Scottish Equitable plc - Aegon UK · 19032013:18:06:58 Form 2 Statement of solvency - long-term insurance business Name of insurer Scottish Equitable plc Global business Financial

Scottish Equitable plc

ANNUAL RETURN UNDER THE INTERIM PRUDENTIAL SOURCEBOOK FOR INSURERS

CHAPTER 9 APPENDICES 9.1, 9.3, 9.4, 9.4A, 9.6

For the year ended 31 December 2012

HEAD OFFICE EDINBURGH PARK, EDINBURGH, EH12 9SE.

Registered in Scotland (No. 144517) and principal office at above address.

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 11 Calculation of general insurance capital requirement - premiums

amount and brought forward amount

6

Form 12 Calculation of general insurance capital requirement - claims

amount and result

7

Form 13 Analysis of admissible assets 8

Form 14 Long term insurance business liabilities and margins 20

Form 15 Liabilities (other than long term insurance business) 23

Form 16 Profit and loss account (non-technical account) 24

Form 17 Analysis of derivative contracts 25

Form 18 With-profits insurance capital component for the fund 29

Form 19 Realistic balance sheet 30

Long Term Insurance Business: Revenue Account and Additional Information

Form 40 Revenue account 32

Form 41 Analysis of premiums 35

Form 42 Analysis of claims 38

Form 43 Analysis of expenses 41

Form 44 Linked funds balance sheet 44

Form 45 Revenue account for internal linked funds 45

Form 46 Summary of new business 46

Form 47 Analysis of new business 47

Form 48 Assets not held to match linked liabilities 51

Form 49 Fixed and variable interest assets 54

Form 50 Summary of mathematical reserves 57

Form 51 Valuation summary of non-linked contracts (other than

accumulating with-profits contracts)

60

Form 52 Valuation summary of accumulating with-profits contracts 69

Form 53 Valuation summary of property linked contracts 74

Form 55 Unit prices for internal linked funds 80

Form 57 Analysis of valuation interest rate 84

Form 58 Distribution of surplus 86

Form 59A/B With-profits payouts on maturity / surrender 89

Form 60 Long-term insurance capital requirement 91

Supplementary Notes to the Return 92

Additional Information on Derivative Contracts 102

Additional Information on Controllers 103

Abstract of the Valuation Report 104

Abstract of the Realistic Report 147

Statement of Information on the With Profits Actuary 170

Directors' Certificate 171

Auditor's Report 173

Certificate on Compliance with the Scheme of Demutualisation 175

19032013:18:06:58

Form 2

Statement of solvency - long-term insurance business

Name of insurer Scottish Equitable plc

Global business

Financial year ended 31 December 2012

Solo solvency calculation Company GL/

registration UK/ day month year Units

number CM

R2 144517 GL 31 12 2012 £000

As at end of As at end of

this financial the previous

year year

1 2

Capital resources

Capital resources arising within the long-term insurance fund 11 814074 1085079

12 481643 486948

13 1295718 1572027

Guarantee fund

Guarantee fund requirement 21 241219 229446

22 1054499 1342580

Minimum capital requirement (MCR)

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)

Excess (deficiency) of available capital resources to cover guarantee fund

requirement

Long-term insurance capital requirement 31 723657 688339

Resilience capital requirement 32

Base capital resources requirement 33 2984 3056

Individual minimum capital requirement 34 723657 688339

Capital requirements of regulated related undertakings 35

Minimum capital requirement (34+35) 36 723657 688339

Excess (deficiency) of available capital resources to cover 50% of MCR 37 933889 1227857

Excess (deficiency) of available capital resources to cover 75% of MCR 38 752975 1055772

Enhanced capital requirement

With-profits insurance capital component 39 444243 661563

Enhanced capital requirement 40 1167900 1349902

Capital resources requirement (CRR)

Capital resources requirement (greater of 36 and 40) 41 1167900 1349902

42 127818 222125

Contingent liabilities

51 6000

Excess (deficiency) of available capital resources to cover long-term

insurance business CRR (13-41)

Quantifiable contingent liabilities in respect of long-term insurance business

as shown in a supplementary note to Form 14

1

19032013:18:06:58

Form 2

Covering Sheet to Form 2


Global business


A.T. GRACE, Chief Executive

C.J. BOUSFIELD, Director

C.M. GARTHWAITE, Director

Edinburgh, 21 March 2013

2

19032013:18:06:58Form 3

(Sheet 1)

Components of capital resources


Global business


Company GL/

registration UK/ Units number CM

R3 GL 31 12 2012 £000

General Long-term Total as at Total as at

insurance insurance the end of the end of

business business this financial the previous

year year1 2 3 4

Core tier one capital

Permanent share capital 11 625000 625000 625000

Profit and loss account and other reserves 12 3388742 3388742 2806038

13

Positive valuation differences 14 1021533 1021533 1995637

15

16

Core tier one capital (sum of 11 to 16) 19 5035275 5035275 5426675

Tier one waivers

21

Implicit Items 22

Tier one waivers in related undertakings 23

24

Other tier one capital

25

26

27

28

31 5035275 5035275 5426675

32

33

34

35

36

37

39 5035275 5035275 5426675

Deductions from tier one (32 to 36)

Total tier one capital after deductions (31-37)

Total tier one capital before deductions

(19+24+25+26+27+28)

Investments in own shares

Intangible assets

Amounts deducted from technical provisions for discounting

Other negative valuation differences

Deductions in related undertakings

Unpaid share capital / unpaid initial funds and calls for

supplementary contributions

Total tier one waivers as restricted (21+22+23)

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

day month year

144517

Share premium account

Fund for future appropriations

Core tier one capital in related undertakings

3

19032013:18:06:58Form 3

(Sheet 2)



Global business


Company GL/


R3 GL 31 12 2012 £000




year year1 2 3 4

Tier two capital

41

42

43

44

45

46

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 (51+52+53) 59

61

Excess tier two capital 62

63

69

Tier two waivers, innovative tier one capital and perpetual non-

cumulative preference shares treated as tier two capital (41 to

43)

Perpetual cumulative preference shares

Perpetual subordinated debt and securities

Total tier two capital before restrictions (49+59)

Further excess lower tier two capital

Total tier two capital after restrictions, before deductions

(61-62-63)

day month year

144517

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

4

19032013:18:06:58 Form 3

(Sheet 3)



Global business


Company GL/


R3 GL 31 12 2012 £000




year year1 2 3 4

Total capital resources

71

72 5035275 5035275 5426675

73 3254253 3254253 3267362

74 485304 485304 587286

75

76

77

79 1295718 1295718 1572027

Available capital resources for GENPRU/INSPRU tests

81 1295718 1295718 1572027

82 1295718 1295718 1572027

83 1295718 1295718 1572027

Financial engineering adjustments

91

92 71753 71753 147515

93

94 75036 75036 130050

95

96 146789 146789 277565

Any other charges on future profits

Sum of financial engineering adjustments

(91+92-93+94+95)

Available capital resources for 50% MCR requirement

Available capital resources for 75% MCR requirement

Implicit items

Financial reinsurance - ceded

Financial reinsurance - accepted

Outstanding contingent loans

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

(72-73-74-75-76-77)

Available capital resources for guarantee fund requirement

day month year

144517

Positive adjustments for regulated non-insurance related

undertakings

Total capital resources before deductions

(39+69+71)

Inadmissible assets other than intangibles and own shares

5

19032013:18:06:58Form 11


Global business


Long term insurance business

Company GL/registration UK/ day month year Unitsnumber CM

R11 144517 GL 31 12 2012 £000

This financial year Previous year1 2

11 16256 16584

12

13 16256 16584

14

15 4033 5600

16 13567 12851

21 16259 16649

22

23 16259 16649

24

25 4033 5600

26 13571 12916

30 13571 12916

31

32 2443 2325

33

34 2443 2325

41 55593 54517

42 82949 85155

43

44 106692 101382

45

46 31850 38289

47 26989 31675

48 4861 6614

49 0.50 0.50

50 1221 1162

51 35195 35841

52

53 3363 3424

54 3363 3424

Provision for claims outstanding (before discounting and gross of reinsurance) if

both 51.1 and 51.2 are zero, otherwise zero

Brought forward amount (See instruction 4)

Greater of lines 50 and 53

Sub-total C (41+42+43-44-45)

Amounts recoverable from reinsurers in respect of claims included

in Sub-total C

Sub-total D (46-47)

Reinsurance Ratio

(Sub-total D /sub-total C or, if more, 0.50 or, if less, 1.00)

Premiums amount (Sub-total J x reinsurance ratio)

Provision for claims outstanding (before discounting and net of

reinsurance

Sub-total J (32-33)

Claims paid in period of 3 financial years

Claims outstanding carried

forward at the end of the 3

year period

For insurance business accounted for on

an underwriting year basis


an accident year basis

Claims outstanding brought

forward at the beginning of

the 3 year period


an underwriting year basis


an accident year basis

Sub-total H (23 + 1/2 24 - 2/3 25)

Sub-total I (higher of sub-total A and sub-total H)

Adjusted sub-total I if financial year is not a 12 month period to produce an

annual figure

Division of gross adjusted premiums

amount sub-total I

(or adjusted sub-total I if appropriate)

x 0.18

Excess (if any) over 61.3M EURO x 0.02

Sub-total A (13 + 1/2 14 - 2/3 15)

Gross premiums earned

Premium taxes and levies (included in line 21)

Premiums earned net of taxes and levies (21-22)

Premiums for classes 11, 12 or 13 (included in line 23)

Premiums for "actuarial health insurance" (included in line 23)

Calculation of general insurance capital requirement - premiums amount and brought forward amount

Gross premiums written

Premiums taxes and levies (included in line 11)

Premiums written net of taxes and levies (11-12)

Premiums for classes 11, 12 or 13 (included in line 13)

Premiums for "actuarial health insurance" (included in line 13)

6

19032013:18:06:58Form 12


Global business


Long term insurance businessCompany GL/


number CM

R12 144517 GL 31 12 2012 £000

This financial year Previous year1 2

11 36 36

21 55593 54517

22 82949 85155

23

24 106692 101382

25

26 31850 38289

27

28 5766 7346

29 28006 33392

31 9335 11131

32 2427 2894

33

39 2427 2894

41 1214 1447

42 3363 3424

43 3363 3424

Claims amount Sub-total G x reinsurance ratio (11.49)

Higher of premiums amount and brought forward amount (11.54)

General insurance capital requirement (higher of lines 41 and 42)

Sub-total E (26 +1/2 27 - 2/3 28)

Sub-total F - Conversion of sub-total E to annual figure (multiply by 12

and divide by number of months in the reference period)

Division of sub-total F

(gross adjusted claims

amount)

x 0.26

Excess (if any) over 42.9M EURO x 0.03

Sub-total G (32-33)

Claims outstanding brought

forward at the beginning of

the reference period

For insurance business accounted for

on an underwriting year basis


on an accident year basis

Claims incurred in reference period (21+22+23-24-25)

Claims incurred for classes 11, 12 or 13 (included in 26)

Claims incurred for "actuarial health insurance" (included in 26)

Calculation of general insurance capital requirement - claims amount and result

Reference period (No. of months) See INSPRU 1.1.63R

Claims paid in reference period

Claims outstanding carried

forward at the end of the

reference period


on an underwriting year basis


on an accident year basis

7

19032013:18:06:58Form 13

(Sheet 1)

Analysis of admissible assets


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

R13 144517 GL 31 12 2012 £000 1

As at end of this

financial year

As at end of the

previous year

1 2

Land and buildings 11

21

22

23

24

25

26

27

28

29

30

Other financial investments

Equity shares 41

Other shares and other variable yield participations 42

Holdings in collective investment schemes 43

Rights under derivative contracts 44

45 233862 258976

46 145000

47

48

Participation in investment pools 49

Loans secured by mortgages 50

51

52

Other loans 53

54 83428 252097

55 30000

Other financial investments 56

Deposits with ceding undertakings 57

58

59Assets held to match linked liabilities

Index linked

Property linked

Variable interest securitiesApproved

Other

Loans to public or local authorities and nationalised industries or undertakings

Loans secured by policies of insurance issued by the company

Bank and approved credit & financial

institution deposits

One month or less withdrawal

More than one month withdrawal

Participating interestsShares

Debts and loans

Fixed interest securitiesApproved

Other

Non-insurance dependantsShares

Debts and loans

Other group undertakingsShares

Debts and loans

Investments in group undertakings and participating interests

UK insurance dependantsShares

Debts and loans

Other insurance dependantsShares

Debts and loans

8

19032013:18:06:58Form 13

(Sheet 2)



Global business





number CM assets

R13 144517 GL 31 12 2012 £000 1

As at end of this

financial year

As at end of the

previous year

1 2

60

61

62

63

71

72

73

74

75

76

77

78

79

80

81 0 (0)

82

83

84

85

86 101

87

89 492289 511174

Deferred acquisition costs (general business only)

Other prepayments and accrued income

Deductions from the aggregate value of assets

Grand total of admissible assets after deduction of admissible assets

in excess of market risk and counterparty limits (11 to 86 less 87)

Other assets

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

Dependantsdue in 12 months or less

due in more than 12 months

Otherdue in 12 months or less


Direct insurance businessPolicyholders

Intermediaries

Salvage and subrogation recoveries

ReinsuranceAccepted

Ceded

Reinsurers' share of technical provisions

Provision for unearned premiums

Claims outstanding

Provision for unexpired risks

Other

Debtors and salvage

9

19032013:18:06:58Form 13

(Sheet 3)



Global business



Company GL/ Categoryregistration UK/ day month year Units ofnumber CM assets

R13 144517 GL 31 12 2012 £000 1

As at end of this

financial year

As at end of the

previous year

1 2

91 492289 511174

92 447819 542827

93

94

95

96

97

98

99

100

101 (10418) (24226)

102 929691 1029775

103

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

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)

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

10

19032013:18:06:58Form 13

(Sheet 1)



Global business


Category of assets Total long term insurance business assets



number CM assets

R13 144517 GL 31 12 2012 £000 10

As at end of this

financial year

As at end of the

previous year

1 2


21 280 870

22

23

24

25

26

27

28 159000

29

30


Equity shares 41 1939795 1915888


Holdings in collective investment schemes 43 37542 39483

Rights under derivative contracts 44 217027 538207

45 4613788 4223268

46 8672881 8150407

47

48 50761 52070


Loans secured by mortgages 50 11 66

51

52 315 367

Other loans 53 152000

54 482515 673409

55



58

59 35938763 34100686 Assets held to match linked liabilities

Index linked

Property linked


Other








Debts and loans


Other


Debts and loans


Debts and loans



Debts and loans


Debts and loans

11

19032013:18:06:58Form 13

(Sheet 2)



Global business





number CM assets

R13 144517 GL 31 12 2012 £000 10

As at end of this

financial year

As at end of the

previous year

1 2

60

61

62

63

71 70376 66291

72

73

74

75 575 1791

76

77

78 61538 75841

79

80 (0) 228

81

82

83

84 4759 7819

85

86 6287 2349

87

89 52256213 50001037






Other assets

Tangible assets


institutions

Cash in hand








Intermediaries


ReinsuranceAccepted

Ceded



Claims outstanding


Other

Debtors and salvage

12

19032013:18:06:58Form 13

(Sheet 3)



Global business




R13 144517 GL 31 12 2012 £000 10

As at end of this

financial year

As at end of the

previous year

1 2

91 52256213 50001037

92 37485 44460

93

94

95

96

97

98

99 3254253 3267362

100 3531341 2916638

101 94212 108118

102 59173504 56337614

103









not valued above)













undertakings



13

19032013:18:06:58Form 13

(Sheet 1)



Global business


Category of assets With Profits Sub-Fund



number CM assets

R13 144517 GL 31 12 2012 £000 11

As at end of this

financial year

As at end of the

previous year

1 2


21

22

23

24

25

26

27

28

29

30


Equity shares 41 1939795 1915888



Rights under derivative contracts 44 209819 538207

45 2660570 2302403

46 1784124 1991250

47

48 50761 52070


Loans secured by mortgages 50 11 66

51

52 315 367

Other loans 53

54 349279 570941

55



58

59Assets held to match linked liabilities

Index linked

Property linked


Other








Debts and loans


Other


Debts and loans


Debts and loans



Debts and loans


Debts and loans

14

19032013:18:06:58Form 13

(Sheet 2)



Global business





number CM assets

R13 144517 GL 31 12 2012 £000 11

As at end of this

financial year

As at end of the

previous year

1 2

60

61

62

63

71 1261 1293

72

73

74

75

76

77

78 2707 1452

79

80

81

82

83

84 4759 7806

85

86

87

89 7005431 7383279






Other assets

Tangible assets


institutions

Cash in hand








Intermediaries


ReinsuranceAccepted

Ceded



Claims outstanding


Other

Debtors and salvage

15

19032013:18:06:58Form 13

(Sheet 3)



Global business




R13 144517 GL 31 12 2012 £000 11

As at end of this

financial year

As at end of the

previous year

1 2

91 7005431 7383279

92

93

94

95

96

97

98

99

100 76838 60215

101 (10871) (6761)

102 7071398 7436733

103









not valued above)













undertakings



16

19032013:18:06:58Form 13

(Sheet 1)



Global business


Category of assets Non Profit Sub-Fund



number CM assets

R13 144517 GL 31 12 2012 £000 12

As at end of this

financial year

As at end of the

previous year

1 2


21 280 870

22

23

24

25

26

27

28 159000

29

30


Equity shares 41



Rights under derivative contracts 44 7208

45 1953218 1920865

46 6888757 6159157

47

48


Loans secured by mortgages 50

51

52

Other loans 53 152000

54 133235 102468

55



58

59 35938763 34100686 Assets held to match linked liabilities

Index linked

Property linked


Other








Debts and loans


Other


Debts and loans


Debts and loans



Debts and loans


Debts and loans

17

19032013:18:06:58Form 13

(Sheet 2)



Global business





number CM assets

R13 144517 GL 31 12 2012 £000 12

As at end of this

financial year

As at end of the

previous year

1 2

60

61

62

63

71 69115 64998

72

73

74

75 575 1791

76

77

78 58831 74389

79

80 (0) 228

81

82

83

84 1 12

85

86 6287 2349

87

89 45250782 42617758






Other assets

Tangible assets


institutions

Cash in hand








Intermediaries


ReinsuranceAccepted

Ceded



Claims outstanding


Other

Debtors and salvage

18

19032013:18:06:58Form 13

(Sheet 3)



Global business




R13 144517 GL 31 12 2012 £000 12

As at end of this

financial year

As at end of the

previous year

1 2

91 45250782 42617758

92 37485 44460

93

94

95

96

97

98

99 3254253 3267362

100 3454502 2856423

101 105083 114878

102 52102106 48900881

103









not valued above)













undertakings



19

19032013:18:06:58Form 14

Long term insurance business liabilities and margins


Global business


Total business/Sub fund Summary

Units £000 As at end of As at end of


year year

1 2

Mathematical reserves, after distribution of surplus 11 50589297 47880314

12

Balance of surplus/(valuation deficit) 13 102993 152808

Long term insurance business fund carried forward (11 to 13) 14 50692289 48033123

Gross 15 48724 39556

Reinsurers' share 16 21319 18880

Net (15-16) 17 27404 20676

Taxation 21

Other risks and charges 22

Deposits received from reinsurers 23

Direct insurance business 31 87064 91835

Reinsurance accepted 32

Reinsurance ceded 33 10609 10490

Secured 34

Unsecured 35

Amounts owed to credit institutions 36 207385 157729

Taxation 37 10870 19113

Other 38 507310 733909

Accruals and deferred income 39 2199 1891

41

Total other insurance and non-insurance liabilities (17 to 41) 49 852841 1035644

Excess of the value of net admissible assets 51 711082 932270

Total liabilities and margins 59 52256213 50001037

61 15587 63924

62 35918216 34024888

71 51442138 48915958

Increase to liabilities - DAC related 72

Reinsurers' share of technical provisions 73 3531341 2916637

Other adjustments to liabilities (may be negative) 74 1115745 2103754

Capital and reserves and fund for future appropriations 75 3084280 2401265

76 59173504 56337614

Provision for "reasonably foreseeable adverse variations"

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 (11+12+49)

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)

Cash bonuses which had not been paid to policyholders prior

to end of the financial year

Claims outstanding

Provisions

Creditors

Debenture loans

Creditors

20

19032013:18:06:58Form 14



Global business


Total business/Sub fund With Profits Sub-Fund



year year

1 2


12

Balance of surplus/(valuation deficit) 13


Gross 15

Reinsurers' share 16

Net (15-16) 17

Taxation 21



Direct insurance business 31 60


Reinsurance ceded 33

Secured 34

Unsecured 35


Taxation 37 10870 6761

Other 38 202280 310208

Accruals and deferred income 39

41




61

62

71 6332800 6490049




Capital and reserves and fund for future appropriations 75

76 7071398 7436733





linked benefits







Claims outstanding

Provisions

Creditors

Debenture loans

Creditors

21

19032013:18:06:58Form 14



Global business


Total business/Sub fund Non Profit Sub-Fund



year year

1 2


12

Balance of surplus/(valuation deficit) 13 102993 152808


Gross 15 48724 39556

Reinsurers' share 16 21319 18880

Net (15-16) 17 27404 20676

Taxation 21



Direct insurance business 31 87004 91835


Reinsurance ceded 33 10609 10490

Secured 34

Unsecured 35


Taxation 37 12353

Other 38 305030 423702

Accruals and deferred income 39 2199 1891

41




61 15587 63924

62 35918216 34024888

71 45109338 42425909




Capital and reserves and fund for future appropriations 75 3084280 2401265

76 52102106 48900881





linked benefits







Claims outstanding

Provisions

Creditors

Debenture loans

Creditors

22

19032013:18:06:58Form 15

Liabilities (other than long term insurance business)


Global business


Company GL/


number CM

R15 144517 GL 31 12 2012 £000



year year

1 2

Technical provisions (gross amount)

Provisions for unearned premiums 11

Claims outstanding 12

Provision for unexpired risks 13

Credit business 14

Other than credit business 15

Other technical provisions 16

Total gross technical provisions (11 to 16) 19

Provisions and creditors

Taxation 21



Direct insurance business 41


Reinsurance ceded 43

Secured 44

Unsecured 45

Amounts owed to credit institutions 46

Taxation 47 10418 24226

Foreseeable dividend 48

Other 49 228

Accruals and deferred income 51

Total (19 to 51) 59 10646 24226

Provision for "reasonably foreseeable adverse variations" 61

Cumulative preference share capital 62

Subordinated loan capital 63

Total (59 to 63) 69 10646 24226

71

Amounts deducted from technical provisions for discounting 82

Other adjustments (may be negative) 83 (10418) (24226)

Capital and reserves 84 929463 1029775

85 929691 1029775



reporting (69-82+83+84)

Equalisation provisions

Provisions

Creditors

Debenture

loans

Creditors

Amounts included in line 69 attributable to liabilities to related insurers, other

than those under contracts of insurance or reinsurance

23

19032013:18:06:58Form 16

Profit and loss account (non-technical account)


Global business

Financial year ended 31 December 2012Company GL/


number CM

R16 144517 GL 31 12 2012 £000

This financial Previous

year year

1 2

From Form 20 11

Equalisation provisions 12

13 (125000)

14 31968 32835

Investment income 15 38555

16 20158 354

17 9 10

Investment charges 18 25090

19

20

21

29 (97974) 71734

Tax on profit or loss on ordinary activities 31 2339 24083

Profit or loss on ordinary activities after tax (29-31) 39 (100313) 47651

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)) 49 (100313) 47651

Dividends (paid or foreseeable) 51

Profit or loss retained for the financial year (49-51) 59 (100313) 47651

Value re-adjustments on

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

(11+12+13+14+15+16-17-18-19-20+21)

Extraordinary profit or loss (particulars to be specified

by way of supplementary note)

Transfer (to)/from the

general insurance business

technical account

Transfer from the long term insurance business

revenue account

Income

Value re-adjustments on

investments

Gains on the realisation of

investments

Investment management

charges, including interest

24

19032013:18:06:58Form 17

Analysis of derivative contracts


Global business





number CM assets

R17 144517 GL 31 12 2012 £000 1

Derivative contracts

Assets Liabilities Bought / Long Sold / Short

1 2 3 4

11

Interest rates 12

Inflation 13

Credit index / basket 14

Credit single name 15

16

Equity stock 17

Land 18

Currencies 19

Mortality 20

Other 21

31

Equity index calls 32

Equity stock calls 33

Equity index puts 34

Equity stock puts 35

Other 36

Swaptions 41





Other 46

Total (11 to 46) 51

52

53

Out of the

money

options

Adjustment for variation margin

Total (51 + 52)

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.

