FTSE Insurers and Solvency II costs - quick round up

So I'm back to work after a well earned pit stop back home. I'll start with a summary of all goings-on in the Solvency II world over the summer using the following complex schematic...

Solvency II implementation costs to insurers, having experienced feast and famine over the last 2 years, will be firmly back on the bean counters' agendas now the finish line is in sight. In the past I had mopped up the 2013 financial year end here, the 2013 interims here, and 2012's full year here, so there is plenty of numbers out there for those interested.

I've therefore taken a quick look at some of the UK interim reports out over the last couple of weeks, just to see what costs/lobbying elements are included. It has been pretty dry going, which may reflect analyst fatigue on the matter more than insurer ambivalence, but I'd flag the following;

Aviva
- Costs which are "mostly" Solvency II at £41m for the half year
- No substantive comments on current legislative position

RSA
- Costs of £14m for the half year, against £20m for all of last year
- Amusingly classify Solvency II expense as "One-off non-operating costs"!

Standard Life
- "...expect [their] capital position to remain strong following implementation"
- No reference to costs

Prudential
- Implementation costs (broken out into p10 of this IFRS supplement) of £11m for half year, versus £13m for the comparable half-year, and £29m for all of 2013
- "...preparations are well advanced"
- Backwards in coming forwards over the likelihood of model approval and valuation assumptions (p17)
- Domicile change still left dangling (p24)

Old Mutual
- "...well positioned" for Solvency II, though "...continue to experience a degree of uncertainty"
- Nothing on costs

Legal and General
- "...expect the final outcome on Solvency II to result in a lower Group Solevncy Capital ratio" than existing EC. They stress in their accompanying presentation and in Nigel Wilson's speech that their existing EC is not Solvency II capital!
- Indication on  p17 of the Analyst presentation notes where L&G and the ABI have potentially fallen out (hence their recent divorce)
- Nothing on costs

FTSE Insurer results for YE 2013 - Solvency II costs and capital commentary

Don't you just love financial year-end? Accountants and Actuaries piddling and moaning about turning numbers around while the Risk profession change some colours around in some spreadsheets? Ah, the good old days...

Figures - ropey

It wouldn't be fair to say the full year results releases for UK plc's insurers has sneaked in under my radar during a fortnight of incessant Omnibus II crowing - they all announced relatively close last year, so I have been waiting patiently for them to arrive en masse - but it's been a week since the first ones reared their heads, so I figured I would post what I have now and update it later.

We know that to-date, Solvency II preparation has been a pricey job - Deloitte and a couple of blokes who should know better have already thrown around more ropey figures than Thursday night at Zumba - so it's always nice to do a bit of regional backtesting (which you will find below), which totals almost £700m pounds just for the four who have definitively broken their Solvency II costs out!

Standard Life - AR&A

Generic Solvency II

• We continue to closely monitor the development of Solvency 2 and our business is well placed to implement the necessary changes expected to be required before 2016. (p10)
• We welcome the positive steps in the development of the Solvency 2 regime during 2013 and expect our capital position to remain strong following implementation. (p16)

 Cost-specific

• Total restructuring costs incurred during the year were £75m (2012: £114m) which includes £11m related to the acquisition of the private client division of Newton Management Limited...The remaining costs relate to a number of business unit restructuring programmes and Solvency 2. (p145)
• For info, the last broken-out cost Solvency II cost was £59m in 2011

Standard Life - Executive transcript

• "In ICA+ we are the pilot firm" (p23)

Legal and General - preliminaries

Generic Solvency II (nothing on costs yet)

• During the second half of 2013 there was encouraging progress on the development of the proposed Solvency II regulatory regime. We now believe that the worst case scenarios have been avoided to the benefit of customers and the wider economy. While full clarity on Solvency II capital will not emerge for at least another 18 months, we currently anticipate that our Solvency II capital surplus will be no lower than our Solvency I IGD capital surplus. (p5)
• We will provide dividend guidance for subsequent years when Solvency II clarity has emerged. (p5)
• Solvency II is targeted for implementation in early 2016. Revised capital calibrations for long term business provide sufficient flexibility to address many of the adverse capital impacts for UK insurance firms. Challenges remain, however, in ensuring that final implementation is proportionate and cost effective for the insurance sector. (p19)

Legal and General presentation

• We believe that the worst case Solvency II scenarios have been avoided. (p5)

