Review of the Year

Financial Key Performance Indicators

IFRS underlying (loss)/profit before tax

Why this is important

IFRS is the primary accounting basis. It includes the cash surplus earned during the period but differs from the EEV basis in that, with limited exceptions, it does not recognise future cash flows in profit, although it does allow for the deferral of some acquisition costs. Dividend cover is a measure of dividend paying capacity.

Commentary on performance

The decrease from 2006 is due to several factors: the inclusion of £156m of reserving basis changes in 2006 not repeated; the effect of widening credit spreads on reserving; expense assumption changes; and the amortisation of deferred acquisition costs on protection business.

Calculation basis

IFRS underlying (loss)/profit is based on longer-term investment return and excludes policyholder tax, returns attributable to minority interests in policyholder funds, non-recurring items, amortisation and impairment of acquired intangible assets and present value of acquired in-force business. It is stated after deducting interest payable on STICS. Dividend cover is the ratio of IFRS underlying (loss)/profit after tax and minority interest to the cost of dividend.