Interim Results 2004 - Part 3
Legal & General Group PLC
29 July 2004
Part 3
Legal & General Group Plc P1
Consolidated Profit and Loss Account
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
Full
Notes year
30.6.04 30.6.03 2003
restated restated
£m £m £m
Profit on continuing operations
Life and pensions 1 215 211 443
Institutional fund management 32 25 55
General insurance 20 19 41
Other operational income 17 3 18
-------- -------- --------
Operating profit 284 258 557
Variation from longer term (26) 20 56
investment return
Change in equalisation provision (4) (4) (7)
Shareholder retained capital (SRC)
movement 2 (170) (30) (137)
-------- -------- --------
Profit on ordinary activities 84 244 469
before tax
Tax charge 3 (26) (55) (65)
-------- -------- --------
Profit for the financial period 58 189 404
Dividends (104) (102) (318)
-------- -------- --------
Retained (loss)/profit (46) 87 86
===============================================================================
Earnings per share 4 p p p
Based on operating profit after tax 3.14 2.79 6.10
Based on profit for the financial period 0.89 2.91 6.22
Diluted earnings per share 4
Based on operating profit after tax 3.08 2.75 6.00
Based on profit for the financial period 0.89 2.87 6.12
Dividend per share 1.61 1.57 4.90
===============================================================================
These financial statements were approved by the Board on 28 July 2004.
The results for the six months to 30 June 2004 and 30 June 2003 are unaudited,
but have been subject to a review by the auditors and constitute non statutory
accounts within the meaning of Section 240 of the Companies Act 1985. They have
been prepared on a basis which is consistent with the financial statements for
the year ended 31 December 2003 except that the Urgent Issues Task Force
abstract 38, 'Accounting for ESOP trusts' has been adopted and the shareholders'
investment return of Institutional fund management has been reanalysed to
provide a longer term rate of return within operating profit, 2003 comparatives
have been restated accordingly.
The results for year ended 2003 have been taken from the financial statements
for the year ended 2003 which have been filed with the Registrar of Companies
and include an auditors' report which is unqualified and does not contain a
statement under either Sections 237(2) or 237(3) of the Companies Act 1985.
These figures have been prepared for long term business using the Modified
Statutory Solvency (MSS) basis. The Achieved Profits (AP) results are included
in Part 2.
===============================================================================
Legal & General Group Plc P2
Consolidated Balance Sheet
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
Notes At 30.6.04 At 30.6.03 At 31.12.03
Restated Restated
Assets £m £m £m
Investments 35,262 33,872 35,268
Assets held to cover linked 93,986 75,733 84,308
liabilities
Other assets 5,931 5,575 5,349
-------- -------- --------
135,179 115,180 124,925
======== ======== ========
Liabilities
Shareholders' funds 5 3,198 3,259 3,248
Fund for future appropriations 1,434 633 1,498
Technical provisions 126,392 107,015 117,341
Borrowings and other creditors 4,155 4,273 2,838
-------- -------- --------
135,179 115,180 124,925
===============================================================================
Statement of Total Recognised
Gains and Losses
At 30.6.04 At 30.6.03 At 31.12.03
£m £m £m
Profit for the financial period 58 189 404
Exchange losses (3) 0 (11)
-------- -------- --------
Total recognised gains and losses 55 189 393
===============================================================================
Legal & General Group Plc P3
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
1. Life and pensions operating profit Full
year
30.6.04 30.6.03 2003
£m £m £m
With-profits business 33 38 74
Non profit business 145 136 295
-------- -------- --------
UK 178 174 369
USA 26 28 57
Netherlands 10 9 17
France 1 0 0
-------- -------- --------
215 211 443
======== ======== ========
UK life and pensions operating profit is the accrued distributable transfer,
grossed up at the corporate tax rate, and for non profit business is augmented
by the distribution in respect of the intra-group subordinated debt capital held
within the SRC. Profits for international life and pensions business are
reported on bases consistent with MSS.
2. Change in SRC Full
year
30.6.04 30.6.03 2003
£m £m £m
Investment income 34 37 73
Interest expense and charges (1) (1) (2)
Realised investment gains/(losses) 59 (13) 20
Unrealised investment (depreciation)/ (26) 93 230
appreciation
-------- -------- -------
Investment return on SRC 66 116 321
Net capital invested in non profit business (91) (10) (163)
Distribution of operating profit from (145) (136) (295)
non profit business
-------- -------- --------
SRC movement before tax (170) (30) (137)
======== ======== ========
SRC at 1 January 2,212 2,259 2,259
******** ******** ********
SRC movement before tax : (170): : (30): : (137):
Tax credit : 57 : : 15 : : 90 :
******** ******** ********
SRC movement after tax (113) (15) (47)
Change in the net asset values of SRC
subsidiaries 0 (1) 0
-------- -------- --------
SRC at end of period 2,099 2,243 2,212
======== ======== ========
SRC includes intra-group subordinated debt capital of £602m.