Aviva - preliminaries

Economic capital and costs

• Strengthening our financial position has been a focus in 2013. Our economic capital surplus has increased to £8.3 billion, which represents a 182% coverage ratio and includes our defined benefit pension on a more conservative fully-funded basis. We welcome the progress made by our regulators on Solvency II and the level playing field that this is likely to create. (p5)
• Solvency II implementation costs reduced to £79 million (FY12: £117 million). (p18)

Aviva presentation slides

• Confirms last 3 year's worth of Solvency II costs as £89m, £117m and £79m (p10) 

Prudential - preliminaries

Generic Solvency II 

• We do not expect to submit our Solvency II internal model to the Prudential Regulation Authority for approval until 2015 (p6)
• With greater visibility on the potential outcome of Solvency II, we are reporting an economic capital surplus of £11.3 billion (2012: £8.8 billion), which is equivalent to an economic solvency ratio of 257 per cent (2012: ratio of 215 per cent). This result is based on an assumption of US equivalence, with no restrictions being placed on the economic value of overseas surplus, and using our internal model, which has not yet been reviewed or approved by the Prudential Regulation Authority. (p12)
• We regularly review our range of options to maximise the strategic flexibility of the Group. This includes consideration of optimising our domicile as a possible response to an adverse outcome on Solvency II. (p30)
• Over the coming months we will remain in regular contact with the Prudential Regulation Authority as we continue to engage in the 'pre-application' stage of the approval process for the internal model. In addition, we are engaged in the Prudential Regulation Authority’s 'Individual Capital Adequacy Standards Plus (ICAS+)' regime, which is enabling our UK insurance entities to leverage the developments made in relation to the Solvency II internal model for the purpose of meeting the existing ICAS regime. (p30)

Cost-specific

• £29m Solvency II costs versus £48m last year (and £55m in 2011)

RSA - preliminaries

Generic Solvency II and economic capital

• ...across the various ratings, internal and regulatory measures, we simply do not have enough tangible equity to properly support our business. This is partly due to 2013 setbacks and partly to rising regulatory standards. (p4)
• The Group is actively involved in shaping the outcome [of Solvency II]...The directors are confident that the Group will continue to meet all future regulatory capital requirements. (p35)
• The economic capital surplus was £0.7bn (31 December 2012: £0.7bn) (on a 1 in 1,250 year calibration) giving coverage over the economic capital requirement of 1.3 times (p9)

Cost-specific

• £20m, versus £32m in 2012 (and £30m in 2011)

Resolution - preliminaries

Generic Solvency II

• We are currently discussing our approach to implementation of Solvency II with the PRA (i.e. standard formula or internal model) and expect to enter the process for PRA approval of our internal model (“IMAP”) such that approval is granted before the end of 2016.

Although the final guidelines for calibration of the standard formula approach have not yet been released, our current expectation is that this would not give the most appropriate assessment of our solvency position. We do not currently expect to gain any capital benefit from IMAP, but continue to monitor this closely as further guidance emerges and our discussions with the PRA continue. (p19)

• "Increased non-recurring costs reflecting increase in Solvency II spend" is down as a negative on Free Surplus performance (p9)
• There remains considerable further work to transition the Group across to a Solvency II basis…In the absence of final regulation, we will continue to adapt our plans as specific requirements are confirmed. Nonetheless, as we transition, there will be an impact in terms of the way in which the Group needs to hold capital against a Solvency II balance sheet and we will consider how best to do this in the manner that best serves our customers and shareholders. (p54)

Cost-specific

• Finance transformation costs of £49 million largely relating to Solvency II (p24). This stands up alongside £76m for 2012, and £56m for 2011, remembering that they dropped out of IMAP during 2012, but appear to have been told to get back in!

 



 

FTSE and European Insurers - Economic Capital and Solvency II trends - money pit filled?

Interim Results season - without question, the most exciting time of the summer for me (although to qualify that, I do live on the Isle of Man and blog in my spare time). As good an opportunity as any to peer review where the big boys are at in the UK and Europe, both on Solvency II preparations/costs and economic captial positions.

Solvency II project costs - on the wane?

As I had mentioned in an earlier post, the FTSE-listed insurers have gone noticeably quiet on both Solvency II and, in the UK's case, the havoc it was inevitably going to wreak in its 2012 form - while the 2013 silence "speaks volumes" as to the priority of the dossier, it is a smart idea to see what impact the threat of a 2014 start has had to EC positions of major insurers over the last 12 months (i.e. after last year's whingeing, did any of them actually do substantive capital-related activity!)

