Standard bearing

You hope to raise new capital through the IPO. How much are you
raising, why that amount and what will you do with the money?

We intend to raise £1.1bn. Of that, we intend to pass £800m down to the life
company, which will be used to fund new business writing and also for regulatory
capital. Around £300m will stay in the holding company for general business

Some reports suggested you were planning to raise up to £2bn.
As I said, £1.1bn is enough for our purposes, but we are providing a
facility for our members who may wish to sell their free shares, and therefore
the total size of the offer may be higher.

What about your pension fund with its £200m deficit, what are your
We have agreed a funding arrangement for the deficit with the trustees
of the scheme. You would also see in our assumptions on the pension, that we
have changed our assumptions on pension inflation in the defined benefit scheme.
We have limited that to the level of inflation, which in these assumptions is
2.85%, to make sure that we do limit our liabilities.

Costs have played an important part in your business performance. You
have already taken £100m in costs out of the business, is there room for

Well, as you say, we have achieved a lot over the past two years. We have
reduced our headcount significantly. We have had 2,000 fewer people on average
this year across the group than last year. A significant proportion of
that is from the UK, particularly on the life and pensions business, but
I do see more opportunity. There is obviously opportunity within processing and
becoming more efficient and we do see the continued opportunity to take cost out
of the business.

You are putting new data into the market today with EEV figures, in
your view, what do they tell us?

In anticipation of becoming a plc we have calculated EEV figures based on the
scheme of demutualisation. There are two key numbers. First, our balance sheet
embedded value has risen by £780m to £3.7bn, and we have also shown EEV group
profits of £535m compared to £48m last year. There is also a move of £245m in
the capital exchange differences.

How successful have the changes to your commission structure been?

We have done a lot, as you know, in terms of sorting out the amount of
commission we pay. We have seen a significant change in our business away from
regular premium to singular premium product, with a SIPP particularly and also
investment products.

We have also made sure that in terms of the actual commission payments we are
making, both on increments and in the new business, that those actual costs

are lower.

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