Finance and Capital Management

Shareholder perspective The Present Value of the Shareholder Transfer Illustrative¹ Customer withdrawals Illustrative¹£10bn cohort and expected churn Payment to customers over 30 years (in £bn) Shareholder transfer Transfer is 1/9 of the net investment return SHT² based on expected returns (in £m) Present value Present value of Shareholder Transfer (PVST) 1.0 0.8 0.6 0.4 0.2 0.0 Principal investment 100 Σ of investment returns c. £7.5bn Same shape of inv. returns paid to Σ of undiscounted 6% customers but 1/9 of magnitude expected SHT c. £830m 50 Σ of principal paid back c. £10.0bn 5% 4% 0 SHT² based on risk-free³ returns (in £m) Σ of undiscounted 3% 100 2% Assumes customers only 50 earn risk-free 1% rate 0% 0 Net inv. returns Yearly exit as % of original cohort (RHS) 1. For simplicity, the charts assume EGR of 5% and Annual Charges of 1% remaining unaltered over the entirety of the holding period with no Unit Price Adjustments; 2. Shareholder Transfer; 3. Assumes risk-free rate of 1.5%; 4. Assumes 5% discount rate risk-free SHT c. £75m PVST based on expected returns and discount rate4: c. £340m PVST recognised under Solvency II on Day-13: c. £55m 48 88

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