Conversion of LGPL to an ISPV

Legal & General Group PLC
01 November 2007

1 November 2007



            LEGAL & GENERAL - FURTHER STEP IN CAPITAL RESTRUCTURING

Legal & General has taken the next important step in its capital restructuring,
converting Legal & General Pensions Limited ('LGPL'), into the UK's first
Insurance Special Purpose Vehicle ('ISPV'), with effect from 1 November 2007.

Legal & General Assurance Society Limited ('LGAS') ceded all non-linked non
profit pensions and annuity business to LGPL, its wholly owned reinsurance
subsidiary, in December 2006.  This provided greater capital transparency and
flexibility although,  as we indicated, it created a capital inefficiency.
There was no material change in the risk borne by the Group but it was necessary
to hold regulatory capital in both the reinsurer, LGPL, and the ceding company,
LGAS.  We stated that we would work to remove this inefficiency and that our
preferred solution was to convert LGPL into an ISPV - a new entity regulated by
the Financial Services Authority ('FSA').

As a result of the successful conversion, the negative impacts of the capital
inefficiency created by LGPL and reported in the full year 2006 results are
largely reversed.  Regulatory capital is increased by an estimated £0.5bn and
embedded value by approximately £120m net of tax.  These impacts are in line
with the assessment we made in December 2006.

Andrew Palmer, Legal & General's Group Director (Finance), said: 'We are
delighted to be the first company in the UK to create an ISPV. It demonstrates
our willingness to pursue innovative solutions to deliver a more efficient and
flexible capital structure for the Group. Our progress in other areas of the
capital review continues according to schedule.'

Notes to editors:

What is an ISPV?

It is a new type of insurance entity regulated by the FSA and introduced at the
end of 2006 as part of the implementation of the EU Reinsurance Directive.  Its
principal characteristics are as follows:

  • It is neither an authorised insurer nor a pure reinsurer.   It is an
    entity which assumes reinsurance risk and is authorised by the FSA to fulfil
    a special purpose.

  • Unlike a reinsurance company, an ISPV is not obliged to cover an
    additional regulatory solvency requirement.  In this case it will be met in
    full by the ceding company, LGAS.  An ISPV is obliged to be fully funded
    with finance subordinated to its reinsurance obligations.

  • It is not required to complete an annual FSA solvency return.

Legal & General has received the necessary waivers from the FSA to enable LGAS
to take credit for the reinsurance to LGPL.

What was the impact on regulatory capital and cost of solvency capital as a
result of the creation of LGPL in December 2006?

The creation of LGPL gave rise to an additional cost of capital of £132m net of
tax in 2006, split as follows:
          
     -    £119m in respect of inforce business
     -    £13m in respect of new business written in 2006

It reduced IGD and Society surplus capital by £0.5bn.

How will the benefit from the ISPV conversion be shown in the Preliminary
results 2007?

The principal impact on our inforce business at the end of 2007 will be shown as
a positive exceptional item through a Corporate Restructure line, below
operating profit.  This is consistent with the equivalent negative impact
reported for 2006.

Any resultant impact on new business profits in 2007 will be reported through '
Contribution from new business after cost of capital'.

Capital review - progress to date

November 2006:

  • Set out the framework for the capital review.
  • Introduced balanced scorecard measures for capital management to enable
    analysts and investors to monitor Legal & General's financial strength.

December 2006:

  • Ceded the non-linked non profit pensions and annuity business of LGAS to a
    new, wholly owned, reinsurance subsidiary, LGPL.
  • Implemented the FSA's Policy Statement 06/14 across its UK individual
    protection business.
  • Reviewed the asset liability matching policy for annuity business during
    2006 and made a number of investment changes to achieve a closer asset
    liability match.

March 2007:

  • Updated the market on our balanced scorecard.

May 2007:

  • Issued £600m Innovative tier 1 perpetual capital securities.

July 2007:

  • Updated the market on our balanced scorecard.
  • Announced and began a £1billion on-market share buyback.


November 2007:

  • Converted LGPL to an ISPV.


About Legal & General

Legal & General Group Plc is a leading UK risk, wealth and investment company.
Founded over 170 years ago, Legal & General today provides life assurance and
other financial protection products, annuities and long-term savings products
including ISA's and pensions. With over £250 billion in funds under management,
it is also the  largest investor for UK pension funds. Legal & General has over
5.5 million UK customers.  Our products are sold through over 30 bank and
building society relationships, through Independent Financial Advisers and also
directly to customers.  Legal & General Assurance Society, our principal
operating company, is one of Europe's top rated life companies for financial
strength, with an AA+ rating from Standard & Poor's and Aa1 from Moody's.

Enquiries to:

Investors:
Jonathan Maddock, Head of Investor Relations                      020 3124 2150
Nicola Marshall, Investor Relations Manager                       020 3124 2151

Media:
John Godfrey, Group Communications Director                       020 3124 2090
Anthony Carlisle, Citigate Dewe Rogerson                          07973 611888


Financial Calendar:

Q4 2007 New business results                                     24 January 2008
2007 Preliminary results                                           13 March 2008
Q1 2008 New business results                                       24 April 2008
2008 AGM                                                             14 May 2008
2008 Interim and new business results                              1 August 2008
Q3 2008 New business results                                     23 October 2008
Q4 2008 New business results                                     29 January 2009

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.


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