3rd Quarter Results

Legal & General Group PLC 18 October 2006 LEGAL & GENERAL GROUP PLC NEW BUSINESS RESULTS FOR THE 9 MONTHS TO 30 SEPT 2006 Stock Exchange Release 18 October 2006 A balanced business. An attractive market. Highlights for the nine months to 30 September 2006: • Worldwide new business up 32% to £1,294m APE(1) • UK new business up 36% to £1,213m APE • New institutional funds under management up 44% at £14.7bn Tim Breedon, Group Chief Executive, said: 'Legal & General's worldwide new business grew by 32% in the first nine months of 2006 with the UK businesses generating a 36% increase over the corresponding period last year. 'In the third quarter of 2006 we achieved £2bn of new bond, pension and retail investment sales(2), bringing the total flow of new savings(3) business to over £7bn in the year to date. Legal & General Investment Management saw new funds rise 44% to £14.7bn in the first nine months of this year. In the third quarter, our individual protection businesses produced a 22% increase in new business to £44m APE, thanks in part to a healthier housing market. At the same time, our new individual annuity sales doubled to £26m APE as our competitive position improved. 'Legal & General has a clear strategy combining focus on the UK protection, savings and investment markets with a balanced mix of products and distribution channels. This positions us strongly in this favourable UK economic climate and resurgent savings market. We believe this environment is set to continue.' (1) 'Annual Premium Equivalent' comprises new annual premiums together with 10% of single premiums (2) 'Sales' includes the sum of annual and single premiums (3) 'Savings' comprises bonds, pensions and retail investments New business APE (£m) Nine months to Nine months to 30 Sept 2006 30 Sept 2005 % change Q3 2006 Q3 2005 % change _______________________________________________________________________________________________________ UK new business Protection and annuities: - Individual protection 122 103 18 44 36 22 - Group risk 50 59 (15) 17 18 (6) - Individual annuities 47 59 (20) 26 13 100 - Bulk purchase annuities 74 55 35 24 22 9 _______________________________________________________________________________________________________ 293 276 6 111 89 25 Savings: - Unit linked bonds 181 148 22 60 54 11 - Pensions - stakeholder and other non profit 139 113 23 48 41 17 - Retail investments 433 248 75 91 78 17 _______________________________________________________________________________________________________ 753 509 48 199 173 15 With-profits business 167 110 52 65 38 71 _______________________________________________________________________________________________________ Total UK new business 1,213 895 36 375 300 25 _______________________________________________________________________________________________________ International new business 81 84 (4) 23 27 (15) _______________________________________________________________________________________________________ Worldwide new business 1,294 979 32 398 327 22 ======================================================================================================= Investment management 14,689 10,206 44 3,931 3,331 18 ======================================================================================================= UK new business - up 36% to £1,213m APE Protection and annuities - up 6% to £293m APE Sales of protection and annuity products for the first nine months of this year increased by 6% against the same period last year. We saw strong growth in individual protection and bulk purchase annuities. This was offset by our reduced market share in individual annuities in the first half of this year, during which pricing conditions remained unattractive. In the last three months, however, sales of individual annuities have increased substantially. Group risk sales also reduced following unusually high industry sales in 2004 and 2005 but remained at levels significantly above those seen in 2003. Individual protection Over the nine months to 30 September 2006, individual protection sales increased by 18% to £122m APE (9M 2005: £103m APE). In the third quarter, volumes grew by 22% to £44m APE (Q3 2005: £36m APE). This reflected a healthier housing market and business received from our new partnership with the estate agency Connells. We also saw strong sales of our pensions term assurance product, evidence of the beneficial effect of changes to pension rules brought about by A-Day in April this year. We continue to reinforce our competitive advantages in the individual protection market, most recently with a further enhancement to our intelligent underwriting capability with interactive functionality, which enables a greater proportion of underwriting decisions to be made at the point of sale. Group risk Sales of group risk products were £17m APE in the third quarter of this year, which represents a decrease of 6% on Q3 2005 (£18m APE) but is broadly in line with previous quarters this year (Q1 2006: £17m APE, Q2 2006: £16m APE). In 2004 and 2005, Legal & General's sales benefited, along with the industry, from the exit of a competitor towards the end of 2003. In the nine months to 30 September 2006, our total sales of £50m APE were more than twice the level seen in the same period of 2003 (9M 2003: £24m APE). Individual annuities Third quarter sales of individual annuities