Value as at the end

of this financial year

Notional amount as at the end


Futures and

contracts

for

differences

Fixed-interest securities

Equity index

In the

money

options

Swaptions

25

19032013:18:06:58Form 17



Global business





number CM assets

R17 144517 GL 31 12 2012 £000 10



1 2 3 4

11

Interest rates 12 54860 20926 3024842 651000

Inflation 13



16 216 145

Equity stock 17

Land 18

Currencies 19 216998 509304

Mortality 20

Other 21

31 74762 292000



Equity index puts 34 61381 315631


Other 36

Swaptions 41 22141 1040737



Equity index puts 44 5881 4863 96553 73549


Other 46

Total (11 to 46) 51 219241 242932 4769763 1233853

52 (2214) (268)

53 217027 242664

Out of the

money

options


Total (51 + 52)



Value as at the end




Futures and

contracts

for

differences


Equity index

In the

money

options

Swaptions

26

19032013:18:06:58Form 17



Global business





number CM assets

R17 144517 GL 31 12 2012 £000 11



1 2 3 4

11

Interest rates 12 54860 20926 3024842 651000

Inflation 13



16 216 145

Equity stock 17

Land 18

Currencies 19

Mortality 20

Other 21

31 74762 292000





Other 36

Swaptions 41 22141 1040737



Equity index puts 44 5881 4863 96553 73549


Other 46

Total (11 to 46) 51 212033 25934 4740885 724549

52 (2214) (268)

53 209819 25666

Out of the

money

options


Total (51 + 52)



Value as at the end




Futures and

contracts

for

differences


Equity index

In the

money

options

Swaptions

27

19032013:18:06:58Form 17



Global business





number CM assets

R17 144517 GL 31 12 2012 £000 12



1 2 3 4

11

Interest rates 12

Inflation 13



16

Equity stock 17

Land 18

Currencies 19 216998 509304

Mortality 20

Other 21

31





Other 36

Swaptions 41





Other 46

Total (11 to 46) 51 7208 216998 28878 509304

52

53 7208 216998

Out of the

money

options


Total (51 + 52)



Value as at the end




Futures and

contracts

for

differences


Equity index

In the

money

options

Swaptions

28

19032013:18:06:58

Form 18

With-profits insurance capital component for the fund


With-profits fund With Profits Sub-Fund


Units £000


this financial year the previous year

1 2

Regulatory excess capital

11 7005431 7383279

12

13 781165 749175

14 31403 30117

15

19 6192863 6603987

21 5338044 5423905

22 213591 316969

29 5551635 5740874

31 196985 201550

32

39 5748620 5942424

Regulatory excess capital (19-39) 49 444243 661563

Realistic excess capital

51

Excess assets allocated to with-profits insurance business

61 444243 661563

62

63

64

65

66 444243 661563

Present value of other future internal transfers not

already taken into account

With-profits insurance capital component for fund (if 62 exceeds

63, greater of 61+62-63-64-65 and zero, else greater of 61-64-65

and zero)

Sum of regulatory value of liabilities, LTICR and RCR

(29+31+32)

Realistic excess capital

Excess (deficiency) of assets allocated to with-profits insurance

business in fund (49-51)

Face amount of capital instruments attributed to the fund and

included in capital resources (unstressed)

Realistic amount of capital instruments attributed to the fund and

included in capital resources (stressed)

Present value of future shareholder transfers arising

from distribution of surplus

Regulatory value

of liabilities

Mathematical reserves (after distribution of

surplus) in respect of the fund's with-profits

insurance contracts

Regulatory current liabilities of the fund

Total (21+22)

Long-term insurance capital requirement in respect of the fund's

with-profits insurance contracts

Resilience capital requirement in respect of the fund's

with-profits insurance contracts

Regulatory value

of assets

Long-term admissible assets of the fund

Implicit items allocated to the fund

Mathematical reserves in respect of the fund's

non-profit insurance contracts


covering the LTICR of the fund's non-profit

insurance contracts


covering the RCR of the fund's non-profit

insurance contracts

Total (11+12-(13+14+15))

29

19032013:18:06:58Form 19

Realistic balance sheet (Sheet 1)




Units £000



1 2

Realistic value of assets available to the fund

11 6192863 6603987

12

13

21

22 44179 45732

23

24

25

26 6237042 6649719

27

29 6237042 6649719

Realistic value of liabilities of fund

31 4383734 4566691

32 440433 426770

33

34 201067 283574

35 160404 145270

36

41 815503 910928

42

43 343480 313071

44 (364) (23014)

45

46

47

49 1639717 1766059

Realistic current liabilities of the fund 51 213591 316969

59 6237042 6649719

Financing costs

Any other liabilities related to regulatory duty to treat

customers fairly

Other long-term insurance liabilities

Total (32+34+41+42+43+44+45+46+47-(33+35+36))

Realistic value of liabilities of fund (31+49+51)

Future policy

related liabilities

Past miscellaneous surplus attributed to with-profits

benefits reserve

Past miscellaneous deficit attributed to with-profits

benefits reserve

Planned enhancements to with-profits benefits

reserve

Planned deductions for the costs of guarantees, options

and smoothing from with-profits benefits reserve

Planned deductions for other costs deemed chargeable

to with-profits benefits reserve

Future costs of contractual guarantees (other than

financial options)

Future costs of non-contractual commitments

Future costs of financial options

Future costs of smoothing (possibly negative)

Value of shares in subsidiaries held in fund (realistic)

Prepayments made from the fund

Realistic value of assets of fund (11+21+22+23+24+25-(12+13))

Support arrangement assets

Assets available to the fund (26+27)

With-profits benefit reserve

Regulatory value of assets

Implicit items allocated to the fund

Value of shares in subsidiaries held in fund (regulatory)

Excess admissible assets

Present value of future profits (or losses) on non-profit insurance contracts written

in the fund

Value of derivatives and quasi-derivatives not already reflected in lines

11 to 22

30

19032013:18:06:58Form 19

(Sheet 2)

Realistic balance sheet




Units £000



1 2

Realistic excess capital and additional capital available

62 6237042 6649719

63

64 6237042 6649719

65

66

67

68

69

Other assets potentially available if required to cover the fund's risk capital margin

81 127818 222125

82 750000 750000

Working capital for fund (29-59)

Working capital ratio for fund (68/29)

Additional amount potentially available for inclusion in line 62

Additional amount potentially available for inclusion in line 63

Value of relevant assets before applying the most adverse scenario

other than the present value of future profits arising from business

outside with-profits funds

Amount of present value of future profits (or losses) on long-term

insurance contracts written outside the fund included in the value

of relevant assets before applying most adverse scenario

Value of relevant assets before applying the most adverse scenario

(62+63)

Risk capital margin for fund (62-59)

Realistic excess capital for fund (26-(59+65))

Realistic excess available capital for fund (29-(59+65))

31

19032013:18:06:58

Form 40

Long-term insurance business : Revenue account


Total business / subfund Summary


Units £000

Financial year Previous year

1 2

Income

Earned premiums 11 4410538 5177248

12 1894321 1682771

13 899945 829652

14 2086008 (1760838)

Other income 15 8000

Total income 19 9290812 5936832

Expenditure

Claims incurred 21 6176496 5478214

22 482103 656995

23 18105 21921

24 (9667) 3179

Other expenditure 25 89606 84828

Transfer to (from) non technical account 26 (125000)

Total expenditure 29 6631644 6245137

Business transfers - in 31

Business transfers - out 32

Increase (decrease) in fund in financial year (19-29+31-32) 39 2659167 (308305)

Fund brought forward 49 48033122 48341428

Fund carried forward (39+49) 59 50692289 48033123

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

Expenses payable

Interest payable before the deduction of tax

Taxation

32

19032013:18:06:58

Form 40



Total business / subfund With Profits Sub-Fund


Units £000


1 2

Income

Earned premiums 11 (101187) (128777)

12 443259 244256

13 371949 410258

14

Other income 15

Total income 19 714020 525738

Expenditure


22 3274 3546

23 470 478

24 13134 10960

Other expenditure 25

Transfer to (from) non technical account 26




Increase (decrease) in fund in financial year (19-29+31-32) 39 (53872) (131488)







Expenses payable


Taxation

33

19032013:18:06:58

Form 40



Total business / subfund Non Profit Sub-Fund


Units £000


1 2

Income

Earned premiums 11 4511725 5306024

12 1451062 1438515

13 527997 419393

14 2086008 (1760838)

Other income 15 8000

Total income 19 8576791 5411095

Expenditure


22 478830 653449

23 17635 21443

24 (22801) (7781)

Other expenditure 25 89606 84828

Transfer to (from) non technical account 26 (125000)




Increase (decrease) in fund in financial year (19-29+31-32) 39 2713039 (176817)







Expenses payable


Taxation

34

19032013:18:06:58

Form 41

Long-term insurance business : Analysis of premiums




Units £000

UK Life UK Pension OverseasTotal Financial

year

Total Previous

year

1 2 3 4 5

Gross

Regular premiums 11 232597 2053260 2285857 2237521

Single premiums 12 80842 2691235 2772077 3534690

Reinsurance - external


Single premiums 14 5313 508546 513859 474095

Reinsurance - intra-group

Regular premiums 15

Single premiums 16

Net of reinsurance


Single premiums 18 75529 2182689 2258218 3060596

Total

Gross 19 313439 4744495 5057933 5772211

Reinsurance 20 132880 514516 647396 594964

Net 21 180559 4229979 4410538 5177248

35

19032013:18:06:58

Form 41





Units £000


year

Total Previous

year

1 2 3 4 5

Gross

Regular premiums 11 3284 (18252) (14968) (23411)

Single premiums 12 753 (36361) (35608) (53750)


Regular premiums 13 11 11 3

Single premiums 14 50600 50600 51613


Regular premiums 15

Single premiums 16

Net of reinsurance

Regular premiums 17 3273 (18252) (14979) (23413)

Single premiums 18 753 (86961) (86208) (105363)

Total

Gross 19 4037 (54613) (50576) (77161)

Reinsurance 20 11 50600 50611 51616

Net 21 4026 (105213) (101187) (128777)

36

19032013:18:06:58

Form 41





Units £000


year

Total Previous

year

1 2 3 4 5

Gross


Single premiums 12 80089 2727596 2807685 3588441



Single premiums 14 5313 457945 463259 422482


Regular premiums 15

Single premiums 16

Net of reinsurance


Single premiums 18 74776 2269650 2344426 3165959

Total

Gross 19 309402 4799108 5108510 5849372

Reinsurance 20 132869 463915 596785 543348

Net 21 176533 4335192 4511725 5306024

37

19032013:18:06:58

Form 42

Long-term insurance business : Analysis of claims




Units £000


year

Total Previous

year

1 2 3 4 5

Gross

Death or disability lump sums 11 131477 79887 211363 223555

Disability periodic payments 12

Surrender or partial surrender 13 255694 3997522 4253216 3888665

Annuity payments 14 830 579309 580139 554030

Lump sums on maturity 15 164019 1249712 1413730 1057232

Total 16 552020 5906429 6458448 5723481


Death or disability lump sums 21 87743 87743 83538


Surrender or partial surrender 23

Annuity payments 24 194209 194209 161729

Lump sums on maturity 25

Total 26 87743 194209 281952 245267


Death or disability lump sums 31



Annuity payments 34


Total 36

Net of reinsurance






Total 46 464277 5712220 6176496 5478214

38

19032013:18:06:58

Form 42





Units £000


year

Total Previous

year

1 2 3 4 5

Gross






Total 16 205861 592598 798459 692596







Total 26 47445 47445 50355





Annuity payments 34


Total 36

Net of reinsurance






Total 46 205861 545152 751013 642242

39

19032013:18:06:58

Form 42





Units £000


year

Total Previous

year

1 2 3 4 5

Gross






Total 16 346159 5313831 5659990 5030885


Death or disability lump sums 21 87743 87743 83538





Total 26 87743 146764 234507 194913





Annuity payments 34


Total 36

Net of reinsurance






Total 46 258416 5167067 5425483 4835972

40

19032013:18:06:58

Form 43

Long-term insurance business : Analysis of expenses




Units £000


year

Total Previous

year

1 2 3 4 5

Gross

Commission - acquisition 11 46687 106297 152984 184900

Commission - other 12 9413 48876 58289 58777

Management - acquisition 13 19156 102093 121249 147955

Management - maintenance 14 10573 94380 104953 107816

Management - other 15 4162 40850 45012 157991

Total 16 89991 392496 482487 657438



Commission - other 22

Management - acquisition 23

Management - maintenance 24

Management - other 25

Total 26 4 380 384 443


Commission - acquisition 31





Total 36

Net of reinsurance






Total 46 89987 392116 482103 656995

41

19032013:18:06:58

Form 43





Units £000


year

Total Previous

year

1 2 3 4 5

Gross


Commission - other 12 68 68 125




Total 16 483 2791 3274 3546







Total 26







Total 36

Net of reinsurance


Commission - other 42 68 68 125




Total 46 483 2791 3274 3546

42

19032013:18:06:58

Form 43





Units £000


year

Total Previous

year

1 2 3 4 5

Gross






Total 16 89508 389706 479214 653892







Total 26 4 380 384 443







Total 36

Net of reinsurance






Total 46 89504 389326 478830 653449

43

19032013:18:06:58

Form 44

Long-term insurance business : Linked funds balance sheet


Total business


Units £000


1 2

Internal linked funds (excluding cross investment)

11 16151821 16891957

12 785096 752630

13 19001015 16455361

14 35937933 34099948

Provision for tax on unrealised capital gains 15

Secured and unsecured loans 16

Other liabilities 17 84943 89774

Total net assets (14-15-16-17) 18 35852990 34010174

Directly held linked assets

Value of directly held linked assets 21 831 738

Total

31 35853821 34010912

Surplus units 32

Deficit units 33 64395 13976

Net unit liability (31-32+33) 34 35918216 34024888

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) (11+12+

13)

Value of directly held linked assets and units held

(18+21)

44

19032013:18:06:58

Form 45

Long-term insurance business : Revenue account for internal linked funds


Total business


Units £000


1 2

Income

11 892411 634322

12 1071353 1036998

13 2086008 (1760838)

14

Total income 19 4049771 (89518)

Expenditure

21 1790703 90034

22 396672 376967

23

24

25

26 19580 17951


39 1842816 (574470)

49 34010174 34584644

59 35852990 34010174 Internal linked funds carried forward (39+49)

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

Increase (decrease) in funds in financial year (19-29)

Internal linked fund brought forward

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

Value of total cancellation of units

Charges for management

45

19032013:18:06:58

Form 46

Long-term insurance business : Summary of new business


Total business


Units £000


year

Total Previous

year

1 2 3 4 5

Regular premium business 11 43706 96968 140674 144231

Single premium business 12 1186 80022 81208 102305

Total 13 44892 176990 221882 246536

Amount of new regular

premiums

Direct insurance business 21 34518 419721 454238 464477

External reinsurance 22

Intra-group reinsurance 23

Total 24 34518 419721 454238 464477

Amount of new single

premiums

Direct insurance business 25 80842 2331590 2412432 2845622

External reinsurance 26 9420 9420 5435

Intra-group reinsurance 27

Total 28 80842 2341010 2421852 2851057

Number of new

policyholders/

scheme members for direct

insurance business

46

19032013:18:06:58

Form 47

Long-term insurance business : Analysis of new business


Total business


Units £000

UK Life / Direct Insurance Business

Number of

policyholders /

scheme members

Amount of premiums

Number of

policyholders /

scheme members

Amount of premiums

1 2 3 4 5 6

325 Level term assurance 20945 17226

330 Decreasing term assurance 10393 5475

340 Accelerated critical illness (guaranteed premiums) 9022 7306

345 Accelerated critical illness (reviewable premiums) 2136 1877

350 Stand-alone critical illness (guaranteed premiums) 650 854

355 Stand-alone critical illness (reviewable premiums) 108 149

360 Income protection non-profit (guaranteed premiums) 423 572

365 Income protection non-profit (reviewable premiums) 29 43

380 Miscellaneous protection rider 1017

410 Group life

420 Group income protection

430 Group critical illness

500 Life UWP single premium 199 7789

700 Life property linked single premium 987 73052

Product

code

number

Product description

Regular premium business Single premium business

47

19032013:18:06:58

Form 47

Long-term insurance business : Analysis of new business (Sheet 1)


Total business


Units £000

UK Pension / Direct Insurance Business

Number of

policyholders /

scheme members

Amount of premiums

Number of

policyholders /

scheme members

Amount of premiums

1 2 3 4 5 6

390 Deferred annuity non-profit 533 651

400 Annuity non-profit (CPA) 10643 374046

525 Individual pensions UWP 670 414 2111 9922

530 Individual pensions UWP - increments 1046 218

535 Group money purchase pensions UWP 556 1055 690 5967

540 Group money purchase pensions UWP - increments 1033 388

550 Individual deposit administration with-profits - increments 69

565 DWP National Insurance rebates UWP 28058

570 Income drawdown UWP 287 2963

571 Trustee investment plan UWP 1 15 21 403

575 Miscellaneous UWP 4 0 1 0

725 Individual pensions property linked 12030 44049 26936 733056

730 Individual pensions property linked - increments 25622 85590

735 Group money purchase pensions property linked 83631 290697 36878 647965

740 Group money purchase pensions property linked - increments 55332 34891

Product

code

number

Product description


48

19032013:18:06:58

Form 47

Long-term insurance business : Analysis of new business (Sheet 2)


Total business


Units £000

UK Pension / Direct Insurance Business

Number of

policyholders /

scheme members

Amount of premiums

Number of

policyholders /

scheme members

Amount of premiums

1 2 3 4 5 6

745 DWP National Insurance rebates property linked 115473

750 Income drawdown property linked 1238 183634

755 Trustee investment plan 10 339 341 61125

795 Miscellaneous property linked 66 50 343 47239

Product

code

number

Product description


49

19032013:18:06:58

Form 47

Long-term insurance business : Analysis of new business


Total business


Units £000

UK Pension / Reinsurance accepted external

Number of

policyholders /

scheme members

Amount of premiums

Number of

policyholders /

scheme members

Amount of premiums

1 2 3 4 5 6

755 Trustee investment plan 9420

Product

code

number

Product description


50

19032013:18:06:58

Form 48

Long-term insurance business : Assets not held to match linked liabilities


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

1 2 3 4 5


Approved fixed interest securities 12 2434123 2434123 85842 2.76

Other fixed interest securities 13 7211244 7211244 402363 4.68

Variable interest securities 14 9175 9175 321 4.02

UK listed equity shares 15

Non-UK listed equity shares 16

Unlisted equity shares 17 280 280

Other assets 18 469763 469763 1745 0.37

Total 19 10124586 10124586 490271 4.02


Approved fixed interest securities 22 2179665 2216756 67973 1.99 7.65

Other fixed interest securities 23 1461637 1461637 86822 4.44 18.50

Variable interest securities 24 41586 41586 1453 4.02 1.29

UK listed equity shares 25 1615675 1601711 52377 5.01 10.27

Non-UK listed equity shares 26 324120 324120 6602 4.20 11.02

Unlisted equity shares 27

Other assets 28 570181 547055 667 0.12 1.39

Total 29 6192864 6192864 215893 3.31 10.47

Overall return on with-profits assets

Post investment costs but pre-tax 31 9.47

Return allocated to non taxable 'asset shares' 32 see page 150

Return allocated to taxable 'asset shares' 33 see page 150

Assets backing non-profit liabilities

and non-profit capital requirements

Assets backing with-profits liabilities

and with-profits capital requirements

51

19032013:18:06:58

Form 48



Category of assets 11 With Profits Sub-Fund


Units £000

Unadjusted

assets

Economic

exposure

Expected

income from

assets in

column 2

Yield before

adjustment

Return on

assets in

financial year

1 2 3 4 5




Variable interest securities 14 9175 9175 321 4.02




Other assets 18

Total 19 812567 812567 34474 2.98


Approved fixed interest securities 22 2179665 2216756 67973 1.99 7.65

Other fixed interest securities 23 1461637 1461637 86822 4.44 18.50

Variable interest securities 24 41586 41586 1453 4.02 1.29

UK listed equity shares 25 1615675 1601711 52377 5.01 10.27

Non-UK listed equity shares 26 324120 324120 6602 4.20 11.02


Other assets 28 570181 547055 667 0.12 1.39

Total 29 6192864 6192864 215893 3.31 10.47


Post investment costs but pre-tax 31 9.47

Return allocated to non taxable 'asset shares' 32 see page 150

Return allocated to taxable 'asset shares' 33 see page 150





52

19032013:18:06:58

Form 48



Category of assets 12 Non Profit Sub-Fund


Units £000

Unadjusted

assets

Economic

exposure

Expected

income from

assets in

column 2

Yield before

adjustment

Return on

assets in

financial year

1 2 3 4 5




Variable interest securities 14



Unlisted equity shares 17 280 280

Other assets 18 469763 469763 1745 0.37

Total 19 9312018 9312018 455797 4.11


Approved fixed interest securities 22

Other fixed interest securities 23

Variable interest securities 24




Other assets 28

Total 29


Post investment costs but pre-tax 31

Return allocated to non taxable 'asset shares' 32

Return allocated to taxable 'asset shares' 33





53

19032013:18:06:58

Form 49

Long-term insurance business : Fixed and variable interest assets


Category of assets 10 Total long term insurance business assets


Units £000

Value of assets Mean termYield before

adjustment

Yield after

adjustment

1 2 3 4

11 3486819 11.76 2.13 2.13

Other approved fixed interest

securities21 1164060 13.36 3.15 3.15

Other fixed interest securities

AAA/Aaa 31 332448 13.03 3.71 3.62

AA/Aa 32 1938269 13.63 3.98 3.66

A/A 33 3257996 10.33 3.96 3.44

BBB/Baa 34 2748791 9.71 5.25 4.08

BB/Ba 35 354101 7.92 7.63 4.55

B/B 36 78388 8.67 11.21 6.26

CCC/Caa 37 14682 8.87 18.08 8.58

Other (including unrated) 38 (51794) 6.27 (1.70) (1.38)

Total other fixed interest

securities 39 8672881 10.88 4.64 3.81

Approved variable interest

securities41

Other variable interest securities 51 50761 17.48 4.02 3.87

Total (11+21+39+41+51) 61 13374521 11.35 3.85 3.31

UK Government approved fixed

interest securities

54

19032013:18:06:58

Form 49



Category of assets 11 With Profits Sub-Fund


Units £000


adjustment

Yield after

adjustment

1 2 3 4

11 1846067 7.19 1.46 1.46


securities21 851594 13.21 3.10 3.10


AAA/Aaa 31 101663 15.02 4.41 4.31

AA/Aa 32 221101 9.04 3.51 3.19

A/A 33 625211 5.60 3.43 2.90

BBB/Baa 34 676315 6.00 4.91 3.73

BB/Ba 35 123724 5.98 6.34 3.76

B/B 36 32225 5.67 12.32 7.29

CCC/Caa 37 2329 5.71 20.36 11.00

Other (including unrated) 38 1556 8.72 0.00 0.00


securities 39 1784124 6.74 4.44 3.48


securities41

Other variable interest securities 51 50761 17.48 4.02 3.87

Total (11+21+39+41+51) 61 4532546 8.26 2.97 2.59


interest securities

55

19032013:18:06:58

Form 49



Category of assets 12 Non Profit Sub-Fund


Units £000


adjustment

Yield after

adjustment

1 2 3 4

11 1640752 16.89 2.89 2.89


securities21 312466 13.80 3.26 3.26


AAA/Aaa 31 230785 12.16 3.41 3.31

AA/Aa 32 1717169 14.22 4.04 3.72

A/A 33 2632785 11.45 4.08 3.56

BBB/Baa 34 2072475 10.92 5.36 4.19

BB/Ba 35 230377 8.96 8.32 4.97

B/B 36 46162 10.77 10.44 5.54

CCC/Caa 37 12353 9.47 17.66 8.12

Other (including unrated) 38 (53350) 6.34 (1.65) (1.34)


securities 39 6888757 11.95 4.69 3.89


securities41

Other variable interest securities 51

Total (11+21+39+41+51) 61 8841975 12.93 4.31 3.68


interest securities

56

19032013:18:06:58

Form 50

Long-term insurance business : Summary of mathematical reserves




Units £000


year

Total Previous

year

1 2 3 4 5

Gross

Form 51 - with-profits 11 105543 199828 305371 443381

Form 51 - non-profit 12 407942 10291102 10699043 9818840

Form 52 13 303310 3910167 4213477 4167524

Form 53 - linked 14 1684939 37301167 38986106 36524895

Form 53 - non-linked 15 15273 70108 85380 129739

Form 54 - linked 16

Form 54 - non-linked 17

Total 18 2517005 51772372 54289377 51084379


Form 51 - with-profits 21 1060 1060 1407

Form 51 - non-profit 22 427078 211599 638678 710438

Form 52 23 52 52 55

Form 53 - linked 24 3067890 3067890 2500007

Form 53 - non-linked 25 240 240 239

Form 54 - linked 26


Total 28 428430 3279489 3707919 3212146


Form 51 - with-profits 31

Form 51 - non-profit 32

Form 52 33

Form 53 - linked 34

Form 53 - non-linked 35 14706 5002 19708 33219

Form 54 - linked 36


Total 38 14706 5002 19708 33219

Net of reinsurance


Form 51 - non-profit 42 (19137) 10079502 10060366 9108402

Form 52 43 303258 3910167 4213425 4167469

Form 53 - linked 44 1684939 34233277 35918216 34024888

Form 53 - non-linked 45 327 65105 65432 96281

Form 54 - linked 46


Total 48 2073870 48487880 50561750 47839014

57

19032013:18:06:58

Form 50





Units £000


year

Total Previous

year

1 2 3 4 5

Gross


Form 51 - non-profit 12 21423 1645990 1667412 1599839

Form 52 13 302917 3892772 4195688 4148753

Form 53 - linked 14


Form 54 - linked 16


Total 18 429882 5738589 6168471 6191973


Form 51 - with-profits 21 1060 1060 1407

Form 51 - non-profit 22 75750 75750 58786

Form 52 23

Form 53 - linked 24


Form 54 - linked 26


Total 28 1060 75750 76810 60193




Form 52 33

Form 53 - linked 34


Form 54 - linked 36


Total 38

Net of reinsurance


Form 51 - non-profit 42 21423 1570239 1591662 1541052

Form 52 43 302917 3892772 4195688 4148753

Form 53 - linked 44


Form 54 - linked 46


Total 48 428822 5662839 6091661 6131781

58

19032013:18:06:58

Form 50





Units £000


year

Total Previous

year

1 2 3 4 5

Gross


Form 51 - non-profit 12 386519 8645112 9031631 8219001

Form 52 13 393 17396 17788 18770

Form 53 - linked 14 1684939 37301167 38986106 36524895

Form 53 - non-linked 15 15273 70108 85380 129739

Form 54 - linked 16


Total 18 2087123 46033783 48120906 44892405



Form 51 - non-profit 22 427078 135849 562927 651652

Form 52 23 52 52 55

Form 53 - linked 24 3067890 3067890 2500007

Form 53 - non-linked 25 240 240 239

Form 54 - linked 26


Total 28 427369 3203739 3631109 3151953




Form 52 33

Form 53 - linked 34

Form 53 - non-linked 35 14706 5002 19708 33219

Form 54 - linked 36


Total 38 14706 5002 19708 33219

Net of reinsurance


Form 51 - non-profit 42 (40559) 8509263 8468703 7567349

Form 52 43 341 17396 17737 18715

Form 53 - linked 44 1684939 34233277 35918216 34024888

Form 53 - non-linked 45 327 65105 65432 96281

Form 54 - linked 46


Total 48 1645048 42825041 44470089 41707233

59

19032013:18:06:58

Form 51

Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts)