===============================================================================
Legal & General Group Plc P4
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
3. Analysis of tax
Full Full
year year
30.6.04 30.6.04 30.6.03 30.6.03 2003 2003
Profit Tax Profit Tax Profit Tax
before (charge)/ before (charge)/ before (charge)/
tax credit tax credit tax credit
Profit on continuing £m £m £m £m £m £m
operations
UK life and pensions 178 (53) 174 (52) 369 (110)
International life
and pensions 37 (12) 37 (13) 74 (28)
-------- -------- -------- -------- -------- --------
215 (65) 211 (65) 443 (138)
Institutional fund
management 32 (10) 25 (7) 55 (16)
General insurance 20 (6) 19 (6) 41 (13)
Other operational
income 17 1 3 1 18 6
-------- -------- -------- -------- -------- --------
Operating profit 284 (80) 258 (77) 557 (161)
Variation from longer
term investment return (26) (4) 20 6 56 4
Change in equalisation (4) 1 (4) 1 (7) 2
provision
SRC movement (170) 57 (30) 15 (137) 90
-------- -------- -------- -------- -------- --------
Profit on ordinary
activities and tax 84 (26) 244 (55) 469 (65)
======== ======== ======== ======== ======== ========
Although the SRC has been recognised as profit in these financial statements,
there has been no corresponding recognition in the FSA regulatory returns, on
which the taxation of life assurance business is currently based. As the payment
of incremental tax on this profit depends upon a future event, the occurrence of
which is under the company's control, no event giving rise to the need to
provide deferred tax has occurred. Accordingly no additional deferred tax has
been provided. The maximum amount of such deferred tax not provided at 30.6.04
was £634m (30.6.03: £676m; 31.12.03: £668m).
===============================================================================
Legal & General Group Plc P5
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
4. Earnings per share (EPS)
Weighted
Earnings average
Profit/ per number
(loss) share of shares
£m p m
Six months ended 30.6.04
Operating profit after tax on
continuing operations 204 3.14 6,491
Variation from longer term
investment return (30) (0.46)
Change in equalisation provision (3) (0.05)
Change in SRC (113) (1.74)
-------- -------- --------
Profit for the period/EPS 58 0.89 6,491
Net shares under options
allocable for no further
consideration - - 22
Convertible bonds outstanding* - - 285
-------- -------- --------
Diluted profit for the period/EPS 58 0.89 6,798
======== ======== ========
Six months ended 30.6.03
Operating profit after tax on
continuing operations 181 2.79 6,489
Variation from longer term
investment return 26 0.40
Change in equalisation provision (3) (0.05)
Change in SRC (15) (0.23)
-------- -------- --------
Profit for the period/EPS 189 2.91 6,489
Net shares under options
allocable for no further
consideration - - 9
Convertible bonds outstanding 6 (0.04) 285
-------- -------- --------
Diluted profit for the period/EPS 195 2.87 6,783
======== ======== ========
Full year ended 31.12.03
Operating profit after tax on
continuing operations 396 6.10 6,490
Variation from longer term
investment return 60 0.92
Change in equalisation provision (5) (0.08)
Change in SRC (47) (0.72)
-------- -------- --------
Profit for the financial year/EPS 404 6.22 6,490
Net shares under options
allocable for no further
consideration - - 15
Convertible bonds outstanding 12 (0.10) 285
-------- -------- --------
Diluted profit for the financial
year/EPS 416 6.12 6,790
======== ======== ========
* These shares are antidilutive as they would increase the net profit per share,
and are therefore ignored along with their associated revenue impact in the
calculation of diluted earnings per share.
