14,836 *1501* Provision for adverse changes No provision for adverse changes under either GENPRU R to GENPRU R or INSPRU R and INSPRU R has been made. The Company considers asset valuations in the context of the requirements of GENPRU R to GENPRU R. The need for a provision for adverse variation is also considered by the Actuarial Function Holder. The Company reviews any potential liquidity issues on assets on a regular basis and incorporates valuation adjustments if required. No derivatives are held outside of the long-term business fund. 40

43 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *1502* Details of contingencies and commitments: a) Charges over assets There are no charges over assets. b) Potential capital gains tax liability There is no potential capital gains tax liability should the Company dispose of its assets, based on asset values as at 31 st December c) Contingent liabilities There are no contingent liabilities. d) Guarantees, indemnities or other contractual commitments effected other than in the ordinary course of insurance business and in respect of related companies. There are no such items. e) Other fundamental uncertainties There are no other uncertainties which it is necessary to disclose. *1601* Basis of conversion of foreign currency Rates of exchange prevailing at the time of the transaction have been used to convert amounts of income and expenditure in foreign currencies. Assets and liabilities denominated in foreign currencies are expressed in sterling at exchange rates ruling at 31 December *1701* Variation margins in the Long Term Business Fund a) The aggregate amount of excess variation margin which has been received is nil. b) Variation margin received is included in Form 13 Line 44. c) Amounts recorded in Form 13 include any liability to repay such assets or equivalent assets. *4002* Details of other income '000 Stock lending income 1,087 Management fees receivable 562 Renewal commission Unit linked rebates Other income Form 40 Line 15 1,836 41

44 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *4005* Basis of conversion of foreign currency Rates of exchange prevailing at the time of the transaction have been used to convert amounts of income and expenditure in foreign currencies. Assets and liabilities denominated in foreign currencies are expressed in sterling at exchange rates ruling at 31 December *4008* Provision of management services and name of the party providing such services: Scottish Widows Investment Partnership Limited, a subsidiary of Lloyds Banking Group plc, and Insight Investment Funds Management Limited provided investment management services to the Company during the year. Invista Real Estate Investment Management Limited, a subsidiary of HBOS Insurance & Investment Group Limited provides investment management services in respect of property investments. There are four providers of administration services to the Company in the period: Aviva plc provided certain administration services to the Company. St Andrews Group plc, a wholly owned subsidiary of HBOS plc, provided management services under a management agreement in respect of the creditor insurance business. Vertex provide administration services in respect of the Third Party Agreement on the life business in respect of whole of life policies, term assurance policies, capital investment bond and secure life plan, which are currently in run off. Opal provide administration services in respect of the Third Party Agreement on the life business in respect of whole of life policies. *4009* Material Connected Party Transactions The intercompany transactions which exceeded 5% of the insurer's liabilities arising from the long term business amount, excluding property linked and reinsurance are as follows: Name of connected person Scottish Widows plc Halifax Life ltd Halifax Life ltd Relationship with connected person Fellow group undertaking Fellow group undertaking Fellow group undertaking Amount Description of transaction m 150 Loan 100 Dividend 27 Reinsurance arrangement No amounts were written off in the period in respect of debts due to or from connected parties. 42

45 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *4401* Basis of linked asset valuation Linked assets are valued using the FSA Handbook Rules in GENPRU 1.3. Financial assets and instruments used to cover linked liabilities are stated at market value. Stock exchange securities and investments in collective investment schemes have been valued at bid prices. Investment property is shown at open market value as determined by independent valuation. Investment property valuations are carried out by persons who are members of the Royal Institute of Chartered Surveyors and were conducted in accordance with the "RICS Statement of Asset Valuation and Guidance Notes". Other assets have been valued using appropriate international financial reporting standards applicable to the firm for the purpose of its external financial reporting. The Rules in GENPRU to GENPRU may require management to make adjustments to these valuations. *4402* Aggregate value of rights under derivative contracts The value of rights and liabilities under derivatives contracts in the linked funds are: '000 '000 '000 Gross Variation Net margin Derivative rights 17,786 (401) 17,385 Derivative liabilities (4,047) 192 (3,855) Net 13,739 (209) 13,530 *4502* Details of items reported as "other income" or "other expenditure" Other income 000 Underwriting Commission 655 Accrued Interest and Rebate 342 Other income Form 45 Line Other expenditure 000 Income distribution 35,703 Other expenditure - Other expenditure Form 45 Line 26 35,703 *4802* No payment of interest is assumed in the event of assets in default. *4803* Where fixed and variable interest securities can be redeemed over a period at the option of the guarantor or issuer, the latest possible redemption date has been assumed. 43

