"I am delighted to report that the Group has continued to deliver a strong trading performance, notwithstanding the significant recent turbulence in global financial markets. Our higher quality, lower risk, business model has been clearly demonstrated in the resilience of our earnings stream.
The Board remains confident in the Group's earnings outlook and, as a result, has decided to increase the final dividend by 5 per cent to 24.7 pence per share."
Sir Victor Blank Chairman
Strong financial performance with statutory earnings per share increased by 17 per cent to 58.3p. Economic profit increased by 21 per cent. Statutory profit before tax was 6 per cent lower at GBP4,000 million, largely reflecting adverse policyholder interests volatility.
- Strong underlying profit momentum. Profit before tax up 6 per cent to GBP3,919 million notwithstanding impact of global financial markets turbulence. Excluding the impact of GBP280 million market dislocation, profit before tax increased by 13 per cent to GBP4,199 million.
- High returns maintained, with return on equity of 25.2 per cent. Improved return on risk-weighted assets, and return on Embedded Value increased to 9.9 per cent.
- Good income growth. Income growth of 5 per cent, reflecting the strength and resilience of the Group's revenue base. Excluding the impact of market dislocation and insurance grossing, income increased by 6 per cent.
- Excellent cost management. Cost growth of only 1 per cent, delivering wide positive jaws. Cost:income ratio improved by 1.8 percentage points to 49.0 per cent. Groupwide productivity programme exceeded 2007 expectations, and remains on track to deliver benefits of GBP250 million in 2008.
- Satisfactory credit quality. Retail impairment charge lower than in 2006. Based on current trends, we do not expect a significant change in the retail impairment charge in the first half of 2008, compared to the first half of 2007. Corporate asset quality remains good.
- Strong liquidity and funding position maintained throughout the recent global financial markets turbulence.
- Excellent capital management. Robust capital ratios maintained. Satisfactory transition to Basel II, with tier 1 capital ratio increasing to 9.5 per cent. Over GBP3.6 billion of capital repatriated from Scottish Widows over the last 3 years.