doubled to £26m APE (Q3 2005: £13m APE), bringing the total for the first nine months of the year to £47m APE (9M 2005: £59m APE). Legal & General only competes in this market where the required return on capital can be achieved. In the more favourable bond yield environment of Q2 and Q3, we have significantly improved our competitive position (Q1 2006: £5m APE; Q2 2006: £16m APE). Bulk purchase annuities Over the first nine months of the year, single premium bulk purchase annuity sales increased by 35% to £743m (9M 2005: £549m). Third quarter sales grew to £244m, including the transfer of business from the Skandia back book, which we announced earlier this year. This was against a strong prior year comparator of £220m. Excluding the Skandia transaction, we won 57 policies during the quarter with an average case size of under £4m of single premiums. We are now beginning to see some evidence of increased quotation activity from new competitors for larger cases. Savings(4) - up 48% to £753m APE Growing awareness of the need to save among UK consumers, the availability of a wide and flexible range of savings options and renewed impetus from Pensions A-Day changes have, we believe, combined to deliver strong growth in sales of savings products this year. Taking into account products written in both the non profit and with-profits part of the long term fund (see below), we have written over £7bn of savings business premiums(5) in the nine months to 30 September 2006. This represents an increase of over 50% against the same period in 2005. Unit linked bonds Over the first nine months of the year, sales of unit linked bonds increased by 22% over the same period in 2005. In the third quarter, new business volumes grew by 11% to £60m APE (Q3 2005: £54m APE), driven predominantly by strong sales of the Legal & General Portfolio Bond through IFAs. Two thirds of these sales were processed using fund platform technology. Non profit pensions New non profit pensions business grew by 23% in the nine months to 30 September 2006 to £139m APE (9M 2005: £113m APE) and by 17% in the third quarter to £48m (Q3 2005: £41m APE). Taking into account pension products written in the with-profits part of the fund (see below), new business volumes increased by 43% to £293m APE (9M 2005: £205m) over the same period in 2005. In the third quarter, we continued to focus on opportunities in the pensions transfer and corporate schemes segments. We were pleased with the continued success of our Portfolio Plus product, launched onto the Cofunds platform at the end of April, which provides customers with a wide range of investment options. Retail investments Sales of retail investment products grew by 75% over the first nine months of the year to £433m APE (9M 2005: £248m APE). This result benefited from a £1.3bn single premium institutional transfer in the second quarter. In the third quarter, sales increased by 17% to £91m APE (Q3 2005: £78m APE). With-profits new business - up 52% to £167m APE The strong growth in with-profits business to £167m APE (9M 2005: £110m APE) over the nine months to 30 September 2006 was mainly a result of higher volumes of pension sales, as referred to above. These include unitised pension products which contain a with-profits investment option. Sales of these products increased by 97% in the third quarter to £59m APE (Q3 2005: £30m APE), including DWP rebates. (4) Savings business not written in the with-profits part of the fund (5) Includes the sum of annual and single premiums International new business - down 4% to £81m APE Over the nine months to 30 September 2006, new business from our international operations decreased by 4% in sterling terms to £81m APE (9M 2005: £84m APE). In local currency terms, sales in our US business increased by 5% to $58m APE (9M 2005: $55m APE) and in our operation in the Netherlands by 3% to €33m APE (9M 2005: €32m APE). In France, volumes fell by 19% against strong prior year comparators to €38m APE (9M 2005: €47m APE) and in the third quarter declined to €6m APE (Q3 2005: €12m APE). Investment management - new funds up 44% to £14.7bn In the third quarter of 2006, Legal & General Investment Management continued its impressive record of growth, once again delivering an average of over £1bn of new funds under management per month. This brings total new funds under management over the nine months to 30 September 2006 to nearly £15bn, an increase of 44% on the same period last year (9M 2005: £10.2bn). Total funds under management stood at £219bn at 30 September 2006 (30 September 2005: £187bn). Outlook The UK market continues to offer significant opportunities for growth. We expect that Pensions A-Day will continue to provide a catalyst for further expansion in the market over the short term and believe longer term growth potential is supported by demographic and economic trends. We believe that the annuities market continues to offer attractive opportunities in both individual and bulk segments and that we will maintain a strong competitive position in this market given our administrative capabilities, financial strength and reputation. Our individual protection business continues to lead the UK market, where our significant scale allows us to remain competitive, to invest in our systems and people and to pursue further growth profitably. Our diversified product base and distribution network