Lloyds TSB snubs IFRS for embedded value
Lloyds TSB has become the second major bank to snub IFRS and publish its accounts – effectively twice – under embedded value criteria as well as under the controversial IFRS rules
In May 2004, the CFO Forum published its European Embedded Value (EEV)
principles which set out a series of agreed standards for embedded value
reporting. The rules mean that Lloyds and other insurers can provide more detail
on the value of contracts with future expected revenues. HBOS has already made
the move.
IFRS only allows for the recording of the revenues once they have been
accrued. The FTSE 100 player believed that compared with traditional embedded
value, EEV Principles also provided a more appropriate valuation of ‘in-force
business’ which takes into account the cost of financial options and guarantees,
and required capital, as well as non-market risks, such as mortality.
Lloyds said that the principles ‘established a consistent treatment for the
financial information provided for insurance and investment contracts,’ and, ‘in
its view, allow a fuller recognition of the economic value being created.’
Lloyds continues to report under IFRS, but stressed in its annual accounts
that embedded value was vital if the true value of its Scottish Widows arm was
to be reflected:
‘We believe that EEV reporting provides for increased clarity, transparency
and comparability of financial information.’
Other major insurers may also jump on the embedded value bandwagon. The CFO
forum counts Old Mutual, Prudential Assurance Company, Standard Life Assurance
Company and Zurich Financial Services Group on its membership list.
COMPANY REPORTS
NES appoints new group finance director
Steve Buckley, a former partner at Arthur Andersen, has been named as the
group finance director at NES Group, the technical, rail, IT and engineering
recruitment company. Buckley graduated from Oxford University, before taking up
his most recent position as group finance director with privately owned consumer
finance business the Funding Corporation. He spent 14 years at Andersen, where
he became its youngest UK partner in 1999. He will be based at the NES’s
Manchester head office.
Mixed bag for London stockmarkets
Companies listing on the main London market raised £3.8bn in the first quarter
of 2007, compared to £3.5bn in the same period last year, according to research
by KPMG. On the downside, research by KPMG’s capital markets group found that
the number of IPOs on AIM had fallen, but the market has been buffered by a
strong demand to list from overseas companies.
According to the study just 10 firms sought a listing on the main market in
the first quarter of 2007 compared with 22 companies in the first quarter of
2006. While this shows a fall in the number of companies listing, the figures
also show the average deal value has approximately doubled compared to those in
the same period last year.
Linda Main, transaction services partner in KPMG’s capital markets group,
said: ‘London remains the city of choice for the world’s most ambitious
companies. Although the overall number of IPOs is down on last year, the value
of those that came onto the market has soared with the funds raised doubling on
average compared to last year.’