46 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 NOTES TO THE FORMS (continued) *4900* Form has been omitted on account of de minimis limits as per IPRU(INS) Rule *5103* Product code 440 covers an endowment provision, waiver of premium reserve, additional claims reserve, profit commission reserve and a reserve for future renewal commission payments. *6001* The gross annual premiums for this class of business are less than 1% of the gross annual premiums of the company so Forms 11 and 12 are not needed. The Insurance Health Risk Capital Component is calculated as the greater of 18% of annual premiums and 26% of gross claims. The capital required for PHI business is the same as if Forms 11 and 12 had been completed. 44

47 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 ADDITIONAL INFORMATION REQUIRED BY RULE 9.29 OF THE ACCOUNTS AND STATEMENTS RULES (a) The use of derivatives within each fund is set out in fund management mandates which are in line with company policy as set out by the Board. A summary of the uses to which they are put is as follows: All derivatives that are held should satisfy the principles of efficient portfolio management (EPM): The transactions must be economically appropriate; The exposure must be fully covered; and The transactions must be entered into for one or of i. the reduction of risk; ii. the reduction of cost; iii. the generation of additional capital or income for the fund with an acceptably low level of risk; and iv. obtaining exposure to the performance of Lloyds Banking Group plc shares through Contracts for Differences where a direct holding of the shares is not permitted Unless they are exchange traded, derivatives may only be executed within the limits of credit exposure with counterparties as approved by the Board from time to time. Where appropriate a change of control clause should be included in the agreement. Over the counter (OTC) contracts should meet the requirements of the International Swaps and Derivatives Association (ISDA). All derivative positions comply with the requirements of INSPRU 3.2.5, which includes the requirement for the positions to be covered with appropriate margining and collateralisation arrangements being applied. They should not create, or potentially create, an open ended liability (net of coverage from the underlying asset). From time to time bespoke derivative arrangements are put in place to mitigate against specific risks in these cases the terms of instruction will specify limitations consistent with the fund mandates. The primary objectives of these policies are to minimise any unintended risks. Any proposed use of derivatives which falls outwith the limits of the relevant fund management mandate must be authorised by either the relevant committee or the Board. Compliance with fund managements is reviewed regularly with breaches reported on a monthly basis. Data relating to derivative positions is also provided on a regular basis to enable Life Company oversight of the actions of the fund manager. (b) The use of contracts which, at the time the contract is entered into, are not reasonably likely to be exercised is restricted to those instruments used for the protection of free assets. (c) During the financial year, the Company did not enter into any contracts described in (b) above. (d) At no time during the year did the Company enter into a derivative or quasi-derivative contract which required a significant provision to be made for it under INSPRU R or did not fall within the definition of a permitted derivative contract (e) No consideration was received by the insurer during the financial year in return for granting rights under derivative or quasi-derivative contracts. 45

48 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 STATEMENT OF INFORMATION ON SHAREHOLDER CONTROLLER AS REQUIRED BY RULE 9.30 OF THE INTERIM PRUDENTIAL SOURCEBOOK FOR INSURERS. The immediate shareholder controller of the Company during the financial year was Halifax Life Limited. Halifax Life Limited is a wholly owned and controlled subsidiary of Clerical Medical Investment Group Limited. Clerical Medical Investment Group Limited is a wholly owned and controlled subsidiary of 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. Halifax Life Limited holds all the issued shares of the Company and is thereby entitled to exercise all the associated voting powers at any general meeting of the Company. 46

