Long-term Business

The results are prepared in accordance with the modified statutory basis of accounting as set out in the Statement of Recommended Practice issued by the Association of British Insurers in December 1998. The main features of this method are as follows:

(i) Premiums and annuity considerations are accounted for when due. For unit-linked business, premiums are accounted for when the liabilities arising from the premiums are created.

(ii) Maturity claims are accounted for on the policy maturity date. Annuities are accounted for when the annuity becomes due for payment. Surrenders are accounted for when paid and death claims when notified.

(iii) Those costs of acquiring new insurance contracts, principally commission and certain costs associated with policy issue and underwriting, which are not matched by policy charges are amortised against margins in future revenues on the related insurance contracts, to the extent that the amounts are recoverable out of the margins.

(iv) Profits in respect of UK companies comprise actuarial surpluses allocated to shareholders adjusted, other than for with-profits business, for the deferral of acquisition costs and movements in the shareholders’ interest in reserves held within long-term funds. Profits in respect of with-profits and unit-linked business are calculated initially at the post-tax level and have been grossed up at the effective rate of tax.

For with-profits business, unappropriated surplus is carried forward in the fund for future appropriations and no allocation is made to shareholders.

The fund for future appropriations comprises amounts arising in relation to participating policies and other non-linked policies, the allocation of which to policyholders or to shareholders has not been determined at the balance sheet date.

(v) Results of overseas subsidiaries are determined initially using local GAAP bases of accounting with subsequent adjustments where necessary to comply with the Group’s accounting policies.

In the case of Jackson National Life, US GAAP results are adjusted to comply with UK SSAP 15 (deferred tax) and to show fixed income securities at amortised cost in the balance sheet. Further details are shown in note 2.