Notes on the EEV basis results
5. UK insurance operations expense assumptions
The half year 2006 EEV basis financial statements included note disclosure which explained that in determining the appropriate expense
assumptions account had been taken of the cost synergies that were expected to arise with some certainty from the initiative announced
in December 2005 from UK insurance operations working more closely with Egg and M&G, and the effect of the end to end review of the
UK business which was underway at the time. The disclosure noted that the half year 2006 basis results had been prepared on the same
basis as the 2005 full year statements which had disclosed that without the anticipation of the cost synergies there would have been
a charge for altered expense assumptions of approximately £55 million.
On 29 January 2007 the Company announced the agreement to sell Egg Banking plc to Citi. On 15 March 2007 the Company announced
the actions necessary to implement the reassessed plans in light of this transaction and additional initiatives. In preparing the 2006 full year
results, account was also taken of the effect of expense savings that were expected to arise with some certainty. Without this factor the
effect on the full year 2006 results would have been a charge of £44 million for the net effect of revised assumptions in line with 2006
unit costs.
The half year 2007 results have been prepared using the same approach. Without the anticipation of expense savings there would have
been an additional charge of £28 million for the net effect of revised assumptions in line with half year 2007 unit costs.