49 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT APPENDIX 9.4 FOR THE PERIOD ENDING 31 DECEMBER 2013 ABSTRACT OF VALUATION REPORT 1. Introduction (1) The valuation date is 31 December (2) The previous valuation date was 31 December (3) Not applicable. 2. Product range New products No new products were introduced during Changes to existing products Over 50s Guaranteed Life Plan Over 50s Guaranteed Life Plan was closed to new business on 31/10/13. This product does not accept increments. 3. Discretionary charges and benefits (1) Not applicable. (2) There were no changes to premiums on reviewable protection policies. (3) Not applicable. (4) Monthly service charges on linked policies are increased annually in line with the Average Weekly Earnings (AWE) or the Retail Prices Index. In 2013 these increases were as follows: Products Old Charge New Index used Charge Investment Plan AWE Savings and Protection Mortgage Plan AWE Savings Plan AWE Mortgage Repayment Plan AWE Flexible for Life Plan AWE Critical Illness Plan AWE Regular Investment Plan AWE Tax Free Home Plan (Home Protection Benefits) RPI The charge increases are based on July to July increases in the relevant indices as follows: July 2012 July 2013 Increase RPI % AWE % 47

50 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) (5) There were no changes to benefit charges on linked contracts. (6) Not applicable. (7) Unit Pricing for Internal Linked Funds (a) (i) Creation and cancellation of units of internal linked funds: The Company s policy is to match the units allocated for policies (the liability units ) closely to the units available within each corresponding unit fund (the asset units ). The excess of asset units over the liability units is called the box of units. The Company s policy is to avoid negative unit boxes, however, for practical reasons these can arise from time to time. The Company's policy also places a limit on the maximum size of the box of units for each fund, after allowing for any units reserved for new policies which have already been accepted but have yet to be issued. Whenever units in a fund are created or cancelled, cash or assets of equivalent value at the bare price are added or deducted respectively. Within the above policy, the Company s practice is to create or cancel units such that each fund s box size is the smallest practical commensurate with efficient dealing in the investments permitted under the guidelines for the fund. (a) (ii) Unit Prices: The unit prices make allowance for the actual or expected outgoings from the fund, actual tax charges and prospective tax liabilities attributable to the fund and are computed for each fund normally each working day as follows:- i) The assets of the fund are valued, together with any accrued income and uninvested cash as follows:- a) The maximum value of any asset may not exceed the market value at which it may be purchased, increased by any charges which may be expected; and b) The minimum value of any asset may not be less than the market value at which it may be sold, reduced by any charges which may be expected. c) The mid-market value of any asset is the average of the maximum and minimum values. ii) iii) iv) (v) For listed securities, prices quoted on a recognised Stock Exchange are used. Otherwise, the value of assets is determined by the Company in conjunction with its investment managers. Any other charges incurred or expected are deducted or added. For single priced funds, the price of the units is the sum of the mid-market values of the assets divided by the number of units in issue. For dual priced funds, the price will be on a bid or offer basis as appropriate. a) The bid price of the units is the sum of the bid-market values divided by the number of units in issue. b) The offer price of the units is the bid price increased for a bid/offer spread. (a) (iii) Valuation of Assets: For all funds the assets are valued on a mid-market basis, where the mid-market value of the assets is the average of the valuations on an offer and a bid basis as 48

51 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) described above. A dilution levy may be applied to large transactions, at the discretion of the company, to avoid dilution of existing investments. (a) (iv) For the purpose of calculating the unit price of each fund the assets are valued at 12pm. Allocations and deallocations of units from policies use the price at the next valuation following receipt of instructions, except for switch transactions where a cut-off point of 5pm applies, with instructions received after this time receiving the price at the next but one valuation point. (b) (c) There is no change in the pricing basis for any funds. Unit-linked contracts can be invested in any of the unit-linked funds within the range of funds available to them. The total value of units held within the contract is determined based on the prices of the units in each of the fund in which the contract is invested. Units held in collective investment schemes have been valued consistently with the underlying investments, using the price applicable at the 12pm valuation point. (8) Taxation deductions for internal linked funds Tax at 20% of realised chargeable gains and taxable income is settled quarterly in arrears. There is no settlement of tax on unrealised gains and losses which remain as a provision within the funds. (9) Taxation provisions for internal linked funds For all unit-linked funds, provision held in the internal linked fund is made on a daily basis for tax on both realised and unrealised chargeable gains. A provision is then made on the basis that there is adequate provision to meet the future incidence of tax payments as they fall due. Realised and unrealised chargeable gains include the respective element of deemed disposals of OEICs. Provision was made during 2013 on the internal linked funds for realised chargeable gains at a rate of 20% and unrealised chargeable gains where the rate of 20% is discounted using a discount rate which is reviewed at regular intervals. During 2013 this rate ranged between 0.6% to 0.9%. Until July 2013, credit for unrelieved capital losses was given at a rate ranging between 0% and 17% depending on the expectation that gains will arise in the future to offset these losses. This was changed in July when cash equivalent to the then credit provision was paid into the funds and losses equivalent to the value at the policyholder rate were removed so there was no impact on price. After July, no credit is normally given for unrelieved capital losses (and losses will be carried forward). (10) When a unit-linked fund invests through an external fund link and the external fund provider charges the Company, then these charges are passed on to investors in the fund as an addition to the existing charges. The end result is therefore profit neutral for the company. 4. Valuation basis (1) Valuation methods Non-linked policies 49