provides the flexibility needed to compete effectively in those markets where we see opportunities and where we believe we can continue to create value for shareholders. Enquiries to: Investors: Jonathan Maddock, Head of Investor Relations 020 7528 6298 Nicola Marshall, Investor Relations Manager 020 7528 6263 Media: John Morgan, Media Relations Director 020 7528 6213 Anthony Carlisle, Citigate Dewe Rogerson 07973 611888 Notes: A copy of this announcement can be found in the News and Results section of our shareholder web site at http://investor.legalandgeneral.com/releases.cfm Financial Calendar 2006/2007: Capital and cash flow presentation 15 November 2006 Q4 2006 New business results 25 January 2007 2006 Preliminary results 14 March 2007 Q1 2007 New business results 25 April 2007 2007 Interim results 26 July 2007 Forward-looking statements: This document may contain certain forward-looking statements with respect to certain of Legal & General Group Plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Legal & General Group Plc's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the impact of competition, the timing impact and other uncertainties of future mergers or combinations within relevant industries. As a result, Legal & General Group Plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Legal & General Group Plc's forward-looking statements. Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make. Legal & General Group Plc Unaudited New Business Premiums Nine months to 30 September 2006 WORLDWIDE NEW BUSINESS Nine months to 30 September 2006 Nine months to 30 September 2005 Annual Single APE Annual Single APE Increase/ premiums premiums premiums premiums (decrease) £m £m £m £m £m £m % ______________________________________________________________________________________________________________________ Protection - Mortgage related 78 - 78 67 - 67 16% - Other 44 - 44 36 - 36 22% - Group risk 50 - 50 59 - 59 (15%) ______________________________________________________________________________________________________________________ 172 - 172 162 - 162 6% Annuities - Individual - 472 47 - 589 59 (20%) - Bulk purchase - 743 74 - 549 55 35% ______________________________________________________________________________________________________________________ - 1,215 121 - 1,138 114 6% Savings - Unit linked bonds - 1,813 181 - 1,483 148 22% - Individual pensions - stakeholder and other non profit 93 458 139 71 420 113 23% - DWP rebates - 4 - - 1 - N/A ______________________________________________________________________________________________________________________ 93 2,275 320 71 1,904 261 23% With-profits - Annuities - 66 7 - 41 4 75% - Individual pensions 92 462 138 55 287 84 64% - DWP rebates - 136 14 - 44 4 250% - Group pensions 2 1 2 4 5 4 (50%) - Bonds - 60 6 - 137 14 (57%) ______________________________________________________________________________________________________________________ 94 725 167 59 514 110 52% ______________________________________________________________________________________________________________________ 359 4,215 780 292 3,556 647 21% UK retail investment business - Unit trusts 1 3,778 379 1 2,001 201 89% - ISAs 15 390 54 11 356 47 15% ______________________________________________________________________________________________________________________ 16 4,168 433 12 2,357 248 75% ______________________________________________________________________________________________________________________ Total UK new business 375 8,383 1,213 304 5,913 895 36% ______________________________________________________________________________________________________________________ - USA 32 - 32 30 - 30 7% - Netherlands 9 130 22 10 117 22 0% - France 11 145 25 16 140 30 (17%) ______________________________________________________________________________________________________________________ 52 275 79 56 257 82 (4%) France retail investment business - 17 2 - 19 2 0% ______________________________________________________________________________________________________________________ Total international new business 52 292 81 56 276 84 (4%) ______________________________________________________________________________________________________________________ Total worldwide new business 427 8,675 1,294 360 6,189 979 32% ______________________________________________________________________________________________________________________ Legal & General Group Plc Unaudited New Business Premiums Nine months to 30 September 2006 WORLDWIDE NEW BUSINESS APE QUARTERLY PROGRESSION 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 30.09.06 30.06.06 31.03.06 31.12.05 30.09.05 30.06.05 31.03.05 £m £m £m £m £m £m £m ______________________________________________________________________________________________________________________ Protection - Mortgage related 26 26 26 23 24 23 20 - Other 18 13 13 11 12 12 12 - Group risk 17 16 17 12 18 19 22 ______________________________________________________________________________________________________________________ 61 55 56 46 54 54 54 Annuities - Individual 26 16 5 7 13 29 17 - Bulk purchase 24 22 28 33 22 6 27 ______________________________________________________________________________________________________________________ 50 38 33 40 35 35 44 Savings - Unit linked bonds 60 60 61 60 54 51 43 - Individual pensions - stakeholder and other non