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Standard Life plc - Annual Report and Accounts 2007
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IFRS underlying profit before tax

Our IFRS statutory income statement, which shows IFRS profit after tax, and the reconciliation to underlying profit are shown in the Group IFRS consolidated financial statements section. We believe that the IFRS underlying profit before tax adjusted for non-operating items provides a more meaningful analysis of the underlying business performance.

Movement in IFRS underlying profit

Underlying profit in both 2006 and 2007 includes certain one off items. In 2006, there were one off reserve releases of £53m. There was also a one off increase in profit in Germany relating to exceptionally high sales in 2004 and 2005 due to changes in tax legislation at that time.

Underlying profit in 2007 includes a one off positive adjustment for PS06/14. This resulted in a significant one off release of reserves of £136m in UK life and pensions and £2m in Ireland. There was an additional £143m one off release of reserves in the UK in relation to the deferred annuity business. Mortality assumptions in the UK and Canada were strengthened by an additional £100m and £37m respectively and took into account lighter mortality experience. However, these were partially offset by other assumption and modelling changes of £94m in the UK.

Excluding the significant one off transactions in both years the normalised underlying profit has increased by 7% from £443m to £476m, predominantly due to increased income from annual management charges of £35m and a £32m reduction in corporate costs. These have been partially offset by increased investment in new business development of £26m.

Movements in IFRS underlying profit £m: Pro forma FY 2006 underlying profit: 540; UK reserving changes: (53); Canadian Universal life losses: 7; Profit on exceptional German sales: (51); Normalised FY 2006 underlying profit: 443; Increased management charges: 35; New business development: (26); Reduction in corporate costs: 32; Other: (8); Normalised FY 2007 underlying profit: 476; Additional mortality reserve on annuities: (137); Adoption of PS06/ 4: 138; Reserving change on deferred annuities: 143; Other assumption/ modelling changes: 94; FY 2007 underlying profit: 714

Diluted IFRS underlying EPS

Diluted IFRS underlying EPS increased by 53% to 33.3p.