Notes to the Financial Statements

47 Reconciliation Of Operating Profit To Net Operating Cash Flows

		£m
	Year to 31 December 2004	Year to 31 December 2003
Profit from insurance and asset management activities before tax and non-operating items	727	690
Depreciation and amortisation of intangible assets	68	83
Unrealised investment gains	(35)	(161)
Profits relating to long term business	(511)	(541)
Investment return in the life business	172	183
Cash received from long term business	336	261
Increase/(decrease) in provisions for other risks and charges	37	(29)
Increase in insurance technical provisions net of reinsurance	24	18
Other (including amounts reinvested in long term business operations)	134	412
Net cash inflow from insurance operating activities	952	916

Profit from banking activities before tax and non-operating items	78	(144)
Provision for bad and doubtful debts	139	321
Depreciation and goodwill amortisation and impairment	127	239
Decrease in accrued income, prepayments and other trading adjustments	110	277
Net cash flow from banking trading activities	454	693
Net decrease in collections/transmissions	(16)	(17)
Net increase in loans and advances to banks and customers	(859)	(997)
Net increase in deposits by banks and customer accounts	114	1,735
Net (decrease)/increase in debt securities in issue	962	(2,081)
Net increase in other operating assets	(788)	(135)
Net decrease/(increase) in other operating liabilities	(279)	123
Net cash outflow from banking operating activities	(412)	(679)

		£m
47(a) Analysis of cash flows	Year to 31 December 2004	Year to 31 December 2003
Returns on investment and servicing of finance
Net interest paid	(22)	(30)
Dividends paid to minority interests	(80)	(95)
Bank charges and other finance costs	(11)	(3)
Net cash outflow from returns on investments and servicing of finance	(113)	(128)

Tax
United Kingdom corporation tax	10	-
Overseas tax	(303)	(174)
Total tax paid	(293)	(174)

Capital expenditure and financial investment
Net disposal of banking investment securities	71	316
Net purchase of tangible fixed assets	(73)	(89)
Net cash (outflow)/inflow from capital expenditure and financial investment	(2)	227

Acquisitions and disposals
Acquisition of interests in subsidiary undertakings and revenue share payments	(110)	(67)
Disposal of interests in subsidiary and associate undertakings	79	227
Net cash movement on acquisition and disposals of subsidiaries	-	(77)
Net cash (outflow)/inflow from acquisitions and disposals	(31)	83

Financing
Issue of ordinary share capital	15	41
Issue of ordinary share capital of subsidiary undertakings to minority interests	217	14
Net increase/(decrease) in amounts due to credit institutions	104	(365)
Net increase/(decrease) in subordinated liabilities	(48)	44
Repayment of convertible unsecured debt	(4)	(14)
Non-equity preference shares and preferred securities issued - net of issue costs	-	511
Net cash inflow from financing	284	231

		£m
47(b) Movement in portfolio investments, net of financing	Year to 31 December 2004	Year to 31 December 2003
Cash flow (excluding long term business):
Net cash inflow for the year	(157)	36
Portfolio investments	546	616

Movement arising from cash flow	389	652
Movement in long term business	96	8
Changes in market values and exchange rates	2,504	3,401

Total movement in portfolio investments, net of financing	2,989	4,061
Portfolio investments, net of financing at beginning of year	24,128	20,067
Portfolio investments, net of financing at end of year	27,117	24,128

					£m
47(c) Movement in insurance and other cash, investments and financing	At start of year	Cash flow	Changes in long term business	Changes to market value, currencies and other	At end of year
Movement in cash and insurance portfolio investments
Cash in hand and at bank	695	(157)	(42)	8	504
Land and buildings	677	9	17	70	773
Other financial investments	22,756	537	121	2,426	25,840
	24,128	389	96	2,504	27,117

Movement in financing
Share capital	384	2	-	-	386
Share premium and merger reserve	771	13	-	-	784
Subordinated liabilities	15	(15)	-	-	-
Amounts owed to credit institutions	377	104	-	(14)	467
Convertible loan stock	357	-	-	(25)	332
Preferred securities (including undistributed profits)	411	-	-	(19)	392
	2,315	104	-	(58)	2,361

				£m
47(d) Movement in banking cash and changes in financing during the period	At start of year	Cash flow	Changes to market value, currencies and other	At end of year
Cash and balances at central banks	1,025	(185)	86	926
Movement in financing
Subordinated liabilities	648	(33)	63	678
Convertible loan stock	10	(4)	-	6
Non-equity preference shares (including undistributed profits)	244	-	22	266
	902	(37)	85	950