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 unitsOther liabilities

Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

100 Conventional whole life with-profits OB 1655 22858 163 16982

120 Conventional endowment with-profits OB savings 770 10296 103 8854

125 Conventional endowment with-profits OB target cash 3549 82265 1893 78668

165 Conventional deferred annuity with-profits 137 38 0 1031

210 Additional reserves with-profits OB 8

315 Individual deposit administration non-profit 417 7429 7429

335 Decreasing term assurance (rider benefits) 39513 181 5

380 Miscellaneous protection rider 441 0 5

390 Deferred annuity non-profit 107 8 0 136

395 Annuity non-profit (PLA) 713 1046 13848

60

19032013:18:06:58

Form 51





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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

100 Conventional whole life with-profits OB 1261 5 954

120 Conventional endowment with-profits OB savings

125 Conventional endowment with-profits OB target cash 83 2 73

165 Conventional deferred annuity with-profits 4 33

335 Decreasing term assurance (rider benefits) 16 0

61

19032013:18:06:58

Form 51





Units £000

UK Pension / Gross

Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

165 Conventional deferred annuity with-profits 2258 7591 82 99325

175 Group conventional deferred annuity with-profits 1602 3144 348 48026

185 Group conventional pensions endowment with-profits 1188 60883 317 52476


390 Deferred annuity non-profit 4674 8202 185916

400 Annuity non-profit (CPA) 14236 49270 649566

440 Additional reserves non-profit OB 810508

62

19032013:18:06:58

Form 51





Units £000

UK Pension / 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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

400 Annuity non-profit (CPA) 75750

63

19032013:18:06:58

Form 51

Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) (Sheet 1)




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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

300 Regular premium non-profit WL/EA OB 1982 5931 73 4956

325 Level term assurance 196392 35037455 112834 187221

330 Decreasing term assurance 90749 12733205 38366 (299)

340 Accelerated critical illness (guaranteed premiums) 65031 7361169 42866 53943

345 Accelerated critical illness (reviewable premiums) 21821 2298200 13580 10751

350 Stand-alone critical illness (guaranteed premiums) 6155 929016 5077 13706

355 Stand-alone critical illness (reviewable premiums) 3558 494102 3097 4563

360 Income protection non-profit (guaranteed premiums) 6305 156238 pa 4885 (12595)

365 Income protection non-profit (reviewable premiums) 918 19507 pa 589 (1332)


380 Miscellaneous protection rider 72306 pa

385 Income protection claims in payment 3575

395 Annuity non-profit (PLA) 839 372 3685

415 Collective life 107867 312 78

420 Group income protection 10 4451 8 23

64

19032013:18:06:58

Form 51

Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts) (Sheet 2)




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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

425 Group income protection claims in payment 1 265 78633

430 Group critical illness 1 100 2 1


65

19032013:18:06:58

Form 51





Units £000


Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

300 Regular premium non-profit WL/EA OB 334 9 298

325 Level term assurance 32861990 103535 213449

330 Decreasing term assurance 11879747 32857 23879

340 Accelerated critical illness (guaranteed premiums) 6655592 37460 69741

345 Accelerated critical illness (reviewable premiums) 2057028 12234 12364

350 Stand-alone critical illness (guaranteed premiums) 838003 4191 15612

355 Stand-alone critical illness (reviewable premiums) 438838 2650 4049

360 Income protection non-profit (guaranteed premiums) 132204 pa 3760 (9461)

365 Income protection non-profit (reviewable premiums) 16566 pa 451 (1045)


385 Income protection claims in payment 2483

420 Group income protection 3496 4 16

425 Group income protection claims in payment 179 45825

430 Group critical illness 80 2 1


66

19032013:18:06:58

Form 51





Units £000

UK Pension / Gross

Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

325 Level term assurance 2732 148020 481 2346

330 Decreasing term assurance 23 4563 3 1


390 Deferred annuity non-profit 11003 31802 544996

400 Annuity non-profit (CPA) 232497 520345 8091463

410 Group life 4 757 8 825

411 Group death in service dependants' annuities 1133 1 55


67

19032013:18:06:58

Form 51





Units £000


Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

325 Level term assurance 132562 433 2071


400 Annuity non-profit (CPA) 131744

410 Group life 151 2 1

411 Group death in service dependants' annuities 457 0 14

68

19032013:18:06:58

Form 52

Long-term insurance business : Valuation summary of accumulating with-profits contracts




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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

500 Life UWP single premium 8271 282520 279722 278025 278025

505 Life UWP whole life regular premium 148 2221 198 2221 2221 2221

515 Life UWP endowment regular premium - target cash 546 22670 496 22670 22670 22670

69

19032013:18:06:58

Form 52





Units £000

UK Pension / Gross

Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

525 Individual pensions UWP 67391 2359908 22779 2359908 2320405 2320405

535 Group money purchase pensions UWP 36300 1161533 18912 1161533 1145235 1145235

545 Individual deposit administration with-profits 3426 172799 1287 172799 172799 172799

555 Group deposit administration with-profits 151 7292 49 7292 7292 7292

570 Income drawdown UWP 1280 221857 221857 218956 218956

571 Trustee investment plan UWP 110 13762 30 13762 13762 13762

575 Miscellaneous UWP 409 14594 141 14594 14322 14322

70

19032013:18:06:58

Form 52





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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

605 Miscellaneous protection rider 52 52

610 Additional reserves UWP 341 341 71

19032013:18:06:58

Form 52





Units £000


Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

605 Miscellaneous protection rider 52 52

72

19032013:18:06:58

Form 52





Units £000

UK Pension / Gross

Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

610 Additional reserves UWP 17396 17396

73

19032013:18:06:58

Form 53

Long-term insurance business : Valuation summary of property linked contracts




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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

700 Life property linked single premium 33912 1665904 1649410 1625612 31242 1656854

710 Life property linked whole life regular premium 535 91412 421 5081 5081 337 5418

715 Life property linked endowment regular premium - savings 1 8 8 8 8

720 Life property linked endowment regular premium - target cash 2293 94203 1299 37701 37701 230 37931

74

19032013:18:06:58

Form 53





Units £000


Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

710 Life property linked whole life regular premium 101 101

720 Life property linked endowment regular premium - target cash 138 138 75

19032013:18:06:58

Form 53





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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

700 Life property linked single premium 14706 14706

76

19032013:18:06:58

Form 53





Units £000

UK Pension / Gross

Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

725 Individual pensions property linked 639737 15850573 445945 15850573 15677943 55272 15733215

735 Group money purchase pensions property linked 780788 15101042 1476124 15101042 15060409 30964 15091373

750 Income drawdown property linked 36639 3128591 3128591 3091371 20576 3111947

755 Trustee investment plan 1189 1385034 1634 1385034 1385033 3097 1388131

760 Small self administered schemes 644 36038 565 36038 35095 305 35400

795 Miscellaneous property linked 2301 1947584 3083 1947584 1945771 65438 2011209

77

19032013:18:06:58

Form 53





Units £000


Product

code

number

Product description

Number of

policyholders /

scheme

members

Amount of

benefit

Amount of

annual office

premiums

Nominal value

of units

Discounted


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

725 Individual pensions property linked 1367329 1367329 1367329 1367329

735 Group money purchase pensions property linked 1302671 1302671 1302671 1302671

750 Income drawdown property linked 269884 269884 269884 269884

755 Trustee investment plan 119478 119478 119478 119478

760 Small self administered schemes 3109 3109 3109 3109

795 Miscellaneous property linked 5420 5420 5420 5420

78

19032013:18:06:58

Form 53





Units £000

UK Pension / 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


Amount of

mathematical

reserves

1 2 3 4 5 6 7 8 9

750 Income drawdown property linked 5002 5002

79

19032013:18:06:58

Form 55

Long-term insurance business : Unit prices for internal linked funds (Sheet 1)


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

1 2 3 4 5 6 7 8

Artemis Income 15 - individual pension - UK equity 116800 Series B 1.70 1.2834 1.4588 13.67

Ballie Gifford Balanced Managed12 - individual pension - balanced managed

fund 662300 Series B 1.25 1.4150 1.5786 11.56

Balanced Passive12 - individual pension - balanced managed

fund 6255400 Series B 1.00 1.3172 1.4191 7.74

BAQ Consensus 16 - individual pension - overseas equity 295700 Series B 1.00 1.3282 1.4569 9.69

Blackrock Balanced Managed12 - individual pension - balanced managed

fund 492400 Series B 1.25 1.2033 1.3414 11.48

Cirilium Moderate 12 - individual pension - balanced managed

fund 178400 Series B 1.75 1.4962 1.6871 12.76

Distribution13 - individual pension - defensive managed

fund 683700 Series B 1.00 1.2667 1.3977 10.34

Ethical 14 - individual pension - other managed fund 559900 Series B 1.00 5.0872 6.0473 18.87

European 16 - individual pension - overseas equity 1621000 Series B 1.00 5.6170 6.7532 20.23

External Balanced Collection12 - individual pension - balanced managed

fund 2220100 Series B 1.25 1.2794 1.4148 10.58

External Stockmarket Collection11 - individual pension - stock market managed

fund 205700 Series B 1.35 1.5264 1.7086 11.94

First State Asia Pacific Leaders 16 - individual pension - overseas equity 239800 Series B 1.85 2.2662 2.6742 18.00

GLG Balanced Managed12 - individual pension - balanced managed

fund 517900 Series B 1.25 1.2073 1.3675 13.27

Global 16 - individual pension - overseas equity 1139300 Series B 1.00 2.1924 2.3423 6.84

International 16 - individual pension - overseas equity 238600 Series B 1.05 11.5901 12.7425 9.94

Invesco Perpetual Income 15 - individual pension - UK equity 440500 Series B 1.95 1.5059 1.6173 7.40

Japan 16 - individual pension - overseas equity 211200 Series B 1.00 1.7169 1.7479 1.81

JP Morgan Natural Resources 16 - individual pension - overseas equity 128100 Series B 1.95 1.8500 1.6117 (12.88)

80

19032013:18:06:58

Form 55



Total business


Units £000


Unit

management

charge

Price at

previous

valuation date

Price at

current

valuation date

Change in

price during

year

1 2 3 4 5 6 7 8

Lazard Euro Smaller Companies 14 - individual pension - other managed fund 115700 Series B 1.45 3.6760 4.5704 24.33

Mixed12 - individual pension - balanced managed

fund 8047500 Series B 1.00 17.3660 18.6299 7.28

Newton Balanced Managed12 - individual pension - balanced managed

fund 1547700 Series B 1.30 1.4975 1.5810 5.58

Newton Higher Income 15 - individual pension - UK equity 115200 Series B 1.40 1.3791 1.4994 8.72

North American 16 - individual pension - overseas equity 1364700 Series B 1.00 5.2881 5.6034 5.96

Omnis Balanced 12 - individual pension - balanced managed

fund 136000 Series B 1.65 1.1124 1.2217 9.83

Pacific 16 - individual pension - overseas equity 777800 Series B 1.05 8.7820 9.8408 12.06

Property 17 - individual pension - property 767200 Series B 1.40 6.6015 6.6720 1.07

Technology 16 - individual pension - overseas equity 112300 Series B 1.00 1.3847 1.4470 4.50

UBS Balanced Managed12 - individual pension - balanced managed

fund 458300 Series B 1.25 1.4491 1.6109 11.17

UBS Global Emerging Markets Equity 16 - individual pension - overseas equity 208600 Series B 1.45 2.6888 2.9041 8.01

UK Equity 15 - individual pension - UK equity 3592000 Series B 1.00 21.2996 23.4002 9.86

UK Equity Tactical 15 - individual pension - UK equity 517800 Series B 1.00 1.4305 1.5309 7.02

UK Smaller Companies 14 - individual pension - other managed fund 218600 Series B 1.00 3.7969 4.5228 19.12

Universal Balanced Collection12 - individual pension - balanced managed

fund 7380000 Series B 1.00 1.3367 1.4505 8.51

UK Equity Select Portfolio 15 - individual pension - UK equity 196900 Series B 1.75 1.0854 1.2238 12.75

Balanced Select Portfolio12 - individual pension - balanced managed

fund 169900 Series B 1.65 1.0668 1.1623 8.95

Balanced Plus Select Portfolio12 - individual pension - balanced managed

fund 170300 Series B 1.70 1.0618 1.1689 10.09

81

19032013:18:06:58

Form 55



Total business


Units £000


Unit

management

charge

Price at

previous

valuation date

Price at

current

valuation date

Change in

price during

year

1 2 3 4 5 6 7 8

Growth Select Portfolio 14 - individual pension - other managed fund 138900 Series B 1.75 1.0593 1.1814 11.53

Scot Eq Aberdeen Emerging Markets 16 - individual pension - overseas equity 111600 Series B 1.90 1.1959 1.4255 19.20

Scot Eq BAQ 50/50 Bond and Equity Index12 - individual pension - balanced managed

fund 131400 Series B 1.00 1.2426 1.3681 10.10

Scot Eq BAQ Over 15 years Corporate Bond12 - individual pension - balanced managed

fund 101800 Series B 1.00 1.1921 1.3549 13.66

Scot Eq BAQ World (Ex UK) Equity Index 16 - individual pension - overseas equity 123900 Series B 1.00 1.2786 1.4075 10.08

Scot Eq Cirilium Dynamic 16 - individual pension - overseas equity 111000 Series B 1.75 1.5866 1.8058 13.82

Scot Eq Newton Global Higher Income 16 - individual pension - overseas equity 103000 Series B 1.55 1.1953 1.3179 10.26

82

19032013:18:06:58

Form 55



Total business


Units £000


Unit

management

charge

Price at

previous

valuation date

Price at

current

valuation date

Change in

price during

year

1 2 3 4 5 6 7 8

Mixed 02 - life - balanced managed fund 128100 Series C 1.00 5.2423 5.5856 6.55

Property 07 - life - property 87700 Series C 1.40 1.0873 1.0841 (0.29)

Distribution 03 - life - defensive managed fund 144300 Series C 1.00 0.9190 0.9674 5.27

83

19032013:18:06:58Form 57

Long-term insurance business: Analysis of valuation interest rate


Subfund With Profits Sub-Fund


Units £000

Net mathematical

reserves

Net valuation

interest rate

Gross valuation

interest rate

Risk adjusted

yield on

matching assets

2 3 4 5

103813 2.00% 2.50% 2.65%

144918 3.27% 3.93% 4.03%

24892 2.42% 2.61% 2.68%

573815 3.27% 3.27% 3.35%

139493 2.50% 2.50% 2.65%

52548 2.50% 2.50% 2.65%

182397 3.27% 3.27% 3.35%

445999 3.27% 3.27% 3.35%

1560908 2.84% 3.02% 3.10%

238876 2.98% 3.23% 3.32%

1197666 3.32% 3.97% 4.07%

28980 3.35% 3.61% 3.70%

172799 3.27% 3.27% 3.35%

843230 See note 5703 See note 5703 See note 5703

364509 See note 5702 See note 5702 See note 5702

44366 n/a n/a 2.05%

Total 6119209

UK Pensions WP Form 52 Assurances (WP2 fund)

UK Pensions WP Form 52 Assurances (DAF & DA2 funds)

UK Pensions WP Form 52 Assurances (Reflex DA fund)

UK Pensions WP Form 52 Assurances (NGWP funds)

UK Pensions WP Forms 51 & 52 Annuities (GAOs)

Miscellaneous

UK Pensions WP Form 51 Deferred Annuities

UK Pensions WP Form 51 Assurances

UK Pensions NP Form 51 Deferred Annuities

UK Pensions WP Form 52 Assurances (GMP guarantees)

UK Pensions WP Form 52 Assurances (WPE fund)

UK Pensions WP Form 52 Assurances (WP1 fund)

Product group

1

UK L&GA WP Form 51 Assurances

UK L&GA WP Form 52 Assurances (WPB fund)

UK L&GA WP Form 52 Assurances (WPC fund)

UK Pensions NP Form 51 Annuities

84

19032013:18:06:58Form 57

Long-term insurance business: Analysis of valuation interest rate


Subfund Non Profit Sub-Fund


Units £000

Net mathematical

reserves

Net valuation

interest rate

Gross valuation

interest rate

Risk adjusted

yield on

matching assets

2 3 4 5

544996 3.71% 3.71% 3.81%

7959719 3.71% 3.71% 3.81%

47157 n/a n/a 0.89%

Total 8551873

Product group

1

UK Pensions NP Form 51 Deferred Annuities

UK Pensions NP Form 51 Annuities

Miscellaneous

85

19032013:18:06:58

Form 58

Long-term insurance business : Distribution of surplus




Units £000


1 2

Valuation result

Fund carried forward 11 50692289 48033123

Bonus payments in anticipation of a surplus 12 109026 79159

Transfer to non-technical account 13

Transfer to other funds / parts of funds 14

Subtotal (11 to 14) 15 50801316 48112281

Mathematical reserves 21 50561749 47839014

29 239567 273268

Composition of surplus

Balance brought forward 31 152808 292808

Transfer from non-technical account 32 125000

Transfer from other funds / parts of fund 33

Surplus arising since the last valuation 34 (38242) (19540)

Total 39 239567 273267

Distribution of surplus

Bonus paid in anticipation of a surplus 41 109026 79159

Cash bonuses 42

Reversionary bonuses 43 26943 40643

Other bonuses 44 605 657

Premium reductions 45

Total allocated to policyholders (41 to 45) 46 136574 120459

Net transfer out of fund / part of fund 47

Total distributed surplus (46+47) 48 136574 120459

Surplus carried forward 49 102993 152808

Total (48+49) 59 239567 273267

Percentage of distributed surplus allocated to policyholders

Current year 61

Current year - 1 62

Current year - 2 63

Current year - 3 64

Surplus including contingency and other reserves held

towards the capital requirements (deficiency) (15-21)

86

19032013:18:06:58

Form 58





Units £000


1 2

Valuation result


Bonus payments in anticipation of a surplus 12 109026 79159



Subtotal (11 to 14) 15 6228235 6252239


29 136574 120459


Balance brought forward 31

Transfer from non-technical account 32


Surplus arising since the last valuation 34 136574 120459

Total 39 136574 120459


Bonus paid in anticipation of a surplus 41 109026 79159

Cash bonuses 42

Reversionary bonuses 43 26943 40643

Other bonuses 44 605 657


Total allocated to policyholders (41 to 45) 46 136574 120459


Total distributed surplus (46+47) 48 136574 120459

Surplus carried forward 49

Total (48+49) 59 136574 120459


Current year 61 100.00 100.00

Current year - 1 62 100.00 100.00

Current year - 2 63 100.00 100.00

Current year - 3 64 100.00 100.00



87

19032013:18:06:58

Form 58





Units £000


1 2

Valuation result


Bonus payments in anticipation of a surplus 12



Subtotal (11 to 14) 15 44573081 41860042


29 102993 152809


Balance brought forward 31 152808 292808

Transfer from non-technical account 32 125000


Surplus arising since the last valuation 34 (174816) (139999)

Total 39 102993 152808


Bonus paid in anticipation of a surplus 41

Cash bonuses 42

Reversionary bonuses 43

Other bonuses 44


Total allocated to policyholders (41 to 45) 46


Total distributed surplus (46+47) 48

Surplus carried forward 49 102993 152808

Total (48+49) 59 102993 152808


Current year 61 n/a n/a

Current year - 1 62 n/a n/a





88

19032013:18:06:58Form 59A

Long-term insurance business : With-profits payouts on maturity (normal retirement)


Original insurer Scottish Equitable plc

Date of maturity value / open market option 01 March 2013

Category of with-profits policyOriginal term

(years)

Maturity value / open market

optionTerminal bonus MVA

CWP /

UWP

MVA

permitted?Death benefit

1 2 3 4 5 6 7 8

Endowment assurance 10 6954 409 n/a UWP N 6954

Endowment assurance 15 11764 774 UWP N 11764

Endowment assurance 20 22740 6660 CWP N 22740


Regular premium pension 5 14485 UWP Y 14485

Regular premium pension 10 34439 UWP Y 34439

Regular premium pension 15 48889 7590 UWP Y 48889

Regular premium pension 20 86358 11947 UWP Y 86358

Single premium pension 5 12644 UWP Y 12644



Single premium pension 20 41814 6969 UWP Y 41814

89

19032013:18:06:58Form 59B

Long-term insurance business : With-profits payouts on surrender


Original insurer Scottish Equitable plc

Date of surrender value 01 March 2013

Category of with-profits policy

Duration at

surrender

(years)

Surrender value Terminal bonus MVACWP /

UWP

MVA

permitted?Death benefit

1 2 3 4 5 6 7 8

Endowment assurance 5 n/a n/a n/a n/a n/a n/a

Endowment assurance 10 6416 357 UWP N

Endowment assurance 15 11118 530 UWP N


With-profits bond 2 9983 UWP Y 9983








90

19032013:18:06:58Form 60

Long-term insurance capital requirement


Global business


Units £000

LTICR

factor

Gross

reserves /

capital at

risk

Net

reserves /

capital at

risk

Reinsurance

factor

LTICR

Financial

year

LTICR

Previous

year

1 2 3 4 5 6

Insurance death risk capital component

Life protection reinsurance 11 0.0%

Classes I (other), II and IX 12 0.1% 1206607 302497 603 660



Classes III, VII and VIII 15 0.3% 314057 289964 0.92 870 1296

Total 16 59569471 4810615 83518 81151

Insurance health risk and life protection reinsurance capital component

Class IV supplementary

classes 1 and 2 and life

protection reinsurance

21 3363 3424

Insurance expense risk capital component

Life protection and permanent

health reinsurance31 0%

Classes I (other), II and IX 32 1% 14299560 13736154 0.96 137362 129129

Classes III, VII and VIII

(investment risk)33 1% 681323 681221 1.00 6812 6966


(expenses fixed 5 yrs +)34 1% 4266072 4266072 1.00 42661 41849


(other)35 25% 13255 13317

Class IV (other) 36 1% 122524 26265 0.85 1041 1055

Class V 37 1%

Class VI 38 1%

Total 39 201131 192316

Insurance market risk capital component

Life protection and permanent

health reinsurance41 0%

Classes I (other), II and IX 42 3% 14299560 13736154 0.96 412085 387386


(investment risk)43 3% 681323 681221 1.00 20437 20898


(expenses fixed 5 yrs +)44 0% 4266072 4266072


(other)45 0% 36631870 31879585

Class IV (other) 46 3% 122524 26265 0.85 3124 3165

Class V 47 0%

Class VI 48 3%

Total 49 56001348 50589297 435646 411448

Long term insurance capital

requirement51 723657 688339

0.50

91

92

Returns under the Accounts and Statements Rules Supplementary Notes Scottish Equitable plc Global Business Financial year ended 31 December 2012 Notes to Form 3 *0301* Net Admissible Asset Reconciliation (£000)

Net admissible assets : 31/12/12 31/12/11 Form 13 Line 89 (other than long-term insurance business) 492,289 511,174 Form 13 Line 89 (long-term insurance business) 52,256,213 50,001,037 Form 14 Lines 11, 12 & 49 (51,442,138) (48,915,956) Form 15 Line 69 (10,646) (24,226)

Net admissible assets 1,295,718 1,572,029

Total capital resources after deductions (Form 3 Line 79) 1,295,718 1,572,029 *0306* Financial Reinsurance Ceded

• On 29 June 2010 the Company entered into a reinsurance agreement with Munich Reinsurance

Company UK Life Branch. Repayments of both interest and principal under the arrangement are contingent on payments calculated on a basis set out in the Treaties. This basis is a proxy for the annual relevant regulatory surplus amount as disclosed in the regulatory returns for certain specified lines of business. Once all interest and principal has been repaid, the relevant regulatory surplus amount for the specified lines of business will be retained by Scottish Equitable plc (Reinsurance treaty 33). The undischarged obligation at the valuation date was £20.1m.

• On 30 June 2010 the Company entered into a reinsurance agreement with Transamerica International

Reinsurance Ireland Limited. The agreement was transferred by novation to Transamerica International Reinsurance (Bermuda) Ltd on 30 November 2010. Repayments of both interest and principal under the arrangement are contingent on payments calculated on a basis set out in the Treaties. This basis is a proxy for the annual relevant regulatory surplus amount as disclosed in the regulatory returns for certain specified lines of business. Once all interest and principal has been repaid, the relevant regulatory surplus amount for the specified lines of business will be retained by Scottish Equitable plc (Reinsurance treaty 34). The undischarged obligation at the valuation date was £19.5m.

• On 1 October 2010 the Company entered into a reinsurance agreement with Transamerica

International Reinsurance (Bermuda) Ltd. Repayments of both interest and principal under the arrangement are contingent on payments calculated on a basis set out in the Treaties. This basis is a proxy for the annual relevant regulatory surplus amount as disclosed in the regulatory returns for certain specified lines of business. Once all interest and principal has been repaid, the relevant regulatory surplus amount for the specified lines of business will be retained by Scottish Equitable plc (Reinsurance treaty 35). During the year a further £8m was advanced under the agreement. The undischarged obligation at the valuation date was £32.2m.