A few notes for each below;

Aviva

• Solvency II project costs of £44m - well down on £77m in 2012 year-to-June
• "...there is still significant uncertainty over the detailed requirements [of Solvency II]"
• Pro-forma economic capital surplus of 175%, up from 172% in December
• IGD coverage 1.8 times, up from 1.7 times in December

Axa

• Nothing on Solvency II at all or project costs
• Solvency ratio down to 218% (from 233%) since December - interest rated attributed
• Economic solvency ratio (calibrated to 1-in-200 VaR) down to 204% (from 206%) since December - dividend and market risk elements attributed

Allianz

• Nothing on project costs
• Solvency ratio (based on FCD) of 177%, down from 197% this time last year - change in accounting standards attributed
• "...Allianz continues to be exposed to two external forces that adversely affect our risk profile and would not normally be associated with our core operating activities: the European sovereign debt crisis and regulatory developments – especially the European solvency directive, Solvency II"
• No reference to economic capital or modelling

Legal and General

• "Investment projects and expenses" (which covered Solvency II last year) were £20m - £23m in 2012 year-to-June
• "...remains uncertainty both to the implementation timescales of Solvency II and the final calibrations that will be used for long term business"
• IGD surplus unchanged at £4.1bn, coverage ratio down to 226%

Old Mutual

• No mention of Solvency II project costs, same as last year
• EC coverage of "over 160%", calibrated to VaR 99.93%
• FGD surplus of 160%
• Dividend outweighed operational cash flows in the 6 month period, though this was due to the special dividend paid last year after a massive disposal

Resolution

• Solvency II project costs of £10m for the half year - well down on the £48m for 2012 comparable!
• "Proposals for Solvency II continue to be the subject of debate"
• EC Coverage of 192% - (194% in Dec - quantum increased by £200m though)
• IGCA coverage of 221% (222% in Dec) - sold a business unit, which helped cover dividend

Prudential

• £13m Solvency II project costs for the half year - £27m in 2012 year-to-June
• "...deferral until 1 January 2016 or beyond appears likely"
• "...we now know that it will not be implemented before 1 January 2016" - my emphasis
• "[potential for] optimising the Group’s domicile as a possible response to an adverse outcome on Solvency II" remains on the table, a copy/paste threat left in from last year.
• IGD coverage of 230% - quantum lower by over a billion since Dec, due to a change in requirements in their US business

Standard Life

• £36m Solvency II "and other programmes" costs for the half year - £42m in 2012 year-to-June
• Solvency II project "...continues to respond to changes in requirements"
• IGD down £500m since half year after accounting for a special dividend, and surplus generation down year-on-year (attributed to new business strain)
• IGD surplus of 185%, down from over 200% at YE2012, but up 11% from this time last year
• Not a single reference to "economic capital" in the document

Generali

• No mention of Solvency II
• Solvency I coverage at 139% - up from 130% this time last year
• Economic capital coverage of 167% - up from 159% this time last year

RSA

• Solvency II project costs down to £10m (was £16m  in 2012 year-to-June)
• "There remains continued uncertainty as delays in agreeing the rules have caused the planned implementation date of 2014 to be delayed."
• IGD covered 1.7 times - down from 1.9 times since December - dividends again cited in explaining the dip.
• Economic capital (calibrated to 1-in-200 VaR) £1.3bn, up from £1.2bn in December.

So a trend of steady Solvency I ratios, and no sign of any war chests being created by holding excess cash back - quite the opposite in some cases, with dividends (special or otherwise) on the high side. With project costs diminishing and barely a passing comment on the Omnibus II impasse, it looks very much like Solvency II is yesterday's news in the boardrooms of major insurers. 

That said, in just those insurers covered above there has been over £100m confirmed spend in the last 6 months on Solvency II preparations, during which time the implementation date has (informally) moved at least two years, IMAP has been elongated, and the LTGA panacea has turned out to be anything but. That's hardly chickenfeed, and the rest of this year can only get busier for the UK with ICAS+ and EIOPA Interim Guidelines to contend with.

I hope Finance Directors don't get too excited by the dwindling project spend though - we haven't started Pillar 3 yet, apparently!

Preliminary full year results - Solvency II implementation costs and opinions

Now the UK preliminary full year results are starting to flow in, we can get more visibility on what was spent in last year's Solvency II phoney war. This is a topic I have covered for the last two years on this Blog (here touches on previous disclosures in particular) and bearing in mind most of the UK's Big Rigs are in the habit of disclosing the sums spent on preparation, it gives a good feel for where the implementation costs tally may finally get to.