52 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) Term Assurances Creditor business In the case of single premium creditor term assurances and disability cover a reserve equivalent to the greater of the (net of agent s commission) unearned premium (without any cancellation charge), and the discounted value of the future benefits increased by 10% to provide for expenses, is held. This reserve covers any return of premium that is due upon the early repayment of the loan and consequent cancellation of the insurance contract including outstanding instalments (where applicable) for which the company takes credit. For revolving credit term assurances a reserve equivalent to the monthly instalment premium (net of agent s commission) at the valuation date is held which covers the cost of outstanding risk. Additional reserves were held for creditor business to cover IBNR, pending claims, continuing claims, accrued profit commission, and for premiums receivable prior to the investigation date for which no valuation data had then been established. Term Assurances - Total Mortgage Protection Plan & PFA Products A gross premium method of valuation was adopted with explicit reserves for expenses after the valuation date. There was no minimum reserve. An additional reserve was held to cover Incurred But Not Reported (IBNR) claims. Term Assurances - Other For conventional term assurances a gross premium valuation basis was used with specific reserves for expenses after the valuation date. Linked policies For property linked business, a gross premium valuation method was used. Comments applying to products in general For business reinsured from St. Andrew's Life to Halifax Life Limited the reserve is the same as the reinsurer's valuation liability. Derivative contracts are used within the internal linked funds and the main fund for efficient portfolio management. All such contracts are fully covered. Consequently, no additional reserve has been made for derivative contracts. (2) Interest Rates Valuation interest rates used in the valuation were as follows: 31/12/ /12/2013 Term Assurances 0.51% p.a. (net) 1.26% p.a. (net) Linked Products 0.51% p.a. (net) 1.26% p.a. (net) (3) Risk Adjusted Yields The Company s policy is to invest non-linked assets in fixed interest securities, variable interest asset backed securities, cash and near cash instruments. The yields on the 50

53 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) underlying assets are adjusted to allow for the maximum of 97.5% of the underlying yield. (4)&(5) Mortality and Morbidity Rates Mortality and morbidity rates are based on UK experience. A small part of the creditor business is written outside the UK, in other EU countries. Non-linked Policies Term Assurances Creditor business The following mortality tables have been used in the valuation: Product 31/12/ /12/2013 Creditor 100% AM92U 100% AM92U Term Assurances - Total Mortgage Protection Plan & PFA Products For Total Mortgage Protection Plans and PFA Products the following mortality has been used:- 31/12/ /12/2013 Male NS 104%TMN00 Select 109%TMN00 Select Male S 104% TMS00 Select 92% TMS00 Select Female NS 109% TFN00 Select 109% TFN00 Select Female S 115% TFS00 Select 109% TFS00 Select Specimen morbidity rates are shown below. The annual rates for critical illness cover only (per 1,000 sum assured) are: Age Male NS Male S Female NS Female S At 31/12/2012, the specimen morbidity rates were: Age Male NS Male S Female NS Female S Term Assurances - Other For term assurance policies the following mortality has been used:- 51