profit 48 50 41 39 41 41 31 - DWP rebates - - - - - - - ______________________________________________________________________________________________________________________ 108 110 102 99 95 92 74 With-profits - Annuities 3 2 2 2 2 1 1 - Individual pensions 49 48 41 26 27 30 27 - DWP rebates 10 2 2 8 3 - 1 - Group pensions 1 - 1 1 2 1 1 - Bonds 2 2 2 3 4 4 6 ______________________________________________________________________________________________________________________ 65 54 48 40 38 36 36 ______________________________________________________________________________________________________________________ 284 257 239 225 222 217 208 UK retail investment business - Unit trusts 78 191 110 58 69 68 64 - ISAs 13 27 14 9 9 27 11 ______________________________________________________________________________________________________________________ 91 218 124 67 78 95 75 ______________________________________________________________________________________________________________________ Total UK new business 375 475 363 292 300 312 283 ______________________________________________________________________________________________________________________ - USA 11 10 11 12 11 9 10 - Netherlands 6 7 9 7 8 6 8 - France 5 13 7 6 7 17 6 ______________________________________________________________________________________________________________________ 22 30 27 25 26 32 24 France retail investment business 1 1 - - 1 1 - ______________________________________________________________________________________________________________________ Total international new business 23 31 27 25 27 33 24 ______________________________________________________________________________________________________________________ Total worldwide new business 398 506 390 317 327 345 307 ______________________________________________________________________________________________________________________ Legal & General Group Plc Unaudited New Business Premiums Nine months to 30 September 2006 INVESTMENT MANAGEMENT Nine months to 30 September Increase/ 2006 2005 (decrease) £m £m % ______________________________________________________________________________________________________________________ UK Managed Funds - Pooled funds 12,077 9,649 25% - Segregated funds 607 146 316% ______________________________________________________________________________________________________________________ 12,684 9,795 29% UK Other 2,005 411 388% ______________________________________________________________________________________________________________________ Total new funds 14,689 10,206 44% ______________________________________________________________________________________________________________________ INVESTMENT MANAGEMENT QUARTERLY PROGRESSION 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 30.09.06 30.06.06 31.03.06 31.12.05 30.09.05 30.06.05 31.03.05 £m £m £m £m £m £m £m ______________________________________________________________________________________________________________________ UK Managed Funds - Pooled funds 3,814 4,500 3,763 5,129 2,939 3,396 3,314 - Segregated funds 8 538 61 94 41 63 42 ______________________________________________________________________________________________________________________ 3,822 5,038 3,824 5,223 2,980 3,459 3,356 UK Other 109 157 1,739 1,705 351 3 57 ______________________________________________________________________________________________________________________ Total new funds 3,931 5,195 5,563 6,928 3,331 3,462 3,413 ______________________________________________________________________________________________________________________ INTERNATIONAL OPERATIONS IN LOCAL CURRENCY Nine months to 30 September 2006 Nine months to 30 September 2005 Increase/ Annual Single APE Annual Single APE (decrease) premiums premiums premiums premiums % ______________________________________________________________________________________________________________________ USA ($m): 58 - 58 55 - 55 5% Netherlands (€m): 14 189 33 15 171 32 3% France (€m): - Life and pensions 15 212 36 23 205 44 (18%) - Unit trusts - 24 2 - 28 3 (33%) ______________________________________________________________________________________________________________________ UK INDIVIDUAL APE BY CHANNEL Nine months to 30 September 2006 Annual Single Total APE % of £m £m £m total ________________________________________________________________________________________________________________________ Independent financial advisers 218 4,427 661 61% Tied 89 3,047 394 36% Direct 16 165 32 3% ________________________________________________________________________________________________________________________ Total 323 7,639 1,087 100% ________________________________________________________________________________________________________________________ Nine months to 30 September 2005 Annual Single Total APE % of £m £m £m total ________________________________________________________________________________________________________________________ Independent financial advisers 155 3,474 502 65% Tied 74 1,759 250 32% Direct 12 126 25 3% ________________________________________________________________________________________________________________________ Total 241 5,359 777 100% ________________________________________________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock Exchange

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