So read on if you are interested in seeing if 2012, just like the popular 'Lovely Day' singer, was the year that the...errrr....Bill Withers (?)

Legal and General

• "Delivered the core components" of Solvency II, though there remains "much uncertainty" - go figure!
• £50m spent on Sol II and "other strategic projects" (no further split available) - this figure was £56m last year

RSA

• Costs of £32m (£30m previous year) for Solvency II
• Expect costs to fall by "around 50%" for the next two years
• "Rephased our implementation project to minimise costs"
• EC calibrated to 1-in-1,250 (S&P 'A' rated)
• In the AR&A, they add that they "...remain at the forefront for internal model approval"

Resolution 

• £76m spent on (predominantly) Solvency II in 2012, as opposed to £56m in 2011 - 2012 was of course the year that they dropped out of IMAP, so the spend dropped in the second half of the year
• Original provision for Sol II released from MCEV this year was £34m!
• Economic Capital coverage of 182%

Aviva

• £117m spent on Sol II specifically, against £96m last year
• "Well placed" for ICAS+ review 

Standard Life

• £112m spent on Sol II, RDR and other restructuring (no further split available) - was down as £59m specifically on Solvency II in 2011

Old Mutual

• Economic capital at risk managed to 99.93%, and currently at over 160%
• "Given the delay to the Solvency II go-live date", focusing on embedding ORSA and internal model during 2013
• No coverage of project spend - same as last year

Prudential

• £48m of Solvency II implementation costs in 2012 (£55m previous year)
• "...expects to engage in the initial stage of the FSA's proposed Individual Capital Adequacy Standards Plus (ICAS+) regime"
• Solvency II "may" provide a more risk-based capital framework, but "...we now know that it will not be implemented before December 31st 2015"
• "Continue to evaluate [their] options, including consideration of the Group's domicile"
• "...remain focused on preparing for implementation" despite uncertainty

And over to continental Europe;

Allianz

• "...adoption in 2014 is no longer guaranteed"
• EC coverage of 199%, calibrated to 99.5% VaR over 1 year - was previously calibrated to 99.97%, and Solvency II is used as rationalisation for the y-o-y change
• Rated 'strong' by S&P for ERM, and have had their internal model positively rated by them
• "Will take advantage of the delay in the implementation of Solvency II" to industrialise balance sheet production and internal model processes

Munich Re

• "..some uncertainty remains" around Solvency II, and they are banking on "at least two further years" delay
• Note that "...the risk that our Life primary insurers may not meet the capital requirements cannot yet be entirely excluded"
• Confident that "new opportunities...will exceed the challenges"
• Targeting 1.75 x 99.5% VaR over 1 year as their Economic Capital Target - this is a "...conservative approach, offering a high degree of security"
• Currently hold 129% of that figure
• Perhaps more significantly from an internal model perspective, hold 225% of 99.5% VaR over 1 year - if we considered that "conservative", I wonder what we might consider "liberal"?

Generali

• Economic capital ratio (calibrated by their internal model to ultimately deliver the required SCR percentile) of 159%, unchanged y-o-y, despite a lot of positive capital management activity (p33)
• Solvency I ratio is 150% (p31), up significantly on last year's 119%

FTSE Insurers and Solvency II at interim-time - 'Oops I spent it again'

While the politicians and eurocrats are having a well earned soak in the August sun before they pick up their Omnibus II cudgels again, the rest of the Solvency II world has to continue with the more mundane tasks of counting beans and predicting the future.

On that basis, the great and good of UK Insurance plc have been comparing abs this week on both cost and go-live date, with the following revelations;

Legal and General

• "...expect implementation [of Solvency II] could be later than 2014"
• On track to submit IMAP by end 2012 - guessing this means a large amount of tedious rolling forward of balance sheets, SCR etc for the guys in 2013 in order to meet FSA application requirements
• £23m spent on "Investment Projects" for the half year, predominantly related to Solvency II - pro-rated, this is down slightly on 2011's total spend of £56m.