54 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) 31/12/ /12/2013 Male NS 88% TMN00U + 88% LTA_CI_EXP_MN U 88% TMN00U + 88% LTA_CI_EXP_MN U Male S 88% TMS00U + 88% LTA_CI_EXP_MS U 88% TMS00U + 88% LTA_CI_EXP_MS U Female NS 55% TFN00U + 55% LTA_CI_EXP_FN U 55% TFN00U + 55% LTA_CI_EXP_FN U Female S 55% TFS00U + 55% LTA_CI_EXP_FS U 55% TFS00U + 55% LTA_CI_EXP_FS U No explicit allowance has been made for possible future increases to mortality. For the Over 50's Plan the following mortality has been used:- 31/12/ /12/2013 Male NS 165% AMC00U 165% AMC00U Male S 165% AMC00U 165% AMC00U Female NS 165% AFC00U 165% AFC00U Female S 165% AFC00U 165% AFC00U Linked Policies For linked policies, the following mortality has been used:- Product 31/12/ /12/2013 Endowment Assurances Male NS 50% AMN00 Select + 50% LTA_CI_EXP_MN U 50% AMN00 Select + 50% LTA_CI_EXP_MN U Male S 50% AMS00 Select + 50% LTA_CI_EXP_MS U 50% AMS00 Select + 50% LTA_CI_EXP_MS U Female NS 50% AFN00 Select + 50% LTA_CI_EXP_FN U 50% AFN00 Select + 50% LTA_CI_EXP_FN U Female S 50% AFS00 Select + 50% LTA_CI_EXP_FS U 50% AFS00 Select + 50% LTA_CI_EXP_FS U Investment Male 77% AMC00U 72% AMC00U Bonds Female 94% AFC00U 94% AFC00U For linked policies, no explicit allowance has been made for possible future increases to mortality. (6) Expenses Non-linked policies The explicit expense allowance per policy is:- 31/12/ /12/2013 Term assurances (325 / 330) Expenses are before tax relief of 20%. Investment expenses are assumed to be 0.154% of the reserve. Linked policies The explicit expense allowance per policy is:- 52

55 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) 31/12/ /12/2013 Investment Bonds (700) Assurances (720) Expenses are before tax relief of 20%. Investment expenses are assumed to be 0.154% of the reserve / unit fund for products managed through Scottish Widows Investment Partnership. For products with funds invested through HBOS Investment Fund Managers Limited investment expenses are assumed to be 0.209% of the reserve. The investment expense for Guaranteed Investment Plan also includes an assumption to reflect the fee for managing the investment guarantee. For policies incepting before September 2008 this fee is 0.55% (paid to HBOS Treasury) and for policies incepting between September 2008 and December 2009 this fee is 0.6% (paid to BNP Paribas) (7) Unit Growth Rates and Expense Inflation For policies linked to internal linked funds, the following growth rates were used:- Type of business Life / Pension 31/12/ /12/2013 All products Life 2.32% p.a. 3.45% p.a. The assumption for expense inflation and policy fee inflation is 4.55% p.a. (8) Future bonus rates in the valuation basis Not applicable. (9) Lapse rates The average lapse rates used in the valuation were as follows: Product Average lapse rate for the policy years (%p.a.) Level Term (325) Lapse Decreasing Term (330) Lapse Income Protection (360) Lapse UL Bond (700) Surrender For all other products no allowance is made for lapses in the valuation. (10) Other material basis assumptions All covered in the above sections. (11) Derivatives No derivative assets were hypothecated to liabilities in setting the valuation interest rate. (12) Impact of methodology changes 53

56 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) There has been no further change in valuation method in respect of changes in INSPRU valuation rules since the previous year-end. 5. Options and Guarantees (1) There is no requirement to hold any additional explicit reserves in respect of guaranteed annuity rate options. (2) An additional explicit reserve is held in respect of the return of premium on death guarantee for the PIP product. The size of this reserve is less than 10m. (3) There is no requirement to hold any additional explicit reserves in respect of guaranteed insurability options. (4) There are no other Guarantees or Options. 6. Expense reserves (1) The total renewal (including terminal) expense loadings in the valuation are 23.3m. This figure is made up of explicit expense allowances only. An allowance for investment expenses, expressed as a percentage of the total mathematical reserve has been calculated as 27.1m. (2) Not applicable. (3) The amount of modelled maintenance expenses is different to the maintenance expenses shown at line 14 of Form 43 because the latter includes additional expenses that are covered elsewhere in the Valuation. (4) An estimate has been made for the valuation surplus for SAL for the 12 months after the valuation date, combined with the expected new business strain based on planned new business volumes. This gives a surplus of 54.4m so no additional reserve is required. (5) Maintenance expense overrun reserve Explicit expense allowances are included in the calculation of the mathematical reserves. No maintenance expense overrun reserve is required. Explicit allowances are set in line with an analysis of actual and expected spend, with an additional prudential margin. (6) Not applicable. 7. Mismatching reserves (1) Not applicable. (2) Not applicable. (3) Currency Matching All non-unit reserves are matched by assets in the same currency. (4) Resilience Capital Requirement 54