93

*0308* Contingent Loans

On 18 July 2008 the company entered into a £250m loan note issue agreement with Barclays Bank plc and AEGON N.V.. The monies received under the Notes were allocated to the long-term business fund of the firm. Repayments of both interest and of principal under the loan agreement are contingent on payments calculated on a basis set out in the loan agreement. This basis is a proxy for the annual relevant regulatory surplus amount as disclosed in the regulatory returns for certain specified lines of business. Once all scheduled interest and principal has been repaid to Barclays Bank plc, the regulatory surplus amount for the specified lines of business will be retained by Scottish Equitable plc. The agreement has a maturity date of 1 July 2023. Under the agreement Barclays Bank plc may require AEGON N.V. (the ultimate parent undertaking of the Company) to take on obligations of the Company in certain specified default circumstances. The amount of the outstanding loan at the valuation date is shown in line 94.

*0310* Net Valuation Differences

Positive valuation differences within Line 14 can be broken down as follows (£000):

31 December 2012 31 December 2011 WPSF NPSF Total WPSF NPSF Total Item 1 672,631 - 672,631 893,230 - 893,230 Item 2 - (418,545) (418,545) - 393,657 393,657 Item 3 - 26,399 26,399 - 32,321 32,321 Item 4 - 666,102 666,102 - 512,486 512,486 Item 5 - 11,725 11,725 - 68,718 68,718 Item 6 - 17,774 17,774 - 25,946 25,946 Item 7 - 17,173 17,173 - 25,544 25,544 Item 8 - 28,272 28,272 - 43,735 43,735 Total 672,631 348,900 1,021,531 893,230 1,102,407 1,995,637

Notes: Item 1: Positive liability valuation differences, reflecting the fact that positive WPSF capital resources

arise within Form 3 while the Fund for Future Appropriations is zero as all funds have been allocated to participating policyholders.

Item 2: Negative liability valuation differences, reflecting differences in mathematical reserves

between the FSA Returns & Accounts.

Item 3: Positive liability valuation differences, reflecting the requirement to set up a deferred revenue liability in the accounts but not in the FSA Returns.

Item 4: Positive liability valuation differences, reflecting the requirement to set up a provision for

deferred tax in the accounts but not in the FSA Returns. Item 5: Positive liability valuation differences, reflecting the fact that the FSA Returns do not recognise

in full the repayments due under a loan note issue agreement with Barclays Bank plc whereas the Accounts do. Details of this arrangement are given in note 0308.

94

Item 6: Positive liability valuation differences, reflecting the fact that the FSA Returns do not recognise in full the contingent repayments due under a reinsurance agreement with Munich Reinsurance Company UK Life Branch whereas the Accounts do. Details of this arrangement are given in note 0306.

Item 7: Positive liability valuation differences, reflecting the fact that the FSA Returns do not recognise

in full the contingent repayments due under a reinsurance agreement with Transamerica International Reinsurance (Bermuda) Ltd whereas the Accounts do. Details of this arrangement are given in note 0306.

Item 8: Positive liability valuation differences, reflecting the fact that the FSA Returns do not recognise

in full the contingent repayments due under a reinsurance agreement with Transamerica International Reinsurance (Bermuda) Ltd whereas the Accounts do. Details of this arrangement are given in note 0306.

*0313* Reconciliation of profit and loss account and other reserves (Form 3 line 12) to the profit retained

(Form 16 line 59)

31/12/12 31/12/11 Profit and loss and other reserves brought forward (Form 3 line 12) 3,388,742 2,806,038 Less Profit and loss account and other reserves brought forward (2,806,038) (2,499,689) IFRS retained profit for the financial year 582,704 306,349 Movements in Non Profit Sub-Fund Movements in positive valuation differences (753,507) (348,267) Movements in inadmissible assets other than intangibles and own shares 13,109 (54,482) Movements in assets in excess of market risk and counterparty exposure limits

6,975

4,053

Movements in capital resources requirement deduction of regulated related undertakings

-

-

Movement in balance of surplus 49,817 139,998 Movement in excess of the value of net admissible assets 589 (1) Roundings - 1 Profit or loss retained for the financial year (Form 16 line 59) (100,313) 47,651

*0314* Contingent Capital Agreement In respect of Pillar 1 capital (the excess/deficiency of available capital resources to cover long-term insurance business CRR), the company has in place a Contingent Capital Agreement with AEGON N.V. (the ultimate parent Company). This agreement gave the Company access to additional Pillar 1 capital, up to a maximum of £200m, in the event that Pillar 1 capital falls below a set limit.

Notes to Form 13 Other than Long Term Insurance Business *1304* Set Off of Amounts in Form 13 The amounts have been set off to the extent permitted by generally accepted accounting principles.

95

*1305* Counterparty Exposure Limits The investment guidelines operated by the insurer during 2012 were the same as the admissibility limits in

INSPRU 2.1.22R. The exception to this is a loan to Scottish Equitable Holdings Limited which, consistent with the insurer’s intentions, had inadmissible value in excess of the INSPRU 2.1.22R limits.

There were no breaches of these guidelines during 2012.

*1306* Exposures to Large Counterparties

The following individual exposure as at 31 December 2012 exceeded 5% of the sum of the base capital resources requirement and the long-term insurance liabilities, excluding property-linked liabilities and net of reinsurance ceded. Loans to Scottish Equitable Holdings Ltd.: £447.8m

Long Term Insurance Business *1308* Aggregate Value of Certain Investments (£000)

31/12/2012

WPSF NPSF Total

Aggregate value of unlisted investments in lines 41, 42, 46 and 48

117,459 71,459 188,918

Aggregate value of listed investments that are not readily realisable in lines 41, 42, 46 and 48

191,738 157,904 349,642

Aggregate value of units or other beneficial interests in collective investment schemes which are not UCITS

Nil Nil Nil

Reversionary interests or remainders in property other than land or buildings

Nil Nil Nil

*1309* Aggregate Value of Hybrid Securities The aggregate value of Hybrid Securities included in lines 46 & 48 is £851,561,474. *1310* Set Off of Amounts in Form 13 The amounts have been set off to the extent permitted by generally accepted accounting principles. *1312* Exposures to Large Counterparties

There were no individual exposures as at 31 December 2012 in excess of 5% of the sum of the base capital resources requirement and the long-term insurance liabilities, excluding property-linked liabilities and net of reinsurance ceded.

*1313* Rights over Collateral The aggregate value of rights to which INSPRU 2.1.35R relates is £175.9m.

96

Long Term and Other than Long Term Insurance Business *1318* Other Asset Adjustments

The entries in Form 13 Line 101 can be broken down as follows (£000): 31 December 2012 31 December 2011 WPSF NPSF S/F Total WPSF NPSF S/F Total Grossing up of derivative assets - 83,764 - 83,764 - 108,351 - 108,351 Tax payable (10,870) - (10,418) (21,288) (6,761) (12,353) (24,226) (43,340) Claims outstanding - 21,319 - 21,319 - 18,880 - 18,880 Total (10,870) 105,083 (10,418) 83,795 (6,761) 114,878 (24,226) 83,891

Note: S/F = shareholder’s fund (other than long term insurance business) *1319* Counterparty Exposure Limits The investment guidelines operated by the insurer during 2012 were the same as the admissibility limits in

INSPRU 2.1.22R. An exception to this is a loan to AEGON International B.V., which, consistent with the insurer’s intentions, had an inadmissible value in excess of the INSPRU 2.1.22R limits.

There were no breaches of these guidelines during 2012.

Notes to Form 14 (Total Long Term Insurance Business) *1401* Provisions for Reasonably Foreseeable Adverse Variations To meet the requirements of GENPRU 1.3.30R to GENPRU 1.3.33R, the firm generally uses current

market data at the valuation point and where this is not available fair value pricing principles are employed. The Insurer has no obligations or potential obligations to which INSPRU 3.2.17R to INSPRU 3.2.18R apply.

*1402* (a) Charges over Assets The Insurer has granted a Deed of Charge (incorporating a floating charge) in favour of

Winterthur Pension Funds UK Limited (Winterthur), created on 12 October 2006, relating to an external fund link the Insurer has with Winterthur (reserves accepted as at 31 December 2012 = £33.1m).

The Insurer granted a bond and floating charge to Guardian Assurance plc on 30 December 2005 in respect of reinsurance contracts (relating to unit-linked business, annuities and other classes of insurance business) between the Insurer and Guardian Assurance plc (reserves accepted as at 31 December 2012 = £2,194.4m). Guardian Assurance plc was fellow subsidiary of the Insurer’s ultimate parent undertaking AEGON N.V. until 23 November 2011 when it was sold to a third party.

97

(b) Potential Capital Gains Tax Liability The potential liability, which equals the liability provided, for tax on capital gains, which might

arise if the Insurer disposed of its assets, was nil as at 31 December 2012. (c) Contingent Liabilities The directors have identified an element of risk in connection with overseas taxation, which could

potentially give rise to a tax impact of c£6m, which would be borne by the shareholder. The directors believe the likelihood of this shareholder impact crystallising is possible but not probable and therefore no provision has been made in these financial statements.

In addition refer to Note 0306 and 4002.

(d) Guarantees, Indemnities etc. There are no guarantees, indemnities or contractual commitments in respect of the existing or

future liabilities of related companies. *1405* Other adjustments to Liabilities The entries in Line 74 of Form 14 can be broken down as follows (£000):

31 December 2012 31 December 2011 WPSF NPSF Total WPSF NPSF Total Valuation Securitisation repayment differences - 11,725 11,725 - 68,718 68,718 Reinsurance contingent repayment differences - 63,219 63,219 - 95,225 95,225 Positive WPSF capital resources 672,631 - 672,631 893,230 - 893,230 Deferred tax - 666,102 666,102 - 512,486 512,486 Mathematical reserve differences Presentation

- (418,545) (418,545) - 393,657 393,657

Grossing up of derivative assets - 83,764 83,764 - 108,351 108,351 Tax payable (10,870) - (10,870) (6,761) (12,353) (19,114) Deferred revenue liability - 26,399 26,399 - 32,321 32,321 Claims outstanding - 21,319 21,319 - 18,880 18,880 Total 661,761 453,983 1,115,744 886,469 1,217,285 2,103,754

Notes to Form 15 *1501* Provisions for Reasonably Foreseeable Adverse Variations To meet the requirements of GENPRU 1.3.30R to GENPRU 1.3.33R, the firm generally uses current

market data at the valuation point and where this is not available fair value pricing principles are employed. The Insurer has no obligations or potential obligations to which INSPRU 3.2.17R to INSPRU 3.2.18R apply.

*1502* (a) Charges over Assets No charge has been made to the assets of the Insurer.

98

(b) Potential Capital Gains Tax Liability The potential liability, which equals the liability provided, for tax on capital gains that might arise

if the Insurer disposed of the assets attributable to “other than long term insurance business” is nil as at 31 December 2012.

(c) Contingent Liabilities

There are no contingent liabilities. (d) Guarantees, Indemnities etc. There are no guarantees, indemnities or contractual commitments in respect of the existing or

future liabilities of related companies. *1507* Other Adjustments to Liabilities

There is an entry of (£10,418) in Form 15 Line 83 relating to tax payable on shareholders’ funds, details of which are given in note 1318.

Notes to Form 16 *1601* Basis of Conversion of Foreign Currency

Assets and liabilities in currencies other than sterling have been translated at the rates of exchange ruling at the financial year-end. Revenue transactions and investment realisations have been translated at the rates of exchange ruling at the time of the transaction.

Notes to Form 17 *1701* Treatment of the Variation Margin There is no excess variation margin contained within the amount disclosed in Form 17 line 52. Notes to Form 19 *1901* The presentation required in Form 19 results in the risk capital margin (line 65), working capital (line 68)

and realistic excess capital (line 66) equalling zero. This is consistent with generally accepted actuarial practice for a closed with-profit fund, where the estate is recognised as a realistic liability within the fund, even though policyholders have no contractual right to that estate. Such a presentation does not give a true reflection of the financial strength of the WPSF and the risks to which it is exposed.

A more accurate picture is obtained by not recognising the estate as a realistic liability. Further details under this presentation are shown in Appendix 9.4A, section 13.

99

Notes to Form 40 *4002* Other Income and Other Expenditure

“Other Expenditure” of £89.6m in Line 25 represents the repayment of £57.6m capital to Barclays Bank plc due at 31 December 2012, under the contingent loan arrangement described in Supplementary Note 0308, plus the repayment of £8.2m capital to Munich Reinsurance Company Life UK Branch, under the reinsurance agreement described in Supplementary Note 0306, and £23.8m capital to Transamerica International Reinsurance Ltd as described above.

*4006* Allocation between Sub-funds While the company maintains only one long-term business fund, the Scheme of Demutalisation defines

two sub-funds and the principles by which the allocations between the sub-funds operate. Therefore, to reflect revenue items by sub-fund we have included separate Forms 40 through 43 for information purposes. Similarly, separate Forms 13, 14, 17, 48 to 53, 57 and 58 are included in addition to the “Total Business” summaries.

*4008* Provision of Management Services Administration expenses are recharged to the company at cost by AEGON UK Corporate Services

Limited and AEGON UK Services Limited which are both fellow AEGON N.V. subsidiaries. *4009* Material Connected Party Transactions

Both Guardian Assurance plc and Guardian Pensions Management Ltd. were subsidiaries of AEGON UK plc, the Insurer’s parent company, until they were sold on 23 November 2011. The reinsurance arrangements remain in place following this change of ownership, however are no longer Connected Party Transactions.

*4010* The entry in line 12 (Non Profit Sub-Fund) includes an amount of £1,071.4m relating to investment income on linked assets.

*4012* The negative premium entries in line 11 (With Profits Subfund) reflect the fact that earned premiums are net of switches out to unit-linked funds.

Notes to Form 44 *4401* Valuation of Assets For the purposes of these Returns, the assets have been valued in accordance with GENPRU 1.3. *4402* Aggregate Value of Rights and Liabilities

The aggregate value of rights under derivative contracts, both gross & net of variation margin, was £251.0m as at 31 December 2012. The aggregate value of liabilities under derivative contracts, both gross & net of variation margin, was £53.9m as at 31 December 2012.

100

Notes to Form 45 *4502* Other Income and Expenditure

Other expenditure at line 26 comprises broker fund fees and revenue collection charges, including interest paid.

Notes to Form 48 *4803* Securities which may be redeemed over a period or at the option of the guarantor or the insurer Where a bond has optional redemption dates, the yield is determined in line with market convention as

follows: • For Conventional Options, the assumed redemption date is determined by reference to the option date

with the lowest gross redemption yield. • For Hybrid Securities with Financial Options, redemption is assumed at the earliest call date.

*4806* Assets used to calculate investment returns

The assets used to calculate the investment returns in column 5 are the same as those in columns 1 & 2. Notes to Form 49 *4901* Credit Ratings The split by credit rating is taken from Bloomberg, which reflects the average credit rating of all available

independent ratings. Notes to Form 51 *5103* Miscellaneous Groupings

The Miscellaneous Protection Rider grouping (product code 380) in Form 51 (Life) shows mathematical reserves of £24.1m. This grouping consists of certain classes that do not fit into other product codes and exceed the lesser of £10m and 1% of the total gross mathematical reserves. The relevant classes are: Life Protection with tax relief : Mathematical reserves = £8.8m

Waiver of Premium : Mathematical reserves = £(13.3)m. Total & Permanent Disability : Mathematical Reserves = £26.1m Other : Mathematical Reserves = £2.5m

101

Notes to Form 52 *5203* Miscellaneous Groupings

The Miscellaneous UWP grouping (product code 575) in Form 52 (Pensions) shows mathematical reserves of £14.3m. This grouping consists of certain classes that do not fit into other product codes and exceed the lesser of £10m and 1% of the total gross mathematical reserves. The relevant classes are: Final salary pensions : Mathematical reserves = £9.7m

Insured assets relating to Small Self-Administered Schemes : Mathematical Reserves = £4.6m. Notes to Form 53 *5303* Miscellaneous Groupings

The Miscellaneous Property Linked grouping (product code 795) in Form 53 (Pensions) shows mathematical reserves of £2,011.2m. This grouping consists of certain classes that do not fit into other product codes and exceed the lesser of £10m and 1% of the total gross mathematical reserves. The relevant classes are: Final salary pensions : Mathematical reserves = £738.7m Unit linked pensions business reinsured from Guardian Assurance plc and Guardian Pensions Management Ltd.: Mathematical reserves = £1,207.8m

A figure of £65.1m is included within column 8 (Other Liabilities) in respect of miscellaneous liabilities related to a program to improve consistency of customer records.

Notes to Form 57 *5701* Reserves of £(85.4)m arise on Scottish Equitable Protect’s range of protection business, which have been

offset against other positive reserves in the NPSF. *5702* Guaranteed annuity options are valued on a market consistent stochastic basis hence the concept of a

valuation interest rate and associated risk-adjusted yield is not applicable. *5703* Mathematical reserves for the New Generation With Profits funds equal the unadjusted value of the

backing assets hence there is no concept of a valuation interest rate.

102

Returns under the Accounts and Statements Rules Statement of additional information on derivative contracts as required by rule 9.29 Scottish Equitable plc Global business Financial year ended 31 December 2012 (a) The Investment Guidelines operated during the year to 31 December 2012 were as follows : (i) Exchange traded Index Futures may be used in the equity and fixed interest sectors of the long

term business fund for efficient portfolio management and reduction of risk up to a level of 25% of the relevant "sector" fund.

(ii) Margin requirements on Futures positions are deposited with the exchange through a clearing

agent. Overall exposure is limited to 25% of the relevant "sector" fund. (iii) Exchange traded puts or calls on individual shares may be bought or sold consistent with the fund

mandates. Options sold by the insurer must be covered. (iv) Currency forward contracts may be used to manage currency exposure. Currency options may be

used as an alternative to currency forwards. Currency hedging may be occasionally achieved by using borrowings. Hedging can only be applied against currencies actually held by the insurer.

(v) Over the Counter (OTC) derivatives are used only for very specific purposes consistent with the

fund mandate. Where investment guarantees are given to policyholders, the guarantees may be achieved by entering into an OTC contract with an investment bank.

(vi) Derivatives may be utilised within structured documented programmes that do not comply with

(a)(i)-(v) above. These programmes specifically detail the way in which derivatives may be used and the funds to which they apply. The limits on the use of derivatives within such programmes are capped at 100% of the value of the fund and the use of derivatives must comply with FSA rules.

(b) The Investment Guidelines do not normally permit any new contracts to be bought or sold which are more

than 10% out of the money (this includes over the counter options). The only exceptions are where a contract that is more than 10% out of the money is covered by an additional contract that is less than 10% out of the money, or the out of the money contract, potentially in combination with other contracts, has the effect of reducing investment risk as defined in FSA rules. The Guidelines also specifically require care to be taken so that out of the money options are not exercised and losses consequently incurred.

(c) The insurer did not enter any such contracts as described in sub-paragraph (b) above during 2012. (d) No derivative contract was held at any time during the financial year which required a significant

provision to be made for it under INSPRU 3.2.17R, or did not fall within the definition of a permitted derivative contract.

(e) No consideration was received by the company during the year in return for granting rights under

derivative contracts.

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Returns under the Accounts and Statements Rules Statement of additional information on controllers required by rule 9.30 Scottish Equitable plc Global business Financial year ended 31 December 2012 All the issued share capital of the Insurer is held by Scottish Equitable Holdings Ltd. (the immediate parent undertaking of the Insurer). Prior to 1 January 1999, all the share capital of Scottish Equitable Holdings Ltd (except for one special share) was held by AEGON Holdings (UK) Ltd., a subsidiary undertaking of AEGON N.V.. With effect from 1 January 1999, a new holding company, AEGON UK plc, acquired the whole issued share capital of Scottish Equitable Holdings Ltd. (with the exception of the special share referred to above) in return for the issue of shares to AEGON Holdings (UK) Ltd.. AEGON UK plc, as a result, is a wholly owned subsidiary of AEGON Holdings (UK) Ltd. AEGON Holdings (UK) Ltd. is a wholly owned subsidiary of AEGON INTERNATIONAL N.V., which is a wholly owned subsidiary of AEGON N.V., the ultimate parent undertaking. Both AEGON INTERNATIONAL N.V. and AEGON N.V. are incorporated in the Netherlands. The ultimate parent undertaking of Scottish Equitable plc is AEGON N.V.. Vereniging AEGON holds approximately 10% of AEGON N.V.'s outstanding common shares and all of the preferred shares. This corresponds to approximately 22% of voting rights. In the event of a “special cause”, Vereniging AEGON’s voting rights would currently increase to around 33%, for up to 6 months per “special cause”. A “special cause” would be such as the acquisition of a 15% interest in AEGON N.V., a tender offer for AEGON N.V. shares or a proposed business combination by any person or group of persons, whether individually or as a group, other than in a transaction approved by AEGON N.V.’s Executive Board and Supervisory Board. As a result of the agreement reached between the parties, AEGON’s interest in the non-participating business is now 100%. The special share in Scottish Equitable Holdings Ltd. continues to be held by Scottish Equitable Policyholders’ Trust Ltd. (“SEPT”), a voting trust established for the benefit of the members of the Scottish Equitable Life Assurance Society at 31 December 1993 and future with profits policyholders of the Insurer. As holder of the special share, SEPT is entitled to receive notice of and attend meetings of members of Scottish Equitable Holdings Ltd. and to vote on a show of hands. On a poll, however, the voting rights attaching to the special share have now reduced to nil, a direct consequence, under the Constitution, of policyholders’ interests in the non-participating business falling to zero.

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SCOTTISH EQUITABLE plc APPENDIX 9.4 [RULE 9.31(a)]

ABSTRACT OF VALUATION REPORT

Introduction

1. (1) The valuation date is 31 December 2012. (2) The previous valuation date was 31 December 2011. (3) No interim valuations (for the purposes of Rule 9.4) have been carried out since the previous

valuation date. Product range 2. The following significant product changes arose during 2012:

Date Product Change

September 2012 SIPP Wrapper AEGON Workplace Savings, a Corporate pension product launched on the platform. The product contains FVR tiers calculated using a stepped approach.

November 2012 Flexible Pension Plan v13

Product Closed to new business.

November 2012 Flexible Pension Plan v15

RDR compliant individual pension contract replacing commission based V13 contract.

December 2012 Retirement Control v14 Product Closed to new business. December 2012 Investment Control Commission options removed

for future new business. December 2012 Trustee Investment Plan Commission options removed

for trustees of a SIPP for future new business.

December 2012 Section 32 Commission options removed for future new business.

December 2012 Individual Pension Plan Commission options removed for future new business.

December 2012 Income for Life Closed to new business.

December 2012 Investment Control v14

Closed our commission paying version product to new business. Launched a new RDR version of the product for future new business. This new version does not facilitate any adviser charging (i.e. it is for ‘clean’ business only).

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No new bonus series were launched or options & guarantees changed during 2012. The firm’s With Profits Subfund (WPSF) is closed to new with-profits business with investment guarantees, except by increment. It remains open to new with-profits business with no investment guarantees.

Discretionary charges and benefits 3. (1) Market value reductions (MVRs) vary by the year and month in which each investment is made.

They were routinely applied during 2012 to non-contractual claims under the following unitised and with profits funds:

• Unitised With Profits Pensions – WP1 fund • Unitised With Profits Pensions – WP2 fund • Unitised With Profits Pensions – DAF fund • Unitised With Profits Pensions – DA2 fund • Unitised With Profits Life Bond – WPB fund

These funds were closed to new business on 30 September 2002, although increments and renewal premiums are still accepted. The exception is WP1 which closed to any future investments from 31 October 1999. Terminal Bonus (TB) rates generally increased while MVRs decreased over 2012. The position over the year was as follows: • WP1 fund: There were no MVRs applied in 2012 with Terminal Bonus applying at all durations and increasing over the year. • WP2 fund: At the beginning of the years MVRs applied to investment months from September 2010. From the second quarter no MVRs were applied. • WPB fund: At the beginning of the years MVRs applied to investment months from December 2010. From the third quarter no MVRs were applied. • DAF & DA2 funds: At the beginning of the years MVRs applied to investment months from August 2010. From the second quarter no MVRs were applied. For all the funds above where no MVRs were applied generally TB rates would have applied.

(2) The following changes to premiums were made to existing premiums as a result of contractual

premium reviews in 2012:

Product Range of change Amount affected (*)

Amount unaffected (*)

Term Assurance -11.9% to 0% £8,000 £17,000 Accelerated Critical Illness -8.7% to +9.5% £125,000 £751,000 Critical Illness -8.4% to + 8.7% £24,000 £55,000 Income Protection -0.2% to 2.6% £1,000 £55,000 Total Permanent Disability Protection -9.2% to + 9.8% £9,000 £66,000

(*) As measured by annual premium + 1/10 of single premium

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(3) For SE Bonds and SE Income Bonds of various series, bonus is added after the 5-year maturity date at rates which vary from time to time to reflect the rates the Firm can earn on money on deposit (with allowance for tax). The rate applicable throughout 2012 was 0.40% p.a. The same rates of bonus apply to Flexplan and ChequePlan policies that remain in force after the final premium termination date.

(4) On linked policies with service charges that are expressed in monetary rather than percentage

terms, the rate of increase applied to these charges as at 31 December 2011 (to apply over 2012) was 1.98%, consistent with changes in UK Average Weekly Earnings in accordance with relevant policy conditions.

(5) Not applicable.

(6) No changes were made to the rates of annual management charge on unitised (accumulating)

with profits & unit-linked policies during 2012. The rate of deduction for guarantee costs within the calculation of unitised (and traditional) with profits asset shares was 0.50% per annum throughout 2012. At 31 December 2012, in-force asset shares were enhanced by 1.00% from the estate, giving a net asset share enhancement of 0.50% in respect of 2012.

(7) Unit liabilities within the Firm arise within the Series B internal linked (pension) and Series C

internal linked (life) funds. This includes a large and wide number of external fund links in addition to a range of funds managed by a sister asset management company within the AEGON group. There are also a small number of “broker funds” and “open broker funds”, which are invested according to the decisions of particular intermediaries. The intermediaries specify the proportions of their “broker funds” which may be invested within the relevant Series of funds. “Open broker funds” operate as “broker funds” except that the intermediary can, in addition, direct that investments be made in the stock market. There are no distinctions in our processes for matching assets and liabilities across these various investment fund styles.

