Investment Return

Investment return comprises investment income, including the amortisation of differences between cost and maturity value of those fixed income securities carried at amortised cost, together with realised and unrealised investment gains. UK dividend income is grossed up by the attaching tax credit.

Investment return in respect of long-term business, including that on assets matching solvency capital, is included in the long-term business technical account. Other investment return is included in the non-technical account.

For long-term business, an allocation is made from the long-term business technical account for the difference between the longer term investment return and the actual return on investments of the long-term business other than for assets backing the long-term business provision, the technical provisions for linked liabilities and the fund for future appropriations.

For general business, an allocation is made between the non-technical account and the general business technical account of the longer term investment return on investments matching general business provisions and solvency capital.

The longer term investment return is an estimate of the long-term trend investment return for the relevant category of investments having regard to past performance, current trends and future expectations.

Operating profit, as disclosed within the profit and loss account and the segmental analysis in note 1 include investment returns for long-term business and general business (as described above) together with longer term returns for investments of other shareholders’ funds.