57 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) A resilience capital requirement (RCR) has been calculated in accordance with INSPRU The RCR was determined by identifying assets which, after applying the scenario set out below, had a value equal to the firm's long term insurance liabilities under that scenario. The amount of the RCR was then calculated by deducting the long term insurance liabilities from the value of the assets identified above, prior to applying the scenario below. For the purposes of calculating the RCR, the most onerous scenario under INSPRU was a fall in the market value of equities by 10%, a fall in real estate value of 20%, and a fall in the yields of fixed interest investments of 69 basis points. (5) There are no assets invested outside the UK and so no testing was necessary. (6) After carrying out this test, an RCR of 7.5m is required. Under the scenario described above, the aggregate amount of the liabilities increases by 7.5m. There is no change in the aggregate amount of assets allocated to match these liabilities from the amount shown in Form 13. (7) No further reserve was made in respect of the resilience capital requirement test. 8. Other special reserves No other reserves are significant enough to include. 9. Reinsurance (1) The company did not cede any reinsurance on a facultative basis to a reinsurer who is not authorised to carry on insurance business in the UK. 55

58 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) (2) (d) Reinsurer 1. Gen Re 2. Halifax Life Limited (e) Nature & Extent of cover under treaty (f) Treaty Premiums ( 000) (g) Amounts Deposited (h) Closed to New Business (i) Undischarged Obligation (j) Mathematical Reserves Ceded ( 000) (k) Retention Original Terms Reinsurance covering TMPP LTA and DTA policies sold after 1/3/2004 Original Terms Reinsurance covering Personal Investment Plan and Flexible Protection Plan 3. Gen Re 4. Munich Re Original Risk Terms Premium Reinsurance Reinsurance covering covering Level Term TMPP LTA Assurance and DTA Plan and policies sold Loan before Assurance 1/3/2004 Plan 5. Swiss Re 6. Gen Re Original Terms Reinsurance covering Over 50s Life Plan 18,641 Nil 4,512 6,061 3,050 2,880 Nil Nil Nil Nil Nil Nil Yes No Yes Yes Yes Yes No No No No No No 48,671 35, ,589 8, % of all claims notified after 31/12/2010. Nil 100% reinsured Life and Accidental Death Benefits: 20% Waiver of premium and Standalone and Accelerated Critical Illness: 25% 50% of all claims. 65% quota share up to max of 8,450. Original Terms Reinsurance covering LTA, DTA and FIB sold through PFAs. 70% quota share up to max of 175,000. (l) (m) (n) (o) (p) Gen Re, HLL, Munich Re and Swiss Re are authorised to carry on business in the UK. HLL is a connected company of the insurer. Gen Re, Munich Re and Swiss Re are not. The company is exposed to the credit default risk of the reinsurer. No provision has been made for the refunding of any reinsurance commission in the event of lapse or surrender of a contract. There are no financing arrangements. (3) Not Applicable 56

59 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 st DECEMBER 2013 ABSTRACT OF VALUATION REPORT (continued) 10. Reversionary (or annual) bonus Not applicable. 57

60 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31 DECEMBER 2013 DIRECTORS CERTIFICATE REQUIRED BY RULE 9.34 OF THE ACCOUNTS AND STATEMENTS RULES We certify: 1. (a) that the return has been properly prepared in accordance with the requirements in IPRU(INS), GENPRU and INSPRU, as modified by waivers dated 5 March 2009 and 30 December 2010 issued under section 148 of the Financial Services and Markets Act 2000, and; (b) we are satisfied that: (i) (ii) throughout the financial year in question, the insurer has complied in all material respects with the requirements in SYSC and PRIN as well as the provisions of IPRU(INS), GENPRU, and INSPRU; and it is reasonable to believe that the insurer has continued so to comply subsequently, and will continue so to comply in future. 2. (a) that in our opinion, premiums for contracts entered into during the financial year and the resulting income earned are sufficient, under reasonable actuarial methods and assumptions, and taking into account the other financial resources of the insurer that are available for the purpose, to enable the insurer to meet its obligations in respect of those contracts and, in particular, to establish adequate mathematical reserves; (b) (c) that the sum of the mathematical reserves and the deposits received from reinsurers as shown in Form 14, constitute proper provision at the end of the financial year in question for the longterm insurance liabilities (including all liabilities arising from deposit back arrangements, but excluding other liabilities which had fallen due before the end of the financial year) including any increase in those liabilities arising from a distribution of surplus as a result of an actuarial investigation as at that date into the financial condition of the long-term insurance business; and that we have in preparing the return, taken and paid due regard to advice from every actuary appointed by the insurer to perform the actuarial function in accordance with SUP R. A M Parsons Director T E Strauss Director C J Thornton Director Date : 20 March