(a) The process for creating and cancelling units measures the surplus or deficit of units arising

continuously as claims are paid and premiums invested (traditionally known as the manager's box). In respect of the box, the aim in unit creation / cancellation is to eliminate all surpluses / deficits as soon as practicable after they arise. During 2012, a daily analysis of the opening unit position for each internal fund was calculated. Estimates were made of the day's new cashflow into each fund. This information permitted the box manager to assess whether each fund was in a net creation / cancellation position on each business day.

All required creations / cancellations were then notified daily to the investment managers. Cancellations were not actioned if the value of the surplus units was less than £1,000.

For internal funds with positive & negative respective flows of investment, unit cancellations were made at prices based on offer & bid values of assets. Where internal funds on a particular day move from a positive cashflow position into a negative cashflow position, an internal pricing framework applies under which unit prices may be moved temporarily to a full "bid basis" depending upon the size of the net disinvestment (relative to a trigger threshold level). A similar principle applies in reverse if, on a particular day, cashflows move from a negative to a positive position.

Valuation of assets occurs at 12 noon on each business day. Transactions other than switches receive the price calculated that day. Individual policy and broker fund switches receive prices calculated later by one business day, assuming that notification of the switch is received prior to 12 noon. If notification of such a switch occurs after 12 noon, the switch

107

receives a price calculated later by two business days. This approach ensures equitable treatment where large switching volumes occur.

Prior to the 12 noon cut off the box manager assesses the cancellation / creation position on each internal linked fund, based on the previous day’s business system cashflows with allowance for any known events scheduled on the current day (for example, investment switches), and advises the investment manager of the investment position required. The investment managers have a degree of freedom to accommodate any asset creations / cancellations required in particular linked funds by purchasing / selling the required units from any of the Insurer’s "fund of funds", provided this is appropriate for the overall investment strategy of the particular fund. Slight variations in these procedures can occur within the externally managed fund range, where individual prices are provided by the external managers.

(b) There are no circumstances where different pricing bases apply to different policies.

Pricing bases vary depending on the position of individual unit-linked funds as described above.

(c) A small number of OEIC & Unit Trust investments are held by the internal linked funds.

The holdings in these assets are bought and sold between the companies at the applicable creation and cancellation prices of the assets.

(8) No capital gains tax deductions are made within the Series B funds, into which only pensions

policies can invest. Transfers in respect of tax are made from the life funds (Series C) on an annual basis.

(9) No capital gains tax provisions exist within the Series B funds, into which only pensions

policies can invest. For the life funds (Series C), an undiscounted Capital Gains Tax provision was assessed at each

daily valuation date, on the net realised and unrealised chargeable gains (less indexation allowance) at 20%, and an explicit provision was held within each Series C internal linked fund. Losses are offset to the extent that there are available gains. No tax credit is given in respect of net unrelieved losses, these are carried forward to use against future gains.

(10) Where internal linked funds invest in units in permitted scheme interests, charges borne by and

disclosed to policyholders are inclusive of charges borne by both the internal linked funds and the underlying units (i.e. policyholder charges are assessed and disclosed on a full look-through basis).

Valuation basis (other than for special reserves) 4. (1) The general principles in the valuation are as follows:

• For unit linked business the reserve is equal to the surrender value, plus an additional reserve to avoid future valuation strain (equivalently, the bid value adjusted for actuarial funding). These additional reserves have been calculated by projecting future cashflows and establishing reserves on the least favourable of the following contingencies :

That a premium paying policy continues to be premium paying until maturity; That the policy is surrendered at the least favourable time; That all premium-paying policies are made paid-up at the valuation date.

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• For accumulating with profits business, a similar method is applied, with an additional reserve being held if the yield on the backing assets calculated in accordance with INSPRU 3.1.28R to INSPRU 3.1.47R is insufficient to cover any rate of guaranteed fund growth.

• For conventional with profits and non-profit business, a gross premium valuation is used.

• Liabilities within Scottish Equitable Protect were calculated using a gross premium

approach. The present value of office premiums was deducted from the present value of benefits and expenses, including commission, allowing for lapses on a prudent basis with no minimum reserve.

The net of reinsurance reserves were calculated as the value of future claims net of reinsurance recoveries, renewal expenses and renewal commission less the value of future premiums net of premiums due to the reinsurer, again allowing for lapses on a prudent basis with no minimum reserve.

• All Scottish Equitable Employee Benefits (SEEB) products have a reserve which consists of

a liability for unexpired risk, depending on the frequency of the premiums, and a liability for claims not yet reported. An additional underwriting risk reserve has been set up to cover potential Group Life claims from schemes where the scheme has been identified as having a member who is a long-term absentee. The extra mortality risk for these members means that the premium charged is likely to be insufficient to cover claims. A reserve for Group Income Protection claims in payment is held and is calculated by applying an annuity factor, based on the valuation interest rate and prudent recovery rates, to the current claim amount that is then increased by a factor sufficient to cover the future claims expenses.

• For the classes SE Funding, Money-Plus and Barclays Retirement Accumulator Plan, the

basic reserve is the accumulated fund plus an additional reserve to avoid future valuation strain (as per unit-linked policies).

(2) Valuation Interest Rates

31 December 2012

31 December 2011

Conventional with profits (life) 2.00% 2.00% Conventional with profits (pensions) 2.50% 2.50% With profits deferred annuities post-vesting (life) 2.52% 2.60% With profits deferred annuities post-vesting (pensions) 3.15% 3.25% Non profit deferred annuities post-vesting (pensions) 2.27% 2.41% Non profit (life) 1.52% 1.60% Non profit (pensions) 1.89% 2.00% WPSF immediate annuities (life) 2.62% 3.67% WPSF immediate annuities (pensions) 3.27% 4.58% NPSF immediate annuities (life) 2.97% 3.73% NPSF immediate annuities (pensions) 3.71% 4.66% NPSF bulk purchase annuities (pre and post vesting) 3.71% 4.66% Scottish Equitable Protect :

- BLAGAB 2.97% 3.73%

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- PHI 3.71% 4.66% Scottish Equitable Employee Benefits :

- Group Income Protection claims in payment 2.50% 3.25% Accumulating with profits (life) :

- WPC fund 2.42% 3.53% -WPB fund 3.27% 3.41%

Accumulating with profits (pensions) :

- WPE fund 2.84% 4.21% - WP1 fund 2.98% 4.22% - WP2 fund 3.32% 3.63% - DAF fund 3.35% 4.22% - DA2 fund 3.35% 4.22%

- Reflex DA fund 3.27% 4.58%

(3) The yields on fixed interest securities are calculated by reference to market prices. These yields are then reduced for the risk of future default as follows:

• Gilts and AAA rated Approved Securities: No adjustment. • AAA rated: 10bps • AA rated: 32bps • A rated: 52bps • BBB rated: 117bps • BB rated: 258bps • B rated: 483bps • CCC and lower 874bps

• For fixed interest securities (other than Gilts and AAA rated Approved Securities) a floor of an

equivalent risk-free yield and a ceiling of 11% on individual risk-adjusted yields are applied. • An additional test is carried out on the aggregate allowance for default risk to ensure it lies

within a 30% to 50% aggregate credit spread boundary range.

Assets that are equity shares or land were divided into the following categories for the purposes of INSPRU 3.1.30R : - Property - UK Equities - UK OEICs - US Equities - Latin American Equities - European Equities - Far East Equities - Overseas OEICs - Japanese Equities - Non-Yielding UK Equities - Non-Yielding Overseas Equities The yield on such assets was adjusted in accordance with INSPRU 3.1.30R by reviewing the portfolio on a stock-by-stock basis for high yields arising due to risk rather than illiquidity and reducing the appropriate yields accordingly.

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(4) Mortality Bases

31 December 2012 31 December 2011 Life annuities in payment

For benefits in payment of up to £800 per annum:

111.40% & 93.96% of [PCMA00 - 2 years ultimate] & [PCFA00 - 1 year ultimate] +

CMI_2011 model improvements using the “core” CMI assumptions with a long

term improvement rate of 1.75% p.a, beginning 1/1/12.

A 6 year initial select period is applied based on the most recent internal mortality experience and a 10 year

initial select period is applied based on the most recent

external mortality experience. Additional factors have been applied based on postcodes.

For benefits in payment of

between £800 and £4,000 per annum:







For benefits in payment of between £4,000 and £9,000

per annum: 83.80% & 70.68% of

[PCMA00 - 2 years ultimate] & [PCFA00 - 1 year ultimate] +




87.30% & 92.98% of [PPMV00 + 2 years] &

[PPFV00 + 1 year] + CMI long cohort improvements.

Improvements are subject to a minimum of 1.25% per annum

up to age 85. Improvements taper linearly from 1.25% at

age 85 to 0% at age 120. Improvements apply from

01/01/2011. In addition, a 6 year initial select period is applied based on the most recent internal mortality

experience.

For benefits in payment of between £800 and £7,000 per

annum: 73.17% & 77.94% of

[PPMV00 + 2 years] & [PPFV00 + 1 year] + CMI long cohort improvements.





experience.

For benefits in payment in excess of £7,000 per annum :

55.10% & 58.68% of [PPMV00 + 2 years] &





01/01/2011. In addition, a 6 year initial select period is applied based on the most

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For benefits in payment in

excess of £9,000 per annum : 73.22% & 61.75% of







recent internal mortality experience

Pensions annuities in payment which commenced between 1/1/94 and 31/12/04 (NPSF).








For benefits in payment of

between £800 and £4,000 per annum:



87.30% & 92.98% of [PPMV00 + 2 years] &






experience.

For benefits in payment of between £800 and £7,000 per

annum: 73.17% & 77.94% of

[PPMV00 + 2 years] & [PPFV00 + 1 year] + CMI long cohort improvements.

Improvements are subject to a

112







per annum: 83.80% & 70.68% of







For benefits in payment in

excess of £9,000 per annum : 73.22% & 61.75% of







minimum of 1.25% per annum up to age 85. Improvements taper linearly from 1.25% at



experience.


55.10% & 58.68% of [PPMV00 + 2 years] &






experience

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Pensions annuities in payment which commenced prior to 1/1/1994 (WPSF). Pensions deferred annuities (post-vesting) where contract effected prior to 1/1/1994.







73.17% & 77.94% of [PPMV00 + 2 years] &






experience.

Pensions annuities in payment : reinsurances accepted from Guardian Assurance plc


88.20% & 94.50% of IML00 & RFV00 + CMI_2011 model improvements using the “core” CMI assumptions with a long

term improvement rate of 1.75% p.a, beginning 1/1/10. In addition, a 3 year initial

select period is applied.


per annum: 81.41% & 87.22% of IML00

& RFV00 + CMI_2011 model improvements using the “core” CMI assumptions with a long




per annum: 77.35% & 82.88% of IML00

& RFV00 + CMI_2011 model improvements using the “core” CMI assumptions with a long




85% & 93% of IML00 & RFV00 + CMI long cohort

improvements. Improvements are subject to a minimum of 1.25% per annum up to age

85. Improvements taper linearly from 1.25% at age 85

to 0% at age 120. Improvements apply from

01/01/2009. In addition, a 3 year initial select period is

applied.

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64.92% & 69.55% of IML00 & RFV00 + CMI_2011 model improvements using the “core” CMI assumptions with a long



Pensions deferred annuities (pre-vesting)

Either 50% of AM92 & AF92 ultimate or nil pre-vesting

mortality depending on whether the pre- or post-

vesting benefit has greater present value.

Either 50% of AM92 & AF92 ultimate or nil pre-vesting

mortality depending on whether the pre- or post-

vesting benefit has greater present value.

Pensions deferred annuities (post-vesting) where contract effected from 1/1/1994 (NPSF).

85% of S1PMA & S1PFA + CMI_2011 model

improvements using the “core” CMI assumptions with a long


85% of S1PMA & S1PFA + CMI long cohort

improvements. Improvements are subject to a minimum of 1.25% per annum up to age

85. Improvements taper linearly from 1.25% at age 85

to 0% at age 120. Improvements apply from

01/01/2003.

Term assurance (life & pensions)

80% of TM92 & TF92 ultimate

+ AIDS allowance of 33% of projection R6A

80% of TM92 & TF92 ultimate


Other assurance contracts (life & pensions)

80% of AM92 & AF92 ultimate


80% of AM92 & AF92 ultimate


Scottish Equitable Protect (term assurance)

Male smoker Male non-smoker Female smoker Female non-smoker

89% of TMS00 select 76% of TMN00 select 89% of TFS00 select 76% of TFN00 select

105% of TMS00 select 85% of TMN00 select 110% of TFS00 select 90% of TFN00 select

Scottish Equitable Protect (income protection)


74% of TMS00 select 63% of TMN00 select

74% of TFS00 select 63% of TFN00 select

80% of TMS00 select 65% of TMN00 select

85% of TFS00 select 70% of TFN00 select

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Expectations of Life (years) : Immediate Annuities (NPSF)

Scot Eq 31 December 2012 31 December 2011 Life annuities in payment :

Annuities £800 p.a. or below

Annuities between £800 and £4,000

p.a.

Annuities between

£4000 and £9,000

p.a.

Annuities in excess of £9,000

p.a.



p.a.


p.a.

Age 65 Male 21.9 23.5 25.2 26.7 21.9 23.5 26.1 Age 65 Female 24.7 26.2 27.7 29.1 25.3 26.7 29.0 Age 75 Male 13.2 14.7 16.3 17.5 13.9 15.1 17.3 Age 75 Female 15.4 16.9 18.3 19.5 16.1 17.3 19.4

Pension annuities in payment:



p.a.

Annuities between

£4000 and £9,000

p.a.


p.a.



p.a.


p.a.

Age 65 Male 21.9 23.5 25.2 26.7 21.9 23.5 26.1 Age 65 Female 24.7 26.2 27.7 29.1 25.3 26.7 29.0 Age 75 Male 13.2 14.7 16.3 17.5 13.9 15.1 17.3 Age 75 Female 15.4 16.9 18.3 19.5 16.1 17.3 19.4

Expectations of Life (years) at 65 : Group Deferred Annuities (NPSF) 31 December 2012 31 December 2011 Pension deferred annuities :

Male currently aged 45 27.2 26.4 Male currently aged 55 25.8 25.4

Female currently aged 45 29.6 28.8 Female currently aged 55 28.3 27.9

(5) Morbidity Bases

31 December 2012 31 December 2011 Scottish Equitable Protect (critical illness) Stand-alone :


110% of CIBT02 58% of CIBT02




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31 December 2012 31 December 2011 Scottish Equitable Protect (critical illness) Accelerated :




92% of CIBT02 50% of CIBT02 97% of CIBT02 79% of CIBT02

Rates for Total Permanent Disability Protection are based on risk premium rates supplied by our reinsurers. The 2012 assumptions, which apply to the Own Occupation definition, are as follows:

TPD with Life TPD with Accelerated Critical Illness

TPD with Stand Alone Critical Illness

Age Non-Smoker Smoker Non-Smoker Smoker Non-Smoker Smoker

25 0.000277 0.000416 0.000126 0.000168 0.000173 0.000231

35 0.000341 0.000513 0.000147 0.000196 0.000216 0.000289

45 0.001050 0.001581 0.000475 0.000634 0.000707 0.000942

55 0.003921 0.005902 0.001585 0.002113 0.002299 0.003065

The equivalent assumptions for 2011 are as follows:

TPD with Life TPD with Accelerated Critical Illness

TPD with Stand Alone Critical Illness

Age Non-Smoker Smoker Non-Smoker Smoker Non-Smoker Smoker

25 0.000273 0.000410 0.000124 0.000166 0.000170 0.000227

35 0.000336 0.000505 0.000145 0.000193 0.000213 0.000284

45 0.001034 0.001557 0.000468 0.000624 0.000696 0.000928

55 0.003863 0.005815 0.001562 0.002082 0.002265 0.003020

To allow for deterioration in morbidity on guaranteed rates and up to the review period for business written on reviewable rates, values are increased by 2.5% p.a. from the valuation date subject to a maximum of 50 years. For Scottish Equitable Protect contracts with Income Protection, the morbidity used in the valuation is based on the CMIR12 inception tables. Recovery rates are based upon recovery tables provided by our reinsurers. The 2012 assumptions, which apply to a 3 month deferred period for the Own Occupation and Occupation Class One definition, are as follows:

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Inception Rates

Age Male Non Smoker Male Smoker Female Non Smoker Female Smoker

25 0.000633 0.000894 0.001583 0.002235

35 0.001148 0.001621 0.002870 0.004051

45 0.002026 0.002861 0.005066 0.007152

55 0.004377 0.006179 0.010942 0.015448


Inception Rates

Age Male Non Smoker Male Smoker Female Non Smoker Female Smoker

25 0.001194 0.001686 0.002132 0.003010

35 0.001380 0.001948 0.002464 0.003479

45 0.002512 0.003546 0.004485 0.006332

55 0.006950 0.009812 0.012412 0.017522

To allow for deterioration in morbidity on guaranteed rates and up to the review period for business written on reviewable rates, values have are increased by 1.75% p.a. from valuation date subject to a maximum of 50 years. The recovery rates, which apply to both 2011 and 2012, are as follows:

Recovery Rates Age Duration 2 yrs Duration 5 yrs 25 0.222925 0.066528 35 0.180330 0.055570 45 0.136038 0.045500 55 0.090338 0.036605

For SEEB Group Income Protection claims in payment the termination rates are of a modified CMIR12 table and modified AM/AF92 ultimate combined.

The 2012 assumptions, using a deferred period of twenty six weeks are as follows:

Modified CMIR12 & Modified AM/AF92 combined Termination Rates

Age Duration 2 yrs

female Duration 2 yrs

male Duration 5 yrs


male 25 0.2531 0.2534 0.0392 0.0395 35 0.2086 0.2088 0.0341 0.0343 45 0.1626 0.1629 0.0299 0.0302 55 0.1163 0.1177 0.0273 0.0287

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Modified CMIR12 & Modified AM/AF92 combined Termination Rates

Age Duration 2 yrs


male Duration 5 yrs


male 25 0.2677 0.2680 0.0481 0.0484 35 0.2205 0.2207 0.0417 0.0419 45 0.1718 0.1721 0.0361 0.0364 55 0.1227 0.1241 0.0324 0.0338

(6) Expense bases

Product Class 31 December 2012 31 December 2011 CWP savings endowment (120) £51.86 p.a. £51.30 p.a. CWP target cash endowment (125) £51.86 p.a. £51.30 p.a. CWP pensions (155/165) £51.86 p.a. £51.30 p.a. Term assurance (325/330) £14.13 p.a. £12.11 p.a. Critical Illness (340/345/350/355) £14.13 p.a. £12.11 p.a. Income protection (360/365) £11.53 p.a. £9.35 p.a. Income protection claims in payment (385) £1347 + £801.00 p.a. £1342 + £717 p.a. Annuity (WPSF) (400) £41.48 p.a. £41.04 p.a. Annuity (NPSF) (400) £5.72 p.a. £4.39 p.a. Group Life (410) 5% of gross premium 5% of gross premium Group Income Protection (420) 5% of gross premium 5% of gross premium Group Income Protection Claims in Payment (425)

£1600 p.a. £1160 p.a.

Group Critical Illness (430) 5% of gross premium 5% of gross premium UWP bond (500) £21.14 p.a. £17.84 p.a. UWP target cash endowment (515) £17.91 p.a. £11.80 p.a. UWP RP pension (525/545) £17.17 p.a. £20.61 p.a. UWP SP pension (525/545) £12.52 p.a. £16.12 p.a. UWP group RP pension (535) £15.41 p.a. £17.31 p.a. UWP group SP pension (535) £11.24 p.a. £12.26 p.a. UL bond (700) £21.36 p.a. £17.23 p.a. UL target cash endowment (720) £17.91 p.a. £11.80 p.a. UL RP pension (725) £17.17 p.a. £20.61 p.a. UL SP pension (725) £12.52 p.a. £16.12 p.a. UL group RP pension (735) £15.41 p.a. £17.31 p.a. UL group SP pension (735) £11.24 p.a. £12.26 p.a.

Notes to table: 1. Expenses incurred within the BLAGAB fund are reduced by 20% tax relief. 2. Expenses on conventional with-profits & WPSF annuity business reflect the terms of the

firm’s Scheme of Demutualisation. 3. There are no zillmer adjustments. 4. The assumed rate of expense inflation as at 31 December 2012 on non-unitised business is

3.5% per annum.

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(7) Unit growth rates & inflation (unitised business)

31 December 2012 31 December 2011 Unit growth rate p.a. 5.50% 5.50% Valuation interest rate 5.50% 5.50% Expense & policy charge inflation p.a. 3.50% 3.50%

Note : The unit growth rate shown above is before any applicable annual management charges.

(8) No future reversionary bonus is assumed in the valuation of traditional or unitised with profits business.

(9)

Product Average lapse / surrender / paid-up rate for the policy years

1-5 6-10 11-15 16-20 Level term Lapse 8.6% 4.4% 3.0% 3.0% Decreasing term Lapse 8.7% 6.0% 4.5% 4.5% Accelerated critical illness Lapse 11.7% 6.0% 4.1% 4.1% Income protection Lapse 18.2% 11.0% 4.5% 4.5% TWP savings endowment Surrender 0.0% 0.0% 0.0% 0.0% TWP target cash endowment Surrender 0.0% 0.0% 0.0% 0.0% UWP savings endowment Surrender 0.0% 0.0% 0.0% 0.0% UWP target cash endowment Surrender 0.0% 0.0% 0.0% 0.0% UL savings endowment Surrender 0.0% 0.0% 0.0% 0.0% UL target cash endowment Surrender 0.0% 0.0% 0.0% 0.0% UWP bond Surrender 0.0% 0.0% 0.0% 0.0% UWP bond Automatic wdls As per actual per policy experience UL bond Surrender 0.0% 0.0% 0.0% 0.0% UL bond Automatic wdls As per actual per policy experience TWP pension RP PUP 0.0% 0.0% 0.0% 0.0% TWP pension RP Surrender 0.0% 0.0% 0.0% 0.0% TWP pension SP Surrender 0.0% 0.0% 0.0% 0.0% UWP individual pension RP PUP 100.0% 0.0% 0.0% 0.0% UWP individual pension RP Surrender 0.0% 0.0% 0.0% 0.0% UWP individual pension SP Surrender 0.0% 0.0% 0.0% 0.0% UL individual pension RP PUP 100.0% 0.0% 0.0% 0.0% UL individual pension RP Surrender 0.0% 0.0% 0.0% 0.0% UL group pension RP PUP 100.0% 0.0% 0.0% 0.0% UL group pension RP Surrender 0.0% 0.0% 0.0% 0.0% UL individual pension SP Surrender 0.0% 0.0% 0.0% 0.0%

Note : The rates in the above table against UWP & UL business relate to the calculation of sterling reserves. The following withdrawal rates are also assumed: • Within the calculation of reserves for growth guarantees under the unitised with-profits

WPE fund, a lapse rate of 1.5% per annum was assumed.

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• Within the calculation of reserves for regular MVR-free (drawdown) withdrawals from UWP funds invested in our Retirement Control contract, a withdrawal rate of 7.5% per annum was assumed.

(10) Not applicable.

(11) The valuation of liabilities allowed for derivative contracts as follows:

• The following index futures exposures were held for short-term asset allocation purposes at 31 December 2012 and have no material impact on the valuation of liabilities:

£37.1m on the LIFFE long gilt index £8.1m on equity futures (£24.8m) on derivative futures

• Three series of interest rate swaptions were held in connection with guaranteed annuity

options (GAOs).

£74.8m market value of Receiver swaptions £22.1m market value of Payer swaptions £32.0m market value of interest rate swaps

• A number of equity put options are held, which were “out the money” as at 31 December

2012 with a total value of £55.2m. These options do not impact on the valuation of liabilities.

(12) Not applicable.

Options and guarantees 5. (1) Guaranteed Annuity Options (GAOs)

Guaranteed annuity options exist under the following pensions contracts : • Conventional with profits executive pension plan : EXSEL • Unitised retirement annuities : Reflex Deposit Administration, Reflex Plus, Reflex Linked

& Reflex 85 • Pre-1990 versions of Individual Buyout

Under EXSEL & Individual Buyout, GAO rates apply on retirement at any age, in almost all annuity formats chosen. Under unitised Reflex contracts, GAO rates also apply on retirement at any age, but in order to qualify for GAO terms the annuity chosen must be single life only, payable annually in arrears with no escalation or guaranteed period of payment. No increments can be paid into Individual Buyout contracts. Increments, which attract GAO terms, can be paid into EXSEL & unitised Reflex contracts. However, in such instances, the EXSEL premium rates would be increased (relative to those underpinning the original premium basis) by 100% and the Reflex allocation rates would be reduced to 50%. Alternatively, increments can be directed to contracts with no attaching GAOs with no increase in premium rate or reduction in allocation rate.

GAOs are valued using market consistent stochastic techniques. In doing so, contracts are grouped to provide the best fit for discounted guarantee and option costs. A number of criteria

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are used such as year of maturity, class, paid-up or premium paying, sex (for financial options) and ratio of projected asset share to fund value at maturity. In assessing the appropriateness of any model point groupings, separate tests are carried out by comparing the discounted guarantee and option costs for all individual policies with those for model points. The separate tests are 5 different scenarios representing the 5th, 25th, 50th, 75th and 95th percentiles of the discounted guarantee costs. The model points are deemed appropriate if the comparison is a reasonable fit, i.e. the discounted guarantee and option costs are within an acceptable level of those for individual policies, taking into account the size of the costs. For very small guarantee costs, a larger percentage error is acceptable. GAO reserves (and other relevant information) attaching to the above GAO classes can be summarised as follows : Basic Reserve

(£m) GAO reserve

(£m) Average term to maturity (years)

Male 65 GAO rate

EXSEL 55 29 8.3 10.0% (i) Reflex 792 585 5.5 10.8% (ii) Individual Buyout 46 19 4.0 11.1% (i)

(i) Single life only, payable monthly in advance, no escalation, guaranteed for 5 years. (ii) Single life only, annuity payable annually in arrears, no escalation, no guaranteed period of

payment.