Old Mutual

• Bermuda's new capital regime (fishing for equivalence of course) has obliged the Group to send capital to Bermuda itself, reducing their FGD surplus.
• Seem confident that the overhanging Omnibus arguments (equivalence, discount rate methodology, contract boundaries) will affect its SCR surplus
• "...increasing risk of delay in the Solvency II timetable beyond January 2014"
• "...currently on track to deliver all requirements for Solvency II compliance"
• No word on project costs as such

Aviva

• Costs associated with preparing the businesses for Solvency II for the half year of (eeeekk!) £72m (as opposed to just under £100m for all of 2011)
• Note that a draft of the Level 2 implementing measures were "published in 2011" - I wouldn't call unofficial circulation via national trade organisations "publication" as such!
• Implementation date "...continues to be discussed"

RSA

• Content that go-live is still scheduled for 2014
• Interesting, calibrating their EC model to 1-in-1,250, which doesn't copy the vogue of 1-in-2,000 which appears to have landed with larger firms, I guess to save the ratings agencies having to work a bit harder!
• £16m of Solvency II costs for the half year 

Prudential

• "...currently anticipated to be implemented from 1 January 2014"
• "...continue to evaluate actions, including continuing consideration of the group's domicile"
• Total of £27m spent on Solvency II implementation costs in the half year

Resolution

• £48m at half year - their bigger news on exiting IMAP until 2015 is covered on this blog post.

Standard Life

• £42m at half year for Solvency II and RDR "restructuring programmes" - RDR is a beast in itself, so may be difficult to attribute a portion of that cost, though the guys were in the £50m+ bracket for all of 2011.
• Little in the way of additional Solvency II comment

Royal London

• £9m in "corporate costs", which includes Solvency II, but doesn't cover all by any stretch
• No additional comment

Some big money getting laid down right now, which was no doubt budgeted as tapering-off by now in previous budgets, alongside (no doubt well briefed) messages of uncertainty on go-live date - let's hope we get it right kids!

FTSE (and other) results and spare capital - Prudential, Munich Re, Standard Life

...and the result keep raining in! Hot on the heels of Old Mutual, Aviva, and a bunch of others all bundled together, a few more preliminaries of those we know and love slipped out today. Highlights below;

Standard Life

“significantly de-risked our business…well placed to operate in the currently proposed Solvency II environment”

• P63 - £59m spent on Solvency II (£64m last year)
• P32 - Solvency cover down from 206% to 173%, mostly due to subordinated debt shenanighans last year

Prudential

• P34 - £55m spent on Solvency II (£45m last year)
• P63 - "Our capital position remains strong. We have continued to place emphasis on maintaining the Group’s financial strength through optimising the balance between writing profitable new business, conserving capital and generating cash. We estimate that our IGD capital surplus is £4.0 billion at 31 December 2011 (before taking into account the 2011 final dividend), with available capital covering our capital requirements 2.75 times. This compares to a capital surplus of £4.3 billion at the end of 2010 (before taking into account the 2010 final dividend)." Note - not sure of the necessity to qualify "pre-dividend", but normally means something cheeky!
• "Therefore, in parallel to continuing our preparation for eventually implementing the Solvency II rules, we also evaluate actions to mitigate the possible negative effects. We regularly review the range of options available to us to maximise the strategic flexibility of the Group. Among these options is consideration of optimising the Group’s domicile, including as a possible response to an adverse outcome on Solvency II."
• Tracts of explanatory text on p63-64 on Solvency II status, most pertinent being "...the Solvency II rules relating to the determination of the liability discount rate and to the treatment of US business remain unclear and Prudential's capital position is sensitive to these outcomes"

Munich Re

• "The economic solvency ratio thus totals 111% (136%), a year-on-year decline of 25 percentage points that is largely ascribable to the very low interest rates and high volatility on the capital markets. Nevertheless, the figure still clearly reflects Munich Re's capital strength – Munich Re's economic risk capital, which produces the solvency ratio described above, corresponds to 1.75 times the capital that is likely to be necessary under Solvency II based on the Group's internal risk model. Munich Re's available financial resources therefore add up to 194% of the required risk capital under Solvency II. "

• "As part of its active capital management, Munich Re intends to buy back an outstanding subordinated bond and to issue a new subordinated bond. Owing to restrictions resulting from US legislation, offers will only be made to investors resident outside the USA. It is not possible to provide further written information at present, also for legal reasons. This new bond is designed to be compliant with the existing (Solvency I) and anticipated future (Solvency II) supervisory regime, and to meet current rating agency requirements." (i.e. More subordinated bond activity having substantial impact on balance sheets, as found at Aviva and Old Mutual)

• P140 "Though the economic solvency ratio of 111% (136%) is 25 percentage points lower than for the previous year, it reflects Munich Re’s capital strength. Munich Re’s economic risk capital, which produces the solvency ratio described above, corresponds to 1.75 times the capital that is likely to be necessary under Solvency II according to our internal risk model. Were we not to apply the safety cushion of 75% to the value at risk with a confidence level of 99.5% and merely to comply with the Solvency II standard, the economic solvency ratio would be 195% (238%)."