===============================================================================
Legal & General Group Plc P6
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
5. Shareholders' funds Full
year
30.6.04 30.6.03 2003
Restated Restated
£m £m £m
At 1 January as originally 3,248 3,184 3,184
published
Prior year adjustment in respect of
UITF 38 - (13) (13)
-------- -------- --------
At 1 January as restated 3,248 3,171 3,171
Total recognised gains and losses 55 189 393
Dividends (104) (102) (318)
Increase in share capital/premium 0 0 1
Allocation of ESOT shares (1) 1 1
-------- -------- --------
At end of period 3,198 3,259 3,248
======== ======== ========
Comprising:
Share capital 163 163 163
Share premium 906 905 906
ESOT reserve (13) (12) (12)
Profit and loss account 2,142 2,203 2,191
-------- -------- --------
3,198 3,259 3,248
======== ======== ========
The number of fully paid ordinary shares of 2.5p in issue at the period end was
6,505m (1H03: 6,503m; FY03: 6,504m).
UITF abstract 38 'Accounting for ESOP trusts' requires that own shares held
within the Employee Share Ownership Trust (ESOT) should be accounted for as a
deduction from shareholders' funds rather than be disclosed as an investment as
was previously required. The 2003 amounts have been restated accordingly.
===============================================================================
Legal & General Group Plc P7
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2004
-------------------------------------------------------------------------------
6. Segmental analysis of
shareholders' funds
At 30.6.04 At 30.6.03 At 31.12.03
Restated Restated
£m £m £m
UK solvency capital
******** ******** ********
SRC* : 2,099: : 2,243: : 2,212:
Society shareholder capital (SSC)** : 1,892: : 1,830: : 1,905:
-------- -------- --------
Society solvency capital : 3,991: : 4,073: : 4,117:
General insurance : 136: : 108: : 120:
******** ******** ********
UK solvency capital 4,127 4,181 4,237
International shareholders' funds
- USA 458 460 443
- Netherlands 40 31 36
- France 46 38 45
-------- -------- --------
4,671 4,710 4,761
Institutional fund management 196 179 176
Corporate funds*** (1,669) (1,630) (1,689)
-------- -------- --------
Shareholders' funds on the
MSS basis 3,198 3,259 3,248
Less: Purchased interests in
long term business included in above (31) (27) (29)
AP long term in-force business asset 2,556 2,028 2,365
-------- -------- --------
Shareholders' funds on the AP basis 5,723 5,260 5,584
======== ======== ========
* Includes £602m of intra-group subordinated debt capital attributed to the SRC.
** Includes £788m from the 2002 rights issue and aggregated investment returns
of £122m (1H03: £65m; FY03: £139m).
*** Includes the convertible debt of £519m (1H03: £517m; FY03: £518m) and £602m
of senior debt which has been onlent to the UK Long Term Fund.
===============================================================================
7. UK Long Term Fund
At 30.6.04 At 30.6.03 At 31.12.03
£bn £bn £bn
With-profits business 25.4 24.0 25.3
Non profit business 15.4 12.9 14.3
******** ******** ********
Sub-fund : 0.2: : 0.2: : 0.2:
SRC : 2.1: : 2.2: : 2.2:
******** ******** ********
2.3 2.4 2.4
-------- -------- --------
Value of fund 43.1 39.3 42.0
===============================================================================
Legal & General Group Plc P8
Consolidated Cash Flow Statement
(excluding long term business)
Six months ended 30 June 2004
-------------------------------------------------------------------------------
Full year
30.6.04 30.6.03 2003
restated restated
£m £m £m
Net cash inflow from
operating activities 348 493 407
Interest paid (29) (30) (58)
Tax (paid)/received (6) 6 (2)
Capital expenditure - net payments - 1 -
Dividends paid (216) (211) (313)
******** ******** ********
Issue of share capital : 0 : : 0 : : 1 :
(Increase)/decrease in : (1): : 1 : : 1 :
shares held by the ESOT : : : : : :
Increase/(decrease) in borrowing : 41 : : (165): : (76):
******** ******** ********
Financing 40 (164) (74)
-------- -------- --------
137 95 (40)
======== ======== ========
Cash flows (not including
long term business)
were invested/(divested) as
follows:
Increase in cash holdings 8 8 2
Net purchase/(sale) of investments 129 87 (42)
-------- -------- --------
Net investment/(divestment) 137 95 (40)
======== ======== ========
Reconciliation of profit before tax
to operating cash flow
Profit on ordinary activities
before tax 84 244 469
Profit relating to life and
pensions business (45) (181) (308)
Long term business profit
included in Institutional
fund management (23) (18) (40)
Cash received from life and
pensions business 232 275 275
Cash received from Institutional
fund management 28 24 24
Increase in other operating
creditors 25 246 19
Other items 47 (97) (32)
-------- -------- --------
Net cash inflow from
operating activities 348 493 407
===============================================================================
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