(2) Guaranteed surrender and unit-linked maturity values Flexplan is a life endowment policy with guaranteed surrender values (GSVs) and Semflex is a low-cost endowment with a Flexplan policy providing its endowment element. GSVs arise once a policy has been in force for at least 10 years and are calculated as t/n x (basic sum assured + attaching annual bonuses), where t = in-force duration and n = original term. Policy-by-policy GSVs are compared against basic reserves with any excess being held as a reserve for guarantees. The relevant characteristics of Flexplan / Semflex are summarised in the following table : Product Name Flexplan / Semflex Basic Reserve £5.93 Split of total reserve by outstanding duration :

< 1 year £0.79m 1 – 2 years £0.59m 2 – 3 years £0.40m 3 – 4 years £0.50m 4 – 5 years £0.59m 5 – 9 years £1.56m

10 – 14 years £1.05m 15 – 19 years £0.37m 20 – 24 years £0.09m

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25+ years £0.00m

Total £5.93m Guarantee reserve £0.02m Total guaranteed surrender values £5.78m MVR-free conditions Not applicable In-force premiums £87,000 per annum Increments allowed? No

(3) Guaranteed insurability options

Scottish Equitable Protect offers an automatic guaranteed insurability option under its term assurance contracts, which is the option to increase the protection without the need to provide medical evidence. Option events which fall under this benefit include marriage, change of home, change of career and birth or adoption of a dependant child. The benefit is only available subject to the life/lives assured having been accepted at ordinary rates. The mortality assumptions used allow fully for this option hence no explicit reserve is required. Additionally, the option to renew a benefit on a 5 or 10-year basis instead of choosing a specific term at outset is also offered. At the end of the 5 or 10 year term the benefit can be renewed without further evidence of health for a further 5 or 10 years. This can continue up until the maximum expiry age of the benefit. Only the 5 year option is now available on new business Reserves are calculated using a gross premium approach allowing for 40% of the options being exercised at the termination of the plan. Pre-option, mortality and morbidity are as per sections 4(4) & 4(5) above; post-option they are 150% & 170% of the valuation mortality and morbidity bases respectively.

(4) Other guarantees and options

Individual S32 Buyout

Guarantees exist under Individual S32 Buyout contracts relating to the provision of guaranteed minimum pension (GMP) benefits. At the point of sale, the firm calculates how much of the transfer value received requires to be set aside in “reserved units” in order to meet the expected cost of securing GMP benefits at state pension age. The reserved unit funds are as follows : • Up to 31 December 1997 : Unitised With Profits WPE fund • From 1 January 1998 – 31 August 1998 : Unitised With Profits WP1 fund • From 1 September 1998 – 30 September 2002 : Unitised With Profits DA2 fund • From 1 October 2002 onwards : Unit-linked Universal Balanced Collection fund

Under contracts effected prior to 30 November 1996, any shortfall at state pension age in the value of reserved units compared to the cost of securing GMP benefits on the firm’s open market annuity rates represents a cost to be borne by the firm. Under contracts effected from 1 December 1996 onwards, any “non-reserved units” (i.e. those units purchased at the point of sale by that portion of the transfer value that is not required to secure GMP benefits) may also be used to cover any GMP shortfall at state pension age.

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For business written prior to 1 October 2002, any such shortfalls at state pension age are met by the WPSF. For business written since 1 October 2002, shortfalls at state pension age are met by the NPSF. Mathematical reserves for GMP shortfalls at state pension age are calculated as follows : • Project policy-by-policy reserved & non-reserved unit funds to state pension age at the

greater of underlying guaranteed growth rates and valuation yields calculated in accordance with the requirements of INSPRU 3.1. Unit-linked funds are projected forward at the annualised equivalent of the 15-year gilt yield.

• Compare the projected reserved & non-reserved units (where appropriate) with the cost of

securing GMP benefits at state pension age. The valuation interest rates used to calculate GMP costs are consistent with the requirements of INSPRU 3.1.

• Any shortfalls in the value of projected reserved & non-reserved units (where appropriate)

are then discounted to the valuation date at a rate of interest consistent with the INSPRU 3.1 yield on the assets deemed to back the shortfalls (fixed interest securities).

As at 31 December 2012, reserved & non-reserved unit funds totalled £259.8m & £269.2m respectively. The additional reserve for GMP guarantees equalled £437.8m. Investment Control & Income for Life Investment guarantees exist under Investment Control, Income for Life and AEGON Secure Income Option, which are 100% reinsured to AEGON Ireland plc, a Dublin-based subsidiary of AEGON NV. Gross guarantee reserves are £9.0m for Investment Control, £5.0m for Income for Life and £5.7m for AEGON Secure Income Option. These reserves are calculated using a Conditional Tail Expectation (CTE) methodology, with the tail dependent on the cohort of business. The reserves for policies written before 01/01/2011 are based on the average of the 10% worst stochastic projections while reserves for policies written on or after 01/01/2011 are based on the average of the 5% worst stochastic projections, both over (approximately) a 60-year projection period.

Expense reserves

6. (1) The aggregate amount, grossed up for taxation where appropriate, arising during the twelve

months after the valuation date from implicit & explicit reserves made in the valuation to meet expenses in fulfilling contracts in force at the valuation date is £162.1m. The following table breaks down this amount into greater detail (figures in £m) –

Homogeneous risk group

Implicit allowances

Explicit allowances

(investment)

Explicit allowances

(other)

Non-attributable

expenses

Total

Certain expenses non attributable -

Unitised business, old protection business & NPSF annuities (see note 1)

- 34.3 82.8 36.0 153.2

- 34.3 82.8 36.0 153.2

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All expenses attributable -

SEEB - - - n/a - SE Protect - - 6.0 n/a 6.0 Non-unitised WPSF (see note 2)

-

0.9

2.0

n/a

2.9

- 0.9 8.0 n/a 8.9 Total - 35.3 90.8 36.0 162.1

Notes : 1. Expenses are reserved for within the first homogeneous risk group in respect of the following:

• Unitised business, which is the combination of unit-linked & unitised with-profits business.

• Old protection business (i.e. excluding that written within SE Protect). • NPSF annuities.

2. In accordance with the firm’s Scheme of Demutualisation, the WPSF passes an agreed amount

to the NPSF, which in turn meets the actual expenses incurred in respect of this business. Expense reserves held within the WPSF reflect the terms of the Scheme rather than the expenses the NPSF expects to incur. As the actual expenses borne by the NPSF are less than the amounts transferred from the WPSF as per the Scheme, no additional reserve is required in the NPSF.

(2) Not applicable. (3) Not applicable. (4) Expenses of continuing to write new business for 12 months were assessed as part of the Insurer's

2012 business plan, which incorporates company expense budgets and target business volumes (with associated expected product charging structures). The plan also projected the associated surplus emerging from existing business at 31 December 2012 (which, in itself, was derived from the actual business in-force as at 30 June 2012 and the expected business volumes & claims in the second half of 2012). Following this investigation, we have determined that no additional provision is required as at 31 December 2012 to meet the requirements of INSPRU 1.2.55R(3).

(5) The assumptions under the 2013 business plan were adjusted so that the Insurer was assumed to

close to new business after 2013. Assumptions were made in respect of redundancy costs and buyout of leases on property and hardware. These costs were then compared with emerging surpluses in 2014 from the projected in force business at 31 December 2013. These were more than sufficient to cover the additional costs and consequently no additional reserve is held.

(6) Unitised business, old protection business & NPSF annuities :

The run-off pattern of future profits on unitised business was examined and shown to cover projected non-attributable expenses for the whole group in each year to around 2026. On this basis, no reserve for non-attributable expenses is held as at 31 December 2012 for this group. SEEB : No expenses within SEEB have been treated as non-attributable.

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SE Protect : No expenses within SE Protect have been treated as non-attributable. Non-unitised WPSF : No expenses within this homogeneous risk group have been treated as non-attributable.

Mismatching reserves 7. (1)

Currency of Liability

Sum of reserves (*) (£000)

Percentage of total

Currency of assets

Value of matching assets (£000)

Sterling 14,379,360 98.0% Sterling 14,379,360 Sterling 28,200 0.2% Far East 28,200 Sterling 103,258 0.7% Europe 103,258 Sterling 139,564 1.0% North America 139,564 Sterling 20,699 0.1% Japan 20,699 Total 14,671,082 100.0% 14,671,082

(*) Excluding property linked but including deposits received from reinsurers.

(2) See (1) above. (3) Within the NPSF, all mathematical reserves are backed by sterling-denominated assets or non-

sterling denominated assets hedged back to Sterling and so no reserve is required for currency mismatching. Within the WPSF, there are sufficient implicit margins within the valuation basis to cover any reserve required for currency mismatching.

(4) As the firm is a realistic reporting firm, there is no requirement to set up a resilience capital

requirement.

(5) See (4) above.

(6) See (4) above.

(7) In the NPSF, an analysis of projected asset & liability cashflows indicated some degree of mismatch and an additional reinvestment risk reserve has been calculated in accordance with INSPRU 3.1.45R.. Given this, no additional reserve is required from the test on assets in INSPRU 1.1.34R(2).

As the WPSF is in run-off, the key issue relates to the liquid nature of its assets, which will require to be sold over time to meet claims. As the WPSF’s assets are appropriately diversified and are highly liquid, no additional reserve is required from the test on assets in INSPRU 1.1.34R(2).

Other special reserves 8. There are no special reserves that exceed the lesser of £10m and 0.1% of total mathematical reserves. Reinsurance 9. (1) Facultative Reinsurance :

The aggregate of premiums payable during 2012 in respect of Scottish Equitable Protect policies to RGA Americas Reinsurance Company Limited is £0.5m.

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(2) Treaty Reinsurance : Treaty 1 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers all disability benefits under Mortgage

Link contracts and operates automatically so that the Insurer retains no risk for any of the disability benefits. There are no material contingencies under the treaty.

Premiums paid The premiums paid under the treaty during 2012 totalled £26,088

Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £138,497 Retention limit for new policies Nil.

Treaty 2 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers death benefits above £300,000 where

there is no critical illness cover and, where there is critical illness cover, 50% of the benefit payable under Passport for Life contracts.


Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £101,275 Retention limit for new policies £300,000

Treaty 3 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This treaty covers death benefits under Mortgage Link

contracts and currently applies for first class lives to the range of sums assured £300,000 to £700,000.

Premiums paid The premiums paid under the treaty during 2012 totalled £569

Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded Nil. Retention limit for new policies Below £300,000 and above £700,000.

Treaty 4 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This disclosure is in respect of a group of two treaties

covering term assurances and currently applies for first class lives to the range of sums assured £200,000 to £3,800,000.


Deposit back arrangements None. Open or closed to new business? Open.

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Undischarged obligations None. Mathematical reserves ceded £46,600 Retention limit for new policies Below £200,000 and above £3,800,000.

Treaty 5 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This treaty covers death benefits under all classes of policy

excluding term assurance on original terms and currently applies for first class lives to the range of sums assured £200,000 to £800,000.


Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £332,266 Retention limit for new policies Below £200,000 and above £800,000.

Treaty 6 Reinsurers Pool of Scottish Life Offices Nature & extent of cover The treaty covers death benefits under all classes of policy

on original terms. There are no material contingencies under the treaty.

Premiums paid The premiums paid under the treaty during 2012 totalled nil.

Deposit back arrangements None. Open or closed to new business? Closed. Undischarged obligations None. Mathematical reserves ceded £1,088,128 Retention limit for new policies Not applicable.

Treaty 7 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers all waiver of premium benefits under

Reflex Plus, Reflex Linked, Reflex 85 and Reflex Personal Pensions contracts and operates automatically so that the Insurer retains no risk for any of the waiver of premium benefits.



Treaty 8 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers all waivers of premium benefits under the

death in service section of the Barclays Retirement Accumulator Plan and operates automatically so that the Insurer retains no risk for any of the waiver of premium benefits. In addition half of the death in service benefit is

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automatically reinsured. Premiums paid The premiums paid under the treaty during 2012 totalled

nil. Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded Nil. Retention limit for new policies Nil on waiver of premium, 50% on death in service

benefits. Treaty 9 Reinsurer Pacific Life Re Ltd. Nature & extent of cover This treaty relates to one particular group scheme. Premiums paid The premiums paid under the treaty during 2012 totalled

£14,076 Deposit back arrangements None. Open or closed to new business? Closed. Undischarged obligations None. Mathematical reserves ceded £966,216 Retention limit for new policies Not applicable.

Treaty 10 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty relates to one particular group scheme. Premiums paid The premiums paid under the treaty during 2012 totalled

£4,506 Deposit back arrangements None. Open or closed to new business? Closed. Undischarged obligations None. Mathematical reserves ceded £12,800 Retention limit for new policies Not applicable.

Treaty 11 Reinsurer Munich Reinsurance Company Nature & extent of cover The treaty covers the future mortality risk in respect of

pension fund annuities in force at 1 April 1998 that reside in the With Profits Sub-Fund.

Premiums paid The premiums paid under the treaty during 2012 totalled £50,714,504

Deposit back arrangements None. Open or closed to new business? Closed – the treaty covers relevant policies effected on or

before 31 December 1993. Undischarged obligations None. Mathematical reserves ceded £75,750,140 Retention limit for new policies Not applicable.

Treaty 12 Reinsurer XL Re Nature & extent of cover The treaty covers the future mortality risk in respect of

pension fund annuities in force at 31 December 2000 that reside in the Non Profit Sub-Fund.


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Deposit back arrangements None. Open or closed to new business? Closed – the treaty covers relevant policies effected

between 1 January 1994 and 31 December 2000. Undischarged obligations None. Mathematical reserves ceded £48,202,818 Retention limit for new policies Not applicable.

Treaty 13 Reinsurer XL Re Nature & extent of cover The treaty covers the future mortality risk in respect of

pension fund annuities in force at 31 December 2001 that reside in the Non Profit Sub-Fund and were written in 2001.



between 1 January 2001 and 31 December 2001. Undischarged obligations None. Mathematical reserves ceded £10,677,119 Retention limit for new policies Not applicable.

Treaty 14 Reinsurer RGA Americas Reinsurance Company Ltd. Nature & extent of cover The treaty covers the individual protection business of

Scottish Equitable Protect, excluding Income Protection. Reinsurance is on original terms on a quota share basis with 10% of the risk retained up to an overall maximum retention of £100,000 for Life Protection and £30,000 for Critical Illness Protection and Total Permanent Disability.

Premiums paid The premiums paid under the treaty during 2012 totalled £14,788,000.


between 23 January 2001 and 11 July 2003. Undischarged obligations None. Mathematical reserves ceded £60,843,000 Retention limit for new policies Not applicable.

Treaty 15 Reinsurer Swiss Re Europe S.A., UK branch. Nature & extent of cover The treaty covers the Income Protection business of

Scottish Equitable Protect. Reinsurance is on original terms on a quota share basis with 20% of the risk retained up to an overall maximum retention of £5,000 p.a.



between 15 October 2001 and 31 August 2003. Undischarged obligations None. Mathematical reserves ceded -£1,849,000 Retention limit for new policies Not applicable.

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Treaty 16 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This treaty covers Group Life business written by Scottish

Equitable Employee Benefits, which is reinsured on risk premium rates on a quota share plus surplus basis The treaty has a retention level of 80%. The surplus is for Group Life and covers up to a maximum of £3,000,000.


Deposit back arrangements None. Open or closed to new business? All parts of the grouping are closed to new business. Undischarged obligations None. Mathematical reserves ceded £1,072 Retention limit for new policies Closed to new business

Treaty 17 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This disclosure covers a group of three treaties covering

Group Income Protection business written by Scottish Equitable Employee Benefits. The grouping reflects reinsurance on risk premium rates on a quota share plus surplus basis. Part 1 has a retention level of 10% and Parts 2 & 3 have a retention level of 55%. The surplus covers up to a maximum of £350,000.


Deposit back arrangements None. Open or closed to new business? Closed Undischarged obligations None. Mathematical reserves ceded £44,862,027 Retention limit for new policies Closed to new business

Treaty 18 Reinsurer Swiss Re Europe S.A., UK branch. Nature & extent of cover The treaty covers the individual protection business of

Scottish Equitable Protect. For policies effected prior to 1 September 2005, the basis is original terms quota share. For policies effected from 1 September 2005, the basis is net level premium quota share.


Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £146,649,000 Retention limit for new policies

For Level Life Protection effected from 22 June 2012 onwards 0% retained. The insurer cedes 45% of sums insured For Income Protection effected from 17 October 2007, 25% retained up to an overall maximum retention of £5,000 pa

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Treaty 19 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover This treaty covers Group Critical Illness business written

by Scottish Equitable Employee Benefits, which is reinsured on risk premium rates on a quota share plus surplus basis. The treaty has a retention level of 20%. The surplus covers up to a maximum of £500,000.


Deposit back arrangements None. Open or closed to new business? Closed.Undischarged obligations None. Mathematical reserves ceded £544 Retention limit for new policies Closed to new business

Treaty 20 Reinsurer �� Company Nature & extent of cover The treaty covers term assurances with sums assured below

£200,000 Premiums paid The premiums paid under the treaty during 2011 totalled

£1,224,057 Deposit back arrangements None. Open or closed to new business? Open Undischarged obligations None. Mathematical reserves ceded £4,406,113 Retention limit for new policies 10% of the risk below sums assured of £200,000.

Treaty 21 Reinsurer Blue Square Re Nature & extent of cover The treaty covers the individual protection business of

Scottish Equitable Protect. The basis is net level premium quota share


Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £3,273,000 Retention limit for new policies For Life and Reducing Life Protection policies effected

from 22 June 2012 onwards 0% retained. The insurer cedes 10% of the sums insured. For Critical, Illness, Life with Critical Illness and Total Permanent Disability Protection effected from 22 June 2012, 10% retained up to an overall maximum of £100,000. The insurer cedes 10% of the sums insured.

Treaty 22 Reinsurer Pacific Life Re Nature & extent of cover The treaty covers Life Protection, Life with Critical Illness

and Total Permanent Disability protection business of Scottish Equitable Protect. For policies effected prior to 1

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September 2005, the basis is original terms quota share. For policies effected from 1 September 2005, the basis is net level premium quota share.


Deposit back arrangements None. Open or closed to new business? Closed – the treaty covers relevant policies effected from

14 February 2005 to 21 September 2009. Undischarged obligations None. Mathematical reserves ceded £44,771,000 Retention limit for new policies Not applicable

Treaty 23 Reinsurers Pacific Life Re Ltd Nature & extent of cover The treaty covers Life and Total Permanent Disability

Protection business of Scottish Equitable Protect and the basis is net level premium quota share.



between 1 September 2005 and 17 October 2007. Undischarged obligations None. Mathematical reserves ceded £7,155,000 Retention limit for new policies Not applicable

Treaty 24 Reinsurer Hannover Life Reassurance (UK)Limited. Nature & extent of cover The treaty covers the Life Protection business of Scottish

Equitable Protect. The basis is net level premium quota share

Premiums paid The premiums paid under the treaty during 2012 totalled £199,000.


between 23 June 2007 and 21 September 2009.

Undischarged obligations None. Mathematical reserves ceded £952,000 Retention limit for new policies Not applicable

Treaty 25 Reinsurer RGA Americas Reinsurance Company Ltd and RGA

Reinsurance UK Ltd. Nature & extent of cover The treaty covers the individual protection business of




between 17 October 2007 and 21 June 2012

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Undischarged obligations None. Mathematical reserves ceded £41,078,000 Retention limit for new policies Not Applicable

Treaty 26 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers stop loss reinsurance of the pensions

annuities in payment that reside in the NPSF of the Insurer. The amount of cover as at 31 December 2012 was £0m.


Deposit back arrangements None. Open or closed to new business ? Open. Undischarged obligations The treaty results in an undischarged obligation of the

insurer of £0m as at 31 December 2012 Mathematical reserves ceded £0 Retention limit for new policies Not applicable.

Treaty 27 Reinsurer Swiss Re Europe S.A. - UK Branch Nature & extent of cover The treaty covers stop loss reinsurance of the pensions

annuities in payment that reside in the NPSF of the Insurer. The amount of cover as at 31 December 2012 was £0.


Deposit back arrangements None. Open or closed to new business ? Open. Undischarged obligations The treaty results in an undischarged obligation of the

insurer of £0 as at 31 December 2011 Mathematical reserves ceded £0 Retention limit for new policies Not applicable.

Treaty 28 Reinsurer SCOR Global Life SE – UK Branch &

SCOR Global Life Reinsurance Ireland Ltd Nature & extent of cover The treaty covers the individual protection business of



Deposit back arrangements None. Open or closed to new business ? Closed – the treaty covers relevant policies effected

between 21 September 2009 and 21 June 2012 Undischarged obligations None. Mathematical reserves ceded £37,341,000 Retention limit for new policies Not Applicable

Treaty 29 Reinsurer Pacific Life Re Limited Nature & extent of cover The treaty covers the individual protection business of

Scottish Equitable Protect. The basis is net level premium

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quota share Premiums paid The premiums paid under the treaty during 2012 totalled

£3,407,000 Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £28,526,000 Retention limit for new policies For Level Life Protection effected from 22 June 2012

onwards 0% retained, the insurer cedes 45% of sums insured. For Simply Life 0% retained, the insurer cedes 90% of sums insured For Life with Critical Illness and Total Permanent Disability Protection with reducing sums insured10% retained up to an overall maximum of £100,000. The insurer ceded 90% of the sums insured.

Treaty 30 Reinsurer RGA International reinsurance Company Ltd Nature & extent of cover The treaty covers the individual protection business of



Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £7,059,000 Retention limit for new policies For Reducing Life Protection policies effected from 22

June 2012 onwards 0% retained. The insurer cedes 900% of the sums insured. For Critical, Illness, Life with Critical Illness and Total Permanent Disability Protection effected from 22 June 2012, 10% retained up to an overall maximum of £100,000. The insurer cedes 90% of the sums insured.

Treaty 31 Reinsurer Munich Re Company United Kingdom Life Branch Nature & extent of cover The treaty covers the individual protection business of



Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None.

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Mathematical reserves ceded £6,158,000 Retention limit for new policies For Reducing Life Protection policies effected from 22

June 2012 onwards 0% retained. The insurer cedes 90% of the sums insured. For Critical Illness, Life with Critical Illness and Total Permanent Disability Protection effected from 22 June 2012, 10% retained up to an overall maximum of £100,000. The insurer cedes 90% of the sums insured.

Treaty 32 Reinsurer AEGON Ireland plc Nature & extent of cover This treaty covers investment guarantees under

Investment Control version 13 Premiums paid The premiums paid under the treaty during 2012 totalled

£3,688,230 Deposit back arrangements None Open or closed to new business? Open Undischarged obligations None Mathematical reserves ceded £9,006,462 Retention limit for new policies 100% of the investment guarantees are reinsured

Treaty 33 Reinsurer AEGON Ireland plc Nature & extent of cover This treaty covers investment guarantees under

Investment Control version 14 (AEGON Secure Income Option)


Deposit back arrangements None Open or closed to new business? Open Undischarged obligations None Mathematical reserves ceded £5,002,359 Retention limit for new policies 100% of the investment guarantees are reinsured

Treaty 34 Reinsurer AEGON Ireland plc Nature & extent of cover This treaty covers investment guarantees under Income

for Life Premiums paid The premiums paid under the treaty during 2012 totalled

£795,236 Deposit back arrangements None Open or closed to new business? Open Undischarged obligations None Mathematical reserves ceded £5,699,443 Retention limit for new policies 100% of the investment guarantees are reinsured

Treaty 35 Reinsurer Munich Reinsurance Company Nature & extent of cover This treaty covers financial reinsurance. Deficit account

based on surplus emerging from unitised business Premiums paid The premiums paid under the treaty during 2012 totalled

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£8,994,617. Deposit back arrangements None Open or closed to new business? Closed Undischarged obligations The treaty results in an undischarged obligation of the

insurer of £20.1m as at 31 December 2012. Mathematical reserves ceded Nil Retention limit for new policies Not applicable.

Treaty 36 Reinsurer Transamerica International Reinsurance (Bermuda) Ltd. Nature & extent of cover This treaty covers financial reinsurance. Deficit account


£8,994,617 Deposit back arrangements None Open or closed to new business? Closed Undischarged obligations The treaty results in an undischarged obligation of the


Treaty 37 Reinsurer Transamerica International Reinsurance (Bermuda) Ltd. Nature & extent of cover This treaty covers financial reinsurance. Deficit account


£16,570,556 Deposit back arrangements None Open or closed to new business? Closed Undischarged obligations The treaty results in an undischarged obligation of the


Treaty 38 Reinsurer Pacific Life Re Limited Nature & extent of cover The treaty covers the future mortality risk in respect of

pension fund annuities written in calendar years 2002 to 2006 inclusive and which remained in force at 30 April 2011.


Deposit back arrangements None. Open or closed to new business? Open Undischarged obligations None. Mathematical reserves ceded £80,463,653 Retention limit for new policies Not applicable.

Treaty 39 Reinsurer BlackRock Life Limited. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE Blackrock Aquila Consensus Pension Fund of the insurer.

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Treaty 40 Reinsurer Baillie Gifford Life Ltd. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE Baillie Gifford Balanced Managed Pension Fund of the insurer.


Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £663,752,039 Retention limit for new policies Nil.


of the Series B SE Baillie Gifford 60:40 Worldwide Equity Pension Fund of the insurer.

Premiums paid The premiums paid under the treaty during 2012 totalled £(661,070)



of the Series B SE Blackrock Aquila 50/50 Global Equity Pension Fund of the insurer.




of the Series B SE Blackrock Aquila UK Equity Index Pension Fund of the insurer.