61 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31st DECEMBER 2013 Auditors report: Regulatory Return for a life insurance company St. Andrew s Life Assurance Plc Global business Independent auditors report to the directors pursuant to rule 9.35 of the Interim Prudential Sourcebook for Insurers We have audited the following documents prepared by the insurer pursuant to the Accounts and Statements Rules set out in Part I and Part IV of Chapter 9 to IPRU(INS) the Interim Prudential Sourcebook for Insurers, GENPRU the General Prudential Sourcebook and INSPRU the Prudential Sourcebook for Insurers ( the Rules ) made by the Financial Services Authority under section 138 of the Financial Services and Markets Act 2000: Forms 2, 3, 13 to 17, 40 to 45, 48, 58 and 60, (including the supplementary notes) on pages 1 to 21, 24 and 34 to 44 ( the Forms ); the statement required by IPRU(INS) rule 9.29 on page 45 ( the statement ); and the valuation report on pages 47 to 57 ( the valuation reports );. We are not required to audit and do not express an opinion on: Forms 46, 47, 50 to 55, 57, (including the supplementary notes) on pages 22, 23 and 25 to 33; the statements required by IPRU(INS) rule 9.30 on page 46; and the certificate required by IPRU(INS) rule 9.34(1) on page 58. Respective responsibilities of the insurer and its auditors The insurer is responsible for the preparation of an annual return (including the Forms, the statement and the valuation report) under the provisions of the Rules. The requirements of the Rules have been modified by directions issued under section 148 of the Financial Services and Markets Act 2000 on 5 March 2009 and 30 December Under IPRU(INS) rule 9.11 the Forms, the statement and the valuation report are required to be prepared in the manner specified by the Rules and to state fairly the information provided on the basis required by the Rules. The methods and assumptions determined by the insurer and used to perform the actuarial investigation as set out in the valuation report are required to reflect appropriately the requirements of INSPRU 1.2. It is our responsibility to form an independent opinion as to whether the Forms, the statement and the valuation report meet these requirements, and to report our opinion to you. We also report to you if, in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the Forms, the statement and the valuation report are not in agreement with the accounting records and returns; or we have not received all the information we require for our audit. This report has been prepared for the directors of the insurer to comply with their obligations under IPRU(INS) rule 9.35 and for no other purpose. We do not, in providing this report, accept or assume responsibility for any other purpose save where expressly agreed by our prior consent in writing. 59

62 RETURNS UNDER THE ACCOUNTS AND STATEMENTS RULES FINANCIAL YEAR ENDED 31st DECEMBER 2013 Basis of opinion We conducted our work in accordance with Practice Note 20 'The audit of insurers in the United Kingdom (Revised)' issued by the Auditing Practices Board. Our work included examination, on a test basis, of evidence relevant to the amounts and disclosures in the Forms, the statement and the valuation report. The evidence included that previously obtained by us relating to the audit of the financial statements of the insurer for the financial year i. It also included an assessment of the significant estimates and judgements made by the insurer in the preparation of the Forms, the statement and the valuation report. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Forms, the statement and the valuation report are free from material misstatement, whether caused by fraud or other irregularity or error and comply with IPRU(INS) rule In accordance with IPRU(INS) rule 9.35(1A), to the extent that any document, Form, statement, analysis or report to be examined under IPRU(INS) rule 9.35(1) contains amounts or information abstracted from the actuarial investigation performed pursuant to IPRU(INS) rule 9.4, we have obtained and paid due regard to advice from a suitably qualified actuary who is independent of the insurer. Opinion In our opinion: (i) the Forms, the statement and the valuation report fairly state the information provided on the basis required by the Rules as modified and have been properly prepared in accordance with the provisions of those Rules; and (ii) the methods and assumptions determined by the insurer and used to perform the actuarial investigation as set out in the valuation report appropriately reflect the requirements of INSPRU 1.2. PricewaterhouseCoopers LLP Chartered Accountants 20 March