• 
  

  P154 "Our long-term target of a 15% return on our risk-adjusted capital (RORAC ) after tax across the capital-market and insurance cycle applies unchanged, but it will be difficult to achieve given the current low-interest-rate environment. As soon as the requirements of Solvency II and the new IFRS s for insurance contracts and financial instruments have been finalised, we will gear our target performance measures to the key indicators from this new framework with its strong economic focus."

FT report on listed insurer's capital trends

Just in case anyone missed out on Monday, the FT provided a quality summary on perceived advance capital planning by UK and EU insurers ahead of Solvency II. I say quality despite the couched terminology (SCR referred to as the "softer capital requirement"!)

The suggested SCR coverage targets referenced are interesting (125-150% in the UK, and as much as 170% in continental Europe) – I have heard generalisations on target SCR surplus before (in the context of economic capital targets), but the guy from JP Morgan obviously thinks he’s onto something.

I had a quick look, and thought Generali may struggle on the European side (they had 168% as their Economic Solvency Coverage on p23), but everyone else was well covered.

The schematic also highlights the increase in surplus capital pre and post-credit crunch.

FTSE Insurers - more revealing on Solvency II preparations in the interims

Old Mutual and Pru announced their half years today - much more information around Solvency II preparations than presented by Aviva, L&G and St James's Place earlier in the week;

Old Mutual

Capital - "The Group issued a £500 million 10 year Tier 2 bond in June 2011, which is expected to be compliant with the anticipated Solvency 2 requirements and qualifies as Tier 2 capital for FGD purposes."

Important uncertainties - "The discussion on the treatment of EPIFP (Expected Profits In Future Premiums), as to whether it should be fully eligible to be treated as Tier 1 capital under Solvency 2 continues. No consensus has yet been reached between the different European bodies.

We await the completion by regulators of the initial equivalence assessments of the first three non-EEA jurisdictions, one of which is Bermuda. Results are due in November. "

Liquidity premia assumptions - "In deriving the liquidity premia at 30 June 2011, we have reviewed emerging Solvency II matching premium guidance and a comparison of the yields of similar durations on South African government bonds and bonds issues by state-owned enterprises. At those durations where swap yields are not available, e.g. due to lack of a sufficiently liquid or deep swap market, the swap curve is extended using appropriate interpolation or extrapolation techniques."

Economic capital, risk management and Use Test - "The iCRaFT project is progressing to plan and is on track to deliver the requirements for Solvency 2 compliance. Despite the ongoing uncertainty in respect of certain Solvency 2 detailed implementation measures we remain confident in our current design. We are now entering a phase of the project, in which we will demonstrate the extent that we have embedded the new tools and risk management processes. This marks a significant milestone in the project and ensures that the iCRaFT deliveries are being integrated into business processes and are adding insight in our key risk decisions. This will place us in a favourable position for the ‘Use Test’ requirements under Solvency 2."

Prudential

General - "We are supportive of the risk-based approaches to capital management provided the metrics used are appropriate. Along with our European peers, we do have concerns about the potential volatility which Solvency II could introduce and the degree of prudence built in to the proposed calibrations for the standard formula. We are engaging directly with our peers, politicians and regulators to ensure a fair and reasonable outcome before the regime becomes law."

Lobbying - "Prudential is actively participating in shaping the outcome through our involvement in industry bodies and trade associations, including the Chief Risk Officer and Chief Financial Officer Forums, together with the Association of British Insurers (ABI) and the Comité Européen des Assurances (CEA)."

Key Risk - "There is also a possibility that depending on the outcome reached on a number of key issues, the effect of the measures finally adopted could be adverse for the Group, including potentially a significant increase in capital required to support its business."

Solvency II costs- "A total of £27 million of Solvency II implementation costs were incurred in the first half of 2011 (2010: £22 million) as we continue to make progress in preparing for this change." 

"Central outflows increased to £141 million in half year 2011 (2010: £118 million). Higher tax receipts in the first half of 2011 were offset by increased net interest payments, following the additional debt  raised in 2011, and higher Solvency II implementation spend."