Premiums paid The premiums paid under the treaty during 2012 totalled

138

£45,947,360 Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £213,000,696 Retention limit for new policies Nil.


of the Series B SE Blackrock Aquila World (ex UK) Equity Index Pension Fund of the insurer.



Treaty 45 Reinsurer Investment Solutions Ltd. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE Investment Solutions Pre-Retirement (Sterling Fixed Interest) Fund of the insurer.




of the Series B SE Investment Solutions Retirement Builder (Mixed Investments 40-85% Shares) Fund of the insurer.

Premiums paid The premiums paid under the treaty during 2012 totalled £(4,980).



of the Series B SE Investment Solutions Active Retirement Builder Fund of the insurer.

Premiums paid The premiums paid under the treaty during 2012 totalled

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£(4,770). Deposit back arrangements None. Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £43,732 Retention limit for new policies Nil.


of the Series B SE Blackrock Aquila Pacific Rim Equity Pension Fund of the insurer.




of the Series B SE Blackrock Aquila Japanese Equity Pension Fund of the insurer.




of the Series B SE Blackrock Aquila over 5 years UK Index Linked Gilt Pension Fund of the insurer.




of the Series B SE Blackrock Aquila European Equity Pension Fund of the insurer.


140



of the Series B SE Blackrock Aquila over 15 years UK Gilt Index Pension Fund of the insurer.




of the Series B SE Blackrock Aquila US Equity Pension Fund of the insurer.




of the Series B SE Blackrock Aquila Over 15 years Corporate Bond Index Pension Fund of the insurer.



Treaty 55 Reinsurer Aberdeen Asset Management Life & Pensions Ltd. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE Aberdeen Life Managed Distribution Pension Fund of the insurer.


141



of the Series B SE Aberdeen Life Asia Pacific Equity Pension Fund of the insurer.




of the Series B SE Aberdeen Life UK Growth Fund of the insurer.




of the Series B SE Aberdeen Life North American Equity Pension Fund of the insurer.




of the Series B SE Aberdeen Life UK Long Dated Bond Pension Fund of the insurer.


142



of the Series B SE Aberdeen Life World Equity Pension Fund of the insurer.




of the Series B SE Aberdeen Life Japan Equity Growth Pension Fund of the insurer.




of the Series B SE Aberdeen Life European Equity Growth Pension Fund of the insurer.




of the Series B SE Aberdeen Life Emerging Markets Equity Pension Fund of the insurer.


Deposit back arrangements None.

143

Open or closed to new business? Open. Undischarged obligations None. Mathematical reserves ceded £7,481,646 Retention limit for new policies Nil.


of the Series B SE Aberdeen Life Sterling Bond Pension Fund of the insurer.




of the Series B SE Aberdeen Life Multi Asset (ex Property) Pension Fund of the insurer.




of the Series B SE Baillie Gifford UK Equity Pension Fund of the insurer.




of the Series B SE Blackrock Aquila Cash Index Pension Fund of the insurer.



144

Undischarged obligations None. Mathematical reserves ceded £4,215,365 Retention limit for new policies Nil.

Treaty 68 Reinsurer Schroder Pension Management Ltd. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE Schroder Diversified Growth Pension Fund of the insurer.



Treaty 69 Reinsurer HSBC Life (UK) Ltd. Nature & extent of cover The treaty covers all benefits expressed in terms of units

of the Series B SE HSBC Life Amanah Pension Fund of the insurer.




of the Series B SE Blackrock Aquila Corporate Bond Index Pension Fund of the insurer.




of the Series B SE Baillie Gifford Diversified Growth Pension Fund of the insurer.



145

Undischarged obligations None. Mathematical reserves ceded £21,398,426 Retention limit for new policies Nil.

Notes to reinsurance treaties:

1. All reinsurers are authorised to carry on business in the United Kingdom, with the exception

of RGA Americas Reinsurance Company Ltd and Transamerica International Reinsurance (Bermuda) Ltd.

2. No treaties are subject to any material contingencies. 3. There are no liabilities to refund commission in the event of lapse or surrender under any of

the treaties. 4. Under treaties 26 and 27, the undischarged obligations are reflected in the valuation through

a reduction in the liabilities of annuity business written since 31 December 2001 with allowance for credit risk consistent with the table of yield deductions detailed in 4.(3).

5. Treaty 35 is a deficit account financial reinsurance agreement where repayment is contingent

on surplus emerging from specific tranches of unitised business. The discharge of the undischarged obligation of £20.1m is expected to take place over the next 3 years.





Reversionary (or annual) bonus 10. (1)

Bonus Series Mathematical Reserves (£m)

Reversionary bonus rate : 2012

Reversionary bonus rate : 2011

Guaranteed annual return

TWP Life 106 2.50% 2.50% N/A TWP Pensions 205 0.25% 0.25% N/A WPE fund 1,561 Nil Nil c5.5% WPC/WWP fund 25 Nil Nil 3.92% WP1 fund 239 Nil Nil 4.00% WP2 fund 1,198 1.88% 2.75% 0.00% DAF fund 9 3.38% 4.38% 0.00% DA2 fund 20 0.13% 0.38% 3.00% WPB fund 145 Nil Nil 0.00% Reflex DA fund 173 Nil Nil 5.00%

Notes : 1. TWP Life & Pensions are traditional (conventional) with profits contracts. All others are

unitised with profits funds.

146

2. There is no concept of a guaranteed return in respect of 2012 under TWP contracts. Guaranteed rates of return are implicit within the premium bases that assume the continued payment of contractual premiums to maturity. Guarantees on offer at outset under TWP contracts were typically in the range 2% p.a. – 5.5% p.a.

3. Guaranteed rates of return on unitised with profits funds are in addition to reversionary

bonus additions. 4. Guaranteed rates of return under the WPE fund vary by outstanding annual duration, but

are typically around 5.5% per annum.

147

SCOTTISH EQUITABLE plc APPENDIX 9.4A [RULE 9.31(b)]

ABSTRACT OF VALUATION REPORT FOR REALISTIC VALUATION

1. Introduction (1) The date to which the actuarial investigation relates is 31 December 2012. (2) The previous valuation was carried out as at 31 December 2011. (3) Not applicable. 2. Assets (1) The future profits on non-profit business in the With Profits Subfund (WPSF) arise under -

• A predominantly closed book of annuity business. Value of future profits as at 31 December 2012 = £30.3m.

• A closed book of group deferred annuities. Value of future profits as at 31 December 2012 =

£13.4m. • Matured endowment policies whose proceeds remain on deposit with the firm. Value of future

profits as at 31 December 2012 = £0.3m. • Small miscellaneous deferred annuity classes. Value of future profits as at 31 December 2012 =

£0.1m.

Economic assumptions are as for the calculation of the corresponding mathematical reserves. The future profits arise largely from the release of the Long Term Insurance Capital Requirement, and to a lesser extent the release of margins in the mortality and interest assumptions relative to the regulatory peak.

(2) The realistic value of assets includes no amounts determined in accordance with INSPRU 1.3.33R(2).

(3) No future profits are included in the relevant assets for the purpose of INSPRU 1.3.43R in

accordance with INSPRU 1.3.45R(2)(c) and INSPRU 1.3.45R(5). (4) Not applicable. (5) Not applicable.

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3. With Profits Benefits Reserve Liabilities (1) (a), (b) & (c)

Figures in £m

Contract/Fund Retrospective / Prospective

With Profits Benefits Reserve

Future Policy Related

LiabilitiesTraditional With Profits :

Life Retrospective 175 22 Pensions Retrospective 137 179

Unitised With Profits :

No guarantees -Life New Generation Growth Fund Retrospective 70 (0)

Life New Generation Cautious Fund Retrospective 60 3 Pensions New Generation Growth Fund Retrospective 532 (21)

Pensions New Generation Cautious Fund Retrospective 198 1

With guarantees -Life WPB Fund Retrospective 187 21 Life WPC Fund Retrospective 18 2

Life WWP Fund Retrospective 2 0 Pensions WPE Fund Retrospective 1212 731 Pensions WP1 Fund Retrospective 236 148 Pensions WP2 Fund Retrospective 1387 187 Pensions DAF Fund Retrospective 10 1 Pensions DA2 Fund Retrospective 24 12

Pensions Reflex DA Fund Retrospective 128 118 Miscellaneous Others (*) Retrospective 7 1

Total : 4384 1406 (*) Deposit Administration classes valued as accumulated fund.

Note : Future Policy Related Liabilities shown above exclude planned enhancements to with profits benefit reserves of £201.1m that appear in Form 19 Line 34, where no allocation across different product lines and/or funds has taken place. Note that the inclusion of this entry in Form 19 Line 34 is not consistent with the way in which the firm measures or manages its with profits business.

(2) Not applicable. 4. With Profits Benefits Reserve – Retrospective Method (1) 100% of the with profits benefits reserve has been calculated using retrospective methods for which

contracts have been valued on an individual basis. (2) (a) Not applicable.

(b) Not applicable.

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(3) Allowances for expenses/contract charges in the calculation of with profits benefits reserves are

consistent with Scottish Equitable’s Scheme of Demutualisation (the “Scheme”). In particular, specified levels of expenses are charged to TWP asset shares and an annual management charge is charged to UWP asset shares, at the same rate as under equivalent unit-linked funds. Note that all expense risk is borne by the shareholder; the mutual WPSF passes amounts to the shareholder-owned Non Profit Subfund (NPSF) in accordance with the Scheme. The shareholder then makes an expense profit or loss depending on how these amounts compare with actual expenses incurred.

The Scheme specifies the following :

• The rates of per policy maintenance expense to be charged to TWP policies and passed from the

WPSF to the NPSF (note that no new TWP business has been written since demutualisation hence there is no reference to acquisition expenses within the Scheme).

• The investment management expenses to be charged to TWP policies and passed from the

WPSF to the NPSF. • Under unitised with profits (UWP) policies, an annual management charge is passed from the

WPSF to the NPSF at a rate equal to that charged on equivalent unit-linked funds. (a) The previous expense investigation relates to calendar year 2012. (b) Expense investigations are carried out annually. (c) The answers in this section are in respect of calendar year 2012 : (i) No expenses identified as initial expenses were allocated to with profits benefit

reserves. (ii) Maintenance expenses of £1.3m were allocated to TWP benefit reserves. Annual

management charges of £36.1m were allocated to UWP benefit reserves.

(iii) Expenses are charged to with profits benefits reserves in accordance with the Scheme.

(iv) Investment expenses are charged against the assets backing non-profit business in

the WPSF and the assets within the estate and totalled £1.9m in 2012.

(4) During 2012, deductions equivalent to the rate of 0.5% per annum were made within the calculation of all with profits benefits reserves, except under the New Generation With Profits (NGWP) Funds. This is the same level of deduction made during 2011. This level of deduction, which may be varied in future, covers a proportion of expected future guarantee costs (including GAO and GMP guarantee costs), with the balance of expected future costs being met from the estate.

Additionally, subject to a regular assessment of economic conditions, the expected emergence of guarantee costs and the level of realistic excess capital, the firm aims to enhance the investment returns underpinning the calculation of asset shares from the estate. As at 31 December 2012 and consistent with the above paragraph, all with profits benefits reserves (excluding NGWP) were increased by 1% from the estate, resulting in a net enhancement over 2012 (i.e. after allowing for a deduction of 0.5%) of 0.5%.

150

With effect from 1 January 2013, the firm’s directors have agreed to maintain the current level of annual deduction for guarantee costs at 0.50%.

(5) No deductions have been made for non-insurance risk within the calculation of with profits benefits

reserves. (6)

Average Ratio of Claims to With Profits Benefits Reserves 2012 2011 2010 Traditional With Profits :

Life 97% 94% 93% Pensions 114% 106% 109%

Unitised With Profits : Life WPB Fund 98% 96% 94% Life WPC Fund 100% 98% 98%

Pensions WPE Fund 100% 98% 98% Pensions WP1 Fund 99% 96% 94% Pensions WP2 Fund 99% 94% 94% Pensions DAF Fund 99% 96% 94% Pensions DA2 Fund 99% 96% 94%

Pensions Reflex DA Fund 97% 95% 94%

Notes 1. Consistent with the PPFM, no past miscellaneous surpluses and deficits have been attributed

to with profits benefits reserves.

2. No figures are shown for the New Generation With Profits Funds, which have no guarantees or bonus mechanisms and whose payouts are driven by explicit smoothing formulae.

(7) As in previous years (following past practice), different investment returns before tax,

expenses/contract charges and deductions for guarantee costs apply to individual constituent elements of the WPSF. This continues to reflect a range of different asset mixes, consistent with different levels of guarantee on offer.

Gross investment returns (before tax, expenses/charges & estate distribution) over the 12 month period to 31 December 2012 are as follows :

Contract/Fund Investment Return

TWP Life & Pensions; Unitised WPE, WPC 12.1% Unitised WP1 11.9% Unitised WP2 11.2% Unitised DAF 11.9% Unitised DA2 11.9%

Unitised Reflex DA 12.4% Unitised WPB 11.2%

5. With Profits Benefits Reserve – Prospective Method (1) No with profits benefits reserves have been assessed using prospective methods. (2) Not applicable.

151

6. Costs of Guarantees, Options and Smoothing (1) Not applicable. (2) (a) Stochastic techniques have been used to value all relevant guarantees and associated

smoothing costs, which fall under the following headings :

• Growth guarantees under TWP & UWP policies. • Guaranteed annuity options. • GMP guarantees under Individual Buyout contracts.

(b) (i) No costs have been valued on an individual policy basis. (ii) All costs have been valued on a grouped basis.

(iii) Contracts are grouped to provide the best fit for discounted guarantee and option costs. A number of criteria are used such as year of maturity, class, paid-up or premium paying, sex (for financial options) and ratio of projected asset share to fund value at maturity.

We have used 317,918 individual contracts and 10,189 model points. These counts are premium type counts and so a policy with both single and regular premiums would contribute a count of two. In assessing the appropriateness of any model point groupings, separate tests are carried out by comparing the discounted guarantee and option costs for all individual policies with those for model points. The separate tests are five different scenarios representing the 5th, 25th, 50th, 75th and 95th percentiles of the discounted guarantee costs. The model points are deemed appropriate if the comparison is a reasonable fit, i.e. the discounted guarantee and option costs are within an acceptable level of those for individual policies, taking into account the size of the costs. For very small guarantee costs, a larger percentage error is acceptable.

(c) Not applicable.

(3) There have been no significant changes to the valuation methods for valuing the costs of guarantees, options or smoothing since the previous valuation.

(4) (a) (i) The guarantees and options being valued are as follows :

Traditional With Profits Growth Guarantees In return for the payment of a single premium or an agreed series of premiums, the firm guarantees to pay a specified level of sum assured, including annual bonus additions to date, at a specified maturity date or on earlier death. Unitised With Profits Growth Guarantees (excluding New Generation With Profits) Each premium paid attracts a guaranteed rate of future accumulation (that is dependent on the UWP fund chosen), including accrued annual bonuses, to a specified future date (e.g. selected retirement date, 10th anniversary of premium

152

payment) at which time no market value reduction may be applied. Similar guarantees exist on earlier death and on regular income withdrawals under certain contracts. The degree to which such guarantees are currently in or out of the money varies by UWP fund and outstanding policy term. “Moneyness” can be assessed in a number of ways, but perhaps the most appropriate is the forward moneyness, which looks ahead to the likely position at maturity. Under this measure WPE investments are generally in the money due to the high guaranteed growth rate. WP2 investments are generally out of the money. Guaranteed Annuity Options Certain pension contracts offer the ability to convert the retirement fund to an annuity on guaranteed terms. Such options are all currently in the money. GMP Guarantees under Individual Buyout Contracts Contracted-out Individual Buyout Contracts provide that the retirement fund will be sufficient to secure the requisite level of guaranteed minimum pension (GMP) at state pension age. Additionally, certain contract variants provide that the cost of securing the GMP will be met from UWP units only (“reserved units”). The degree to which such guarantees are currently in the money depends on the contract variant and on the relative proportion of GMP and non-GMP units within an individual policy. For example, GMP guarantees are generally currently in the money under contract variants that require the GMP to be secured from “reserved units” only, but the opposite is the case where the GMP proportion of an individual policy is small and units other than “reserved units” can be used to meet GMP guarantee costs.

(ii) The stochastic modelling is carried out using an economic scenario generator (ESG) licensed from Barrie & Hibbert. Risk neutral techniques are used to ensure arbitrage free pricing.

Interest Rate Calibration

Risk free interest rates are modelled using the annual Libor Market Model (LMM), calibrated to gilts plus 10 basis points.

The WPSF GAO liabilities are In-The-Money, so the interest rate volatility was calibrated to appropriate In-The-Money (ITM) options. The ITM surface is calculated as the sum of the ATM swaption surface plus a +200bps ITM volatility skew. Bloomberg is the data source for both the interest rate volatilities (derived from swaptions data) and the skew components, and further details on these inputs are in the table below. All missing maturities and tenors are interpolated, and the skew is held constant at the last available maturity and tenor for terms beyond the available data.

153

Swaption Currency Code (BB) BPSVSwaption Closing Time (BB) London

Swaption Bloomberg Contributor CMPGuide Economy for Extrapolation None

Swaption Skew Currency Code (BB) BPPDSwaption Skew Bloomberg Contributor TRPU

Swaption Skew Code (BB) BPPD<MMTT> TRPU Curncywhere MM = 2 digit maturity year, TT = 2 digit tenor year

Volatility Factor Loadings Source Barrie and HibbertLong Term Volatility Source Barrie and HibbertLong Term Volatility Weight 0.001

Forward Rate Cap 0.63* BB = Bloomberg data indicators

UK Interest Rate Inputs

Swaption Assumptions

Swaption Skew

Assumptions

LMM Assumptions

The assumed volatility of interest rates as of December 31, 2012 are shown in the table below.

Constructed using GBP Bloomberg ATM surface + 200bps

1 2 3 4 5 6 7 8 9 10 15 20 25 301 66.59% 55.42% 54.75% 50.38% 46.70% 42.82% 36.07% 35.45% 33.66% 29.25% 24.47% 22.65% 21.73% 21.35%

2 62.57% 53.83% 45.65% 40.56% 39.52% 33.06% 30.58% 28.48% 26.88% 25.74% 22.23% 20.75% 19.93% 19.48%

3 58.30% 48.76% 42.42% 35.54% 31.93% 30.98% 27.28% 25.73% 24.60% 23.78% 21.02% 19.62% 18.98% 18.56%

4 46.24% 40.09% 35.05% 32.28% 28.10% 26.24% 24.77% 23.82% 23.14% 22.64% 20.25% 18.90% 18.30% 18.46%

5 39.74% 34.92% 31.45% 28.68% 25.36% 25.04% 24.17% 23.40% 22.42% 22.56% 19.83% 18.55% 18.07% 17.61%

7 28.58% 25.44% 23.44% 21.69% 20.21% 20.74% 19.51% 20.11% 19.08% 18.93% 18.02% 17.06% 16.84% 16.52%

10 21.75% 20.52% 19.32% 18.17% 18.10% 17.83% 17.55% 17.38% 17.11% 16.41% 16.36% 15.91% 15.64% 14.79%

15 18.04% 17.72% 17.57% 17.16% 16.55% 16.36% 16.18% 16.00% 15.92% 15.84% 15.28% 14.56% 14.25% 14.15%

20 17.04% 17.68% 17.07% 16.56% 16.05% 14.91% 15.78% 15.70% 15.52% 14.68% 14.58% 13.76% 13.55% 12.94%

25 17.34% 18.08% 17.57% 16.96% 16.45% 16.26% 16.08% 16.00% 15.72% 15.54% 14.58% 13.86% 13.55% 13.15%

30 16.94% 17.68% 17.07% 16.46% 15.85% 15.76% 15.58% 15.40% 15.32% 15.14% 14.58% 13.26% 13.12% 12.85%

Swap Tenor

Ma

turi

ty

200+ Surface

UK Equity Calibration Equity returns are derived from the risk free short rate plus a lognormally distributed excess return. The model is calibrated to UK equity implied volatilies of put options with durations of one to five years, and extrapolates to an assumed long-term forward volatility target thereafter. The equity parameter inputs are as follows:

154

UK Equity InputsIndex FTSE 100

Total Return Index Source

Bloomberg: TUKXG Index

Exchange Rate Source N/AImplied Volatility Quotes

SourceInvestment Banks: JP

Morgan, Morgan StanleyCorrelation Tolerance 2%

Volatility Tolerance 2%Forward Volatility Floor 5%

Best Estimate Long Term Volatility 20%

The assumed volatility of equity assets as of December 31, 2012 are shown in the table below.

Market Equity Option Implied Volatility Targets (1 - 5+ Years FATM)

Index FTSESource Group Risk

1 17.49%2 20.17%3 21.51%4 22.55%5 23.42%

Ultimate 25.45% The ultimate long term equity volatility target is derived from an estimate of historical long-term volatility, with margins incorporated to reflect parameter and contagion risk.

Credit Risk Calibration Credit risk is captured using a Jarrow-Lando-Turnbull framework for credit spreads and ratings transitions. The target corporate bond chosen is a 10-year A bond, and yield data is sourced from Bloomberg. The below table indicates the settings for the credit model calibration:

ModelID UK_WPSFCredit Rating Target A - 10Yrs

Credit Ticker (BB) C41110Y IndexCredit Closing Time (BB) London

Bloomberg Contributor CMPCredit Alpha 0.1Credit Sigma 0.75

Credit Mu 3Recovery Rate 0.35

* BB = Bloomberg data indicators

UK Credit Calibration Inputs

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The following table gives a synopsis of the established set up for the generic bond portfolio parameters defined for the UK.

ModelIDPortfolio Name Gilt AAA AA A BBB

Stategy Fixed Coupon and Maturity

Fixed Coupon and Maturity




Currency GBP GBP GBP GBP GBP

Equity Asset EquityAssets.E_GBP

EquityAssets.E_GBP

EquityAssets.E_GBP

EquityAssets.E_GBP

EquityAssets.E_GBP

Credit Class Gov't (Risk- AAA AA A BBBBond Type Nominal Nominal Nominal Nominal Nominal

Number of Bonds 50 50 50 50 50Coupon 0 0 0 0 0

Frequency 0 0 0 0 0Term 9.6 9.6 9.6 9.6 9.6

Term Decline Rate 0.3 0.3 0.3 0.3 0.3Seniority 3 3 3 3 3

UK_WPSFGeneric Bond Portfolio Parameters

The following table shows the weightings for the corporate bond portfolio: Bond rating %AAA 38%AA 8%A 27%BBB 27% Correlations Correlations are generally not directly observable in the market; parameters are therefore derived by analysis of historic experience. Correlations between asset classes are not specified directly in the ESG, but rather via a 2-stage process : 1. The identification of suitable targets for the key correlations. 2. The specification of correlation parameters between the random shocks underlying the stochastic processes within the asset model. These are set such that the model output produces the target correlations. The equity-rate correlations are correlations between the excess equity return and the short rate and long rate interest rate drivers of the Libor Market Model interest rate model. The correlations are not directly related to the yield curve we input; rather, the Barrie and Hibbert default equity-rate correlation assumptions are used. These correlations are as follows: 1. -0.07 correlation between excess equity returns and changes in the short interest rate. 2. -0.17 correlation between excess equity returns and changes in the long interest rate.

15

6

(iii) Figures in £ -

KDuration (n) 5 15 25 35 5 15 25 35 5 15 25 35

Annualised compound equivalent of the risk free rate assumed for the

period (r ) 1.01% 2.68% 3.49% 3.72% x x x x x x x x

Risk-Free Zero Coupon Bond £950,840 £672,256 £424,229 £278,146 x x x x x x x x

FTSE All Share Index (p=1) £83,158 £211,379 £292,032 £369,478 £206,669 £368,432 £465,740 £552,687 £581,226 £745,793 £860,192 £950,602

FTSE All Share Index (p=0.8) £80,338 £179,767 £219,785 £256,213 £200,617 £318,279 £354,828 £388,583 £568,432 £654,887 £670,648 £680,478

Property (p=1) x x x x x x x x x x x x

Property (p=0.8) x x x x x x x x x x x x

15yr Risk-Free ZCBs (p=1) £13,577 £19,667 £16,486 £30,375 £77,704 £79,686 £102,887 £156,160 £501,322 £501,493 £517,957 £560,493

15yr Risk-Free ZCBs (p=0.8) £12,709 £13,785 £6,789 £3,391 £73,358 £52,579 £35,333 £39,792 £486,335 £388,655 £303,009 £276,260

15yr Corporate Bonds (p=1) £18,435 £30,656 £34,558 £50,711 £89,581 £107,160 £123,486 £165,711 £493,214 £490,712 £505,568 £551,669

15yr Corporate Bonds (p=0.8) £17,399 £22,017 £16,507 £16,262 £85,076 £75,784 £59,429 £59,635 £478,325 £382,722 £301,474 £278,084

Portfolio 1 (p=1) £83,158 £211,379 £292,032 £369,478 £206,669 £368,432 £465,740 £552,687 £581,226 £745,793 £860,192 £950,602

Portfolio 1 (p=0.8) £80,338 £179,767 £219,785 £256,213 £200,617 £318,279 £354,828 £388,583 £568,432 £654,887 £670,648 £680,478

Portfolio 2 (p=1) £38,548 £111,939 £169,421 £233,236 £142,874 £246,512 £315,830 £390,905 £530,322 £614,143 £687,571 £761,581

Portfolio 2 (p=0.8) £36,559 £87,861 £113,797 £141,689 £137,274 £201,452 £220,743 £249,439 £516,891 £522,642 £503,780 £507,049

Portfolio 3 (p=1) £31,097 £90,450 £139,987 £196,864 £129,521 £217,517 £278,935 £348,955 £519,880 £584,038 £644,910 £713,885

Portfolio 3 (p=0.8) £29,358 £69,100 £89,606 £112,237 £123,994 £174,165 £188,148 £212,185 £506,182 £491,485 £462,440 £461,820

17.18% 9.34% 7.92% 6.78% 18.98% 11.56% 10.03% 8.36% 20.73% 13.70% 11.87% 9.58%

FSA Table0.75 1 1.5

Sterling Receiver SwaptionsSwap Duration = 15 years Swap Duration = 20 years Swap Duration = 25 years

Notes to Table Row 1 is completed showing the value of cash payments of £1,000,000 due n years after the valuation date. Rows 2 to 15 inclusive is completed for the appropriate asset classes showing the value of a put option on a portfolio worth £1,000,000 on the valuation date exercisable n years after the valuation date with strike price of K*£1,000,000*(1+r*p)^n. All references to 15 year bonds mean rolling bonds traded to maintain the 15 year duration at all future dates. The corporate bonds are assumed to be rolling AA rated zero coupon bonds. Row 16 is completed showing the value of sterling receiver swaptions with a strike of 5% exercisable n years after the valuation date with swap durations on exercise of L years. Rows 4 and 5 are blank as we have minimal property exposure and consequently have not modelled property stochastically. Similarly, in the portfolios in rows 10-15, the property component has been replaced by equity. Thus we have: Portfolio 1: 65% equity and 35% property (100% equity used) Portfolio 2: 65% equity and 35% 15-year risk free zero coupon bonds Portfolio 3: 40% equity, 15% property, 22.5% 15-year risk free zero coupon bonds and 22.5% 15-year corporate bonds. (55% equity, 22.5% risk free zero coupon bonds and 22.5% 15-year corporate bonds used)

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(iv) The stochastic modelling focuses on total returns for each asset class; equity and

property yields are not used. (v) There are no significant territories other than the UK. (vi) The overall duration of the with profits liabilities is 9.24 years, although clearly this

reflects a wide range of policy durations. The fit of the asset model to risk free yields and to implied volatilities for equity and

interest rate options is shown in section 6(4)(a)(ii) above. (vii) The asset model satisfies the no-arbitrage (or “martingale”) test; that is, for each asset

class, the mean discounted value of the projected fund equals the current value. (viii) 1000 simulations were carried out. Variance reduction techniques (antithetic variables)

were used to improve convergence. The standard error of the measure of future policy related liabilities was 0.4%.

(b) Not applicable. (c) Not applicable. (5) (a) The management actions assumed in the projection of assets and liabilities used to determine

the costs in (4)(a) are detailed below. It should be noted that, in practice, the PPFM gives the directors greater flexibility than indicated by these assumptions.

Bonus Policy Reversionary bonus rates to be applied to each with-profits fund within each annual projection step are calculated by comparing the following : A. A proportion “t” of asset shares projected to maturity using best estimate investment returns

and with an allowance for decrements. The level of “t” varies by the type of with-profits fund and will typically be lowest in funds that invest significantly in equities. The lowest level of “t” that currently applies is 70% within the WP2 & WPB funds.

B. Projected guaranteed maturity benefits including reversionary bonus additions to date and

allowing for contractual future premiums where appropriate. As under the calculation in A above, an allowance for decrements is made.

The affordable reversionary bonus rate (ARB) for each model point is then calculated as – ARB = (A/B)1/n-1, where n = outstanding term to maturity. ARB may be negative for some model points. The affordable reversionary bonus rate for each with-profits fund is then weighted across all model points as follows – Sum (ARB x AS) / Sum (AS), where AS = asset share

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Policies with outstanding durations of less than 1 year are excluded from this calculation as they are assumed to receive the balance of their asset share in terminal bonus. Rates are then rounded to the nearest 0.25% and used within the next projection step, subject to the following – • The maximum step change, from one year to the next is 1% up or 1.5% down. • The weighted rate is subject to a minimum of 0%. • The weighted rate is subject to a maximum of the risk-free rate. Investment Policy The investment policy for each with profits fund is set so that the asset share should be sufficient to provide for the guaranteed benefits after an equity fall of 25% for the majority (a 30% fall is the trigger for the WP2 and WPB funds). Hence, as the level of asset share falls relative to guaranteed benefits, EBR reductions become more likely. EBRs are allowed to fall as low as 5% for TWP, W10 and WPE funds, 10% for DA2 and DAF and 40% for the high equity funds WP2 and WPB. This is subject to an overall maximum change from year to year of 5% up or down. As an example, if market conditions indicated that a reduction in the EBR of the WP2 fund was required from, say, 55% to 25%, the model would move to an EBR of 40% over a 3-year period. Deductions for Guarantee Costs The process of reviewing the level of deduction over the first year is as follows : • The initial level of deduction within each simulation is 0.50% per annum. • Calculate the initial level for the “guarantee account”, which equals the excess at time zero

of the present value of future guarantee costs over guarantee charges, assuming that the charge remains at 0.50% per annum throughout. This guarantee account represents the proportion of future guarantee costs that we expect the estate to meet, a key associated point being that an annual deduction of 0.50% pa in isolation would be insufficient to meet expected future guarantee costs.

• Roll forward the initial guarantee account to time 1, allowing for the difference between the

charge and cost of guarantees in the first year. • The revised level of charge at time 1 is then recalculated to cover the present value of future

guarantee costs at time 1 less the revised level of the guarantee account at time 1. For the purposes of the calculations as at 31 December 2012, the maximum level of annual deduction has been capped at 2%, although, in practice, the PPFM gives the directors greater flexibility than this.

159

Payout Rules The aggregate cost of smoothing (as measured by a smoothing account) is targeted to be cost-neutral on a realistic basis, which will generally prove true if expected investment experience is borne out in practice. However, under certain investment scenarios the smoothing account can become more positive or negative than expected. Under these circumstances, it is assumed that management discretion will be applied to the level of policyholder payouts to bring the smoothing account back to its cost-neutral position over the outstanding duration of the business. This can result in payouts that are more or less than 100% of smoothed asset share.

(b) By applying the decision rules relating to equity backing ratios, the best estimates of the future

proportions of the assets backing the with profits benefits reserves that would be invested in equities are as follows : Scenario (i) – Future returns = forward rates derived from the risk-free interest rate curve as calibrated at the valuation date.

Current 5 years' time 10 years' time

Traditional With Profits:

Life 15.1% 5.0% 5.1%

Pensions 15.1% 5.0% 5.1%

Unitised With Profits

Life WPB Fund 54.6% 61.7% 58.2%

Life WPC Fund 15.1% 5.0% 5.1%

Pensions WPE Fund 15.1% 5.0% 5.1%

Pensions WP1 Fund 20.0% 15.0% 13.9%


Pensions DAF Fund 20.0% 27.1% 24.3%

Pensions DA2 Fund 20.0% 21.6% 18.2%

Pensions Reflex DA Fund 0.0% 0.0% 0.0%

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Scenario (ii) - Future returns = forward rates derived from the risk-free interest rate curve increased across the period by 17.5% of the long-term gilt yield.



Life 15.1% 5.1% 5.1%

Pensions 15.1% 5.1% 5.1%


Life WPB Fund 54.6% 63.1% 60.0%

Life WPC Fund 15.1% 5.1% 5.1%






Pensions Reflex DA Fund 0.0% 0.0% 0.0% Scenario (iii) - Future returns = forward rates derived from the risk-free interest rate curve reduced across the period by 17.5% of the long-term gilt yield.



Life 15.1% 5.0% 5.0%

Pensions 15.1% 5.0% 5.0%


Life WPB Fund 54.6% 60.2% 56.2%

Life WPC Fund 15.1% 5.0% 5.0%







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By applying the decision rules relating to reversionary bonus, the best estimates of future reversionary bonus rates are as follows : Scenario (i) – Future returns = forward rates derived from the risk-free interest rate curve as calibrated at the valuation date.



Life 2.50% 1.64% 2.02%

Pensions 0.25% 0.01% 0.02%


Life WPB Fund 0.00% 1.53% 1.84%

Life WPC Fund 0.00% 0.00% 0.00%






Pensions Reflex DA Fund 0.00% 0.00% 0.56% Scenario (ii) - Future returns = forward rates derived from the risk-free interest rate curve increased across the period by 17.5% of the long-term gilt yield.



Life 2.50% 1.84% 2.38%

Pensions 0.25% 0.02% 0.03%


Life WPB Fund 0.00% 1.87% 2.23%

Life WPC Fund 0.00% 0.00% 0.00%







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Scenario (iii) - Future returns = forward rates derived from the risk-free interest rate curve reduced across the period by 17.5% of the long-term gilt yield.



Life 2.50% 1.44% 1.66%

Pensions 0.25% 0.00% 0.00%


Life WPB Fund 0.00% 1.20% 1.47%

Life WPC Fund 0.00% 0.00% 0.00%






Pensions Reflex DA Fund 0.00% 0.00% 0.00% Note : Current rates are effective from 1 April 2012.

(6) Product

1 - 5 6 - 10 11 - 15 16 - 20CWP savings endowment Surrender 2.06% 2.06% 2.06% 2.06%CWP target cash endowment Surrender 0.00% 0.00% 0.00% 0.00%UWP savings endowment Surrender 4.72% 4.72% 4.72% 4.72%UWP target cash endowment Surrender 4.72% 4.72% 4.72% 4.72%UWP bond Surrender 4.70% 20.00% 20.00% 20.00%UWP bond Automatic wdlsCWP pension regular premium PUP 0.00% 0.00% 0.00% 0.00%CWP pension regular premium Surrender 0.00% 0.00% 0.00% 0.00%CWP pension single premium Surrender 0.00% 0.00% 0.00% 0.00%UWP indiv pension regular premium PUP 6.03% 6.03% 6.03% 6.03%UWP indiv pension regular premium Surrender 4.34% 4.34% 4.34% 4.34%UWP indiv pension single premium Surrender 4.26% 4.26% 4.26% 4.26%

Average lapse / surrender / paid-up rate for the policy years

As per actual per policy experience

Guaranteed annuity option take-up assumptions are as follows:

TWP - RAW take-up rate : 90% TWP - EXSEL take-up rate: 80% TWP - SEL take-up rate: 90% Reflex take-up rates use the following formula: Take-upt = Max{0, MIN{maximum take-up, current take-up + annual increase * t + (current gilt yield – stochastic bond yield) * yield factor } }

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where yield factor = (maximum take-up – current take-up) / current gilt yield Initial Reflex take-up rate: 67% Maximum Reflex take-up rate: 85%

The post-vesting annuitant mortality assumptions underpinning the calculation of GAO costs are 99.1% of [PCMA00] & 90.6% of [PCFA00] base tables, projected in line with CMI_2011 model improvements using the “core” CMI assumptions with a long term improvement rate of 1.50% p.a.

(7) Take-up assumptions at MVR-free points are 100% when in-the-money and 20% when out-of-the-

money for both Trustee Investment Plan and With Profits Bond. 7. Financing Costs No financing arrangements exist in the WPSF. 8. Other Long Term Insurance Liabilities There are no entries at Lines 46 & 47 of Form 19. 9. Realistic Current Liabilities The realistic current liabilities shown at Line 51 of Form 19 are equal to the regulatory current liabilities, which reflect routine amounts owed to a range of creditors. 10. Risk Capital Margin (a) The amount of the risk capital margin as at 31 December 2012 was zero.

(i) The percentage change assumed in accordance with INSPRU 1.3.68R for the market values of equities was a 20% decrease. The WPSF holds no real estate.

(ii) The assumed nominal change in yields in accordance with INSPRU 1.3.68R for fixed interest

securities, consistent with the most onerous requirement, was a decrease of 41 basis points, which corresponds to a decrease of 17.5% in the long-term gilt yield of 2.32%.

(iii) INSPRU 1.3.78R (credit risk) impacts :

Average Change in Spread

Percentage Change in Asset Value

Bonds 0.64% -4.18% Debts Not applicable Not applicable Reinsurance Items Not applicable Not applicable Non-Reinsurance Financing Not applicable Not applicable Other Assets Not applicable Not applicable

(iv) The overall percentage change in the realistic value of liabilities that results from applying the

persistency risk scenario according to INSPRU 1.3.100R is 0.58%.

164

(v) Not applicable.

(b) The calculation of the risk capital margin includes additional management actions to those set out in 6(5)(a) above. These are described below:

(i) In the event of adverse financial or non-financial conditions arising, some or all of the historic

increases made to asset shares due to the distribution of the estate may be removed. In addition the future annual bonus rates may be set to 0.0%. The removal of historic increases shall not extend to the £160m enhancement to asset shares at the point of demutualisation.

(ii) The removal of historic increases made to asset shares due to the distribution of the estate described in 10.b(i) has the impact of increasing the planned enhancements to with profits benefits reserve, line 34, and decreasing the past miscellaneous surplus attributed to with profits benefits reserve, line 32. The change to line 34 under the risk capital margin stress excluding the extra management actions is not significant enough to make this line become zero and so the risk capital margin will still be zero. The risk capital margin is zero as we recognise the estate as a realistic liability within a closed with profits fund, even though policyholders have no contractual right to that estate. If the estate is not recognised as a realistic liability and only the management actions described in 6(5)(a) were used, the risk capital margin would equal £98.4m. The removal of historic increases made to asset shares due to the distribution of the estate is a much more powerful action than setting the bonus rates to zero.

(iii) Equity backing ratios & reversionary bonus rates The best estimates of the future proportions of the assets backing the with profits benefits reserves that would be invested in equities and the future reversionary bonus rates will be similar to the scenario as shown in 6.5(b), scenario(iii). One difference would be that the current reversionary bonus rates would be zero.

(iv) The requirements INSPRU 1.3.188R are still met after the inclusion of the extra management actions.

(c) Not applicable as the risk capital margin is zero. 11. Tax In the determination of current and projected with profits benefits reserves and associated future policy related liabilities, assets backing with profits benefits reserves in respect of life business are accumulated at rates of investment return that are net of tax. Realistic current liabilities reflect accounting liabilities as specified in INSPRU 1.3.30R(1) and the allowance for tax is therefore consistent with the treatment within the calculation of the accounting liabilities.

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12. Derivatives The WPSF holds a range of interest rate and equity derivatives to protect against changes in the cost of guarantees. The table below shows a summary of the asset type and market value. Hedging

Risk Instrument Term to

Expiry (years) Nominal / MV £m

Strike Rate (interest rate) or FTSE 100 Strike (equity)

Interest Rate

Receiver Swaptions 0 to 25 890 / 5% 75

Payer Swaptions 1 to 14 473 / 6.75% 22

Receiver Swaps 24 to 39 651 / ( 2.98% - 3.20%) 41

Payer Swaps 2 to 37 2,076 / (1.3% to 5.4%) -9

Equity risk

FTSE 100 Total Return Put Options (long)

1 to 10 92,443 / (3,370 to 4,472) 60

FTSE 100 Total Return Put Options (Short)

2 to 4 17,738 / (3,233 to 3,478) -5

Total All Derivatives 184

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13. Analysis of Working Capital The movement in working capital over the period 31 December 2011 – 31 December 2012 can be summarised as follows (£m) :

31 December 2011 31 December 2012 2012 ChangeRegulatory value of assets (line 11) 6,604 6,193 (411)PVFP of non-profit business (line 22) 46 44 (2)Value of derivatives (line 23) 0 0 0Realistic value of assets (line 26) 6,650 6,237 (413)

Asset shares (line 31) 4,567 4,384 (183)“Past” asset share enhancements (line 32) 427 440 14“Planned” asset share enhancements (line 34) 284 201 (83)Deductions for guarantees (line 35) (145) (160) (15)Future guarantee costs (Line 41) 911 816 (95)Future option costs – GAOs (line 43) 313 343 30Future smoothing costs (line 44) (23) (0) 23Realistic current liabilities (line 51) 317 214 (103)Realistic value of liabilities (line 59) 6,650 6,237 (413)

Working Capital (line 68 = line 26 – line 59) - - - The presentation required in Form 19 results in the risk capital margin (line 65), working capital (line 68) and realistic excess capital (line 66) equalling zero. This is consistent with generally accepted actuarial practice for a closed with-profit fund, where the estate is recognised as a realistic liability within the fund, even though policyholders have no contractual right to that estate. Such a presentation does not give a true reflection of the financial strength of the WPSF and the risks to which it is exposed. A more accurate picture is obtained by not recognising the estate as a realistic liability, which would have generated the presentation below.

Figures in £m 31 December 2011 31 December 2012Working Capital (line 68) 284 201Risk Capital margin (line 65) 0 0Realistic Excess Capital (line 66) 284 201

Note: The risk capital margin is zero due to extra management actions as detailed in section 6(5)(a) The key elements of the analysis of movement over 2012 are changes in (a) realistic value of assets (b) asset shares and (c) net guarantee costs (i.e. with profits guarantee costs, GAO costs, deductions for guarantees and smoothing profits/losses). The relevant movement analyses are given below.

167

Analysis of Movement in Realistic Value of Assets (£m) Realistic value of assets as at 31 December 2011 6,650 Change in non-profit PVFP (2) Investment return 509 Net income (premiums & net switches) (50) Outgo (claims, excluding GAO & GMP costs) (606) Change in surrender charge (payment from NPSF to WPSF) 9 Change in current liabilities (including cash collateral) (103) Payments from WPSF to NPSF as per Scheme of Demutualisation (57) GAO & GMP costs (126) Return on assets backing NP business and basis changes 3 Untraced 10 Realistic value of assets as at 31 December 2012 6,237

Analysis of Movement in Asset Shares (£m) Asset shares as at 31 December 2011 4,955 Investment return (net of investment expenses, tax & UWP annual management charges) 481 Net income (premiums & net switches) (50) Outgo (claims, excluding GAO & GMP costs) (605) Estate distribution at 31 December 2012 41 Deductions for guarantee costs (21) Expenses & commission on TWP business (1) Claims paid less asset shares (9) Change in surrender charge (payment from NPSF to WPSF) 9 Untraced 7 Asset shares as at 31 December 2012 4,807

17

0

Analysis of Movement in Net Guarantee Costs (£m)

Planned asset share

enhancements

Past asset share

enhancements

Guarantee Charges

With Profits Guarantee

Costs

GAO costs

Smoothing profits/losses

Net guarantee

costs

(line 34) (line 32) (line 35) (line 41) (line 43) (line 44) (line 49)31-Dec-11 284 427 145 911 313 (23) 1,766

Assumption movements :Change in TWP persistency 1 4 13 17

Change in Mortality 0 17 7 24Change in GAO take up rate assumptions 0 0 39 39

Change in equity backing ratios & bond/gilt split (0) 5 0 5Change in equity volatility methodology 0 (26) 1 (25)

Total assumption change : 0 0 1 (0) 60 0 59

Experience movements :Minus Expected cashflows during the year (18) (43) (35) (60)

Unwinding of discount rate 0 3 1 4Unwinding of time value 1 (35) (1) (37)

Persistency variance (0) 43 (5) 38Estate distribution 1 (14) 1 (14)

Credit variance (movement in credit spreads) 6 (85) 9 (82)Change in ESG credit calibration (1) (7) (4) (10)

Interest variance 3 57 5 59Interest volatility variance 0 (8) (11) (19)

Equity volatility variance 0 (4) 1 (4)Equity variance 4 (26) 10 (20)

Total experience change 0 0 (5) (120) (30) 0 (145)

Change in S32 redress & other misc reserves 14 14Impact of decision rules on above changes 19 12 (0) 2 (6)

Change in planned asset share enhancements (83) 14 (69)Change in New Generation Smoothing Account 21

31-Dec-12 201 440 160 816 344 (0) 1,640

169

14. Optional Disclosure Not applicable.

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Returns under the Accounts and Statements Rules Statement of information on the actuary appointed to perform the With Profits Actuary function required by rule 9.36 Scottish Equitable plc Global business Financial year ended 31 December 2012 (1) i) Mr James R Crispin was appointed to the role of With-Profits Actuary Function Holder from 1

September 2012 and held the role throughout the period to 31 December 2012. (a) Mr Crispin held no interest in any shares or debentures of the company at any time during the year. Mr

Crispin participated in a bonus scheme during the year operated by AEGON N.V., the ultimate parent undertaking of the Company.

(b) Mr Crispin had no transactions with the company during the period. (c) The aggregate amount of remuneration and other benefits (before tax) received by the Mr Crispin from

AEGON UK Corporate Services Ltd. during the year was £159,194.20 under a contract of service with that company. AEGON UK Corporate Services Ltd. is a wholly owned subsidiary of AEGON UK plc, the immediate parent company of Scottish Equitable plc.

(d) Pension, permanent health insurance and lump sum life assurance benefits are provided under the

standard terms and conditions of the AEGON UK Staff Group Personal Pension Scheme. ii) Mr John A Jenkins was appointed to the role of With-Profits Actuary Function Holder from 01 January

2012 and held the role throughout the period to 31 August 2012. (a) Mr Jenkins did not have any interest in shares or debentures of the company at any time during the

period.

(b) Mr Jenkins had no transactions with the company during the period other than the consulting relationship as set out in (c) below.

(c) (i) Mr Jenkins is a partner of KPMG LLP, an independent professional services firm. KPMG LLP

invoiced the company for the actuarial consulting services that Mr Jenkins provided to the company during the period 01 January to 31 August 2012.

(ii) For the period 01 January to 31 August 2012 Mr Jenkins was not a director of the company.

(d) Mr Jenkins was not entitled to receive and did not receive in that period any other pecuniary benefit from

the company. (2) The insurer made a request to the With Profits Actuaries to furnish to it the particulars specified in paragraph

(1). Pursuant to that request, they supplied the requisite information and the insurer has nothing to add to it.

171

Returns under the Accounts and Statements Rules Certificate required by rule 9.34(1) Scottish Equitable plc Global business Financial year ended 31 December 2012 We certify that : (1) (a) the return has been properly prepared in accordance with the requirements in IPRU(INS), GENPRU and

INSPRU; and (b) we are satisfied, save as disclosed on the attached note to the certificate, that:

(i) throughout the financial year, 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

(ii) it is reasonable to believe that the insurer has continued so to comply subsequently, and will continue so to comply in future.

(2) (a) in our opinion, premiums for contracts of long-term insurance business entered into during the financial

year and the resulting income 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) 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 long-term insurance business 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;

(c) the with-profits fund has been managed in accordance with the Principles and Practices of Financial

Management, as established, maintained and recorded under COBS 20.3; and (d) we have, in preparing the return, taken and paid due regard to - (i) advice from every actuary appointed by the insurer to perform the actuarial function in accordance

with SUP 4.3.13R; and (ii) advice from every actuary appointed by the insurer to perform the with-profits actuary function in

accordance with SUP 4.3.16AR. A.T. GRACE, Chief Executive C.J. BOUSFIELD, Director C.M. GARTHWAITE, Director Edinburgh, 21 March 2013

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Note to the Certificate required by Rule 9.34(1) As noted in last year’s certificate, the Firm has continued to progress its programme to identify and correct historical issues within its customer policy records. The Firm also continued implementation and embedding of a significant programme of activity to strengthen its governance and risk management systems during 2012. These programmes are now well advanced with governance and risk management systems well embedded and the resolution of historical issues with customer policy records due to complete at the end of 2013. We therefore believe that there will be no continuing need for further notes to the certificate in 2013 in regards to these matters.

173

Independent auditor’s report to the directors pursuant to rule 9.35 of the Interim Prudential Sourcebook for Insurers Scottish Equitable plc Global business Financial year ended 31 December 2012 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, 11 to 19, 40 to 45, 48, 49, 58 and 60 (including the supplementary notes) (“the Forms”);

• the statement required by IPRU(INS) rule 9.29 (“the statement”); and

• the valuation reports required by IPRU(INS) rule 9.31 (“the valuation reports”). We are not required to audit and do not express an opinion on:

• Forms 46, 47, 50 to 53, 55, 57, 59A and 59B (including the supplementary notes);

• the statements required by IPRU(INS) rules 9.30 and 9.36; and

• the certificate required by IPRU(INS) rule 9.34(1). This report is made solely to the insurer’s directors, in accordance with IPRU(INS) rule 9.35. Our audit work has been undertaken so that we might state to the insurer’s directors those matters we are required by the Rules to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the insurer for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the insurer and its auditor

The insurer is responsible for the preparation of an annual return (including the Forms, the statement and the valuation reports) under the provisions of the Rules. Under IPRU(INS) rule 9.11 the Forms, the statement and the valuation reports 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 reports are required to reflect appropriately the requirements of INSPRU 1.2 and 1.3. It is our responsibility to form an independent opinion as to whether the Forms, the statement and the valuation reports 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 reports are not in agreement with the accounting records and returns; or

• we have not received all the information we require for our audit.

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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 reports. The evidence included that previously obtained by us relating to the audit of the financial statements of the insurer for the financial year on which we reported on 21 March 2013. It also included an assessment of the significant estimates and judgments made by the insurer in the preparation of the Forms, the statement and the valuation reports. 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 reports are free from material misstatement, whether caused by fraud or other irregularity or error, and comply with IPRU(INS) rule 9.11. 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: (a) the Forms, the statement and the valuation reports fairly state the information provided

on the basis required by the Rules and have been properly prepared in accordance with the provisions of those Rules; and

(b) the methods and assumptions determined by the insurer and used to perform the actuarial investigation as set out in the valuation reports appropriately reflect the requirements of INSPRU 1.2 and 1.3.

Ernst & Young LLP Statutory Auditor Edinburgh 21 March 2013

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Compliance with Scheme of Demutualisation Scottish Equitable plc Twelve month period ended 31 December 2012 The business of Scottish Equitable Life Assurance Society was transferred to Scottish Equitable plc at 23.59 hours on 31 December 1993, under a Scheme of Transfer under Section 49 of the Insurance Companies Act 1982 ("the Scheme"), as approved by the Court of Session on 9 November 1993. We certify that, in our opinion, the provisions of the Scheme have been complied with and given effect to for the twelve month period to 31 December 2012. J. EWING, Actuarial Function Holder J. R. CRISPIN, With Profits Actuary Edinburgh, 21 March 2013

Documents

Scottish Equitable plc - Aegon UK · 19032013:18:06:58 Form 2 Statement of solvency - long-term insurance business Name of insurer Scottish Equitable plc Global business Financial