L&G 2000 Results - Part 2

Legal & General Group PLC 27 February 2001 Part 2 Legal & General Group Plc Summary of audited results for the year ended 31 December 2000 CONTENTS P1 Consolidated profit and loss account P2 Consolidated balance sheet P3 Life and pensions premiums and operating profit P3 Half yearly analysis of operating profit P4 General insurance P5 Investment return P5 Other income P6 Change in shareholders' retained capital (SRC) in the UK long term fund P6 Tax P7 Funds under management P8 Shareholders' funds P8 Segmental analysis of shareholders' funds P9 Borrowings P9 UK long term fund P10 Consolidated cash flow statement P11 New business P12 Half yearly analysis of new UK business Legal & General Group Plc P1 Consolidated Profit and Loss Account Year ended 31 December 2000 --------------------------------------------------------------------- Notes 2000 1999 £m £m Life and pensions 1 364 321 Investment management 62 43 General insurance 4 20 25 Other income 6 33 29 ------- ------- Operating profit 479 418 Variation from longer term general insurance investment return 5 (5) 3 Change in equalisation provision (6) (5) Change in shareholders' retained capital (SRC) 7 30 260 ------- ------- Profit from ordinary activities before tax 498 676 Tax on profit on ordinary activities 8 (181) (89) ------- ------- Profit for the financial period 317 587 Dividends (243) (212) ------- ------- Retained profit 74 375 ====================================================================== Earnings per share p p Based on operating profit after tax 6.61 6.56 Based on profit for the financial period 6.18 11.50 Diluted earnings per share Based on operating profit after tax 6.59 6.53 Based on profit for the financial period 6.16 11.44 Dividend per share 4.71 4.13 ====================================================================== Statement of Total Recognised Gains and Losses £m £m Profit for the financial period 317 587 Exchange gains 17 3 ------- ------- Total recognised gains and losses 334 590 ====================================================================== These financial statements were approved by the Board on 26 February 2001 and have been prepared using the modified statutory solvency basis for long term business. The results constitute non-statutory accounts within the meaning of Section 240 of the Companies Act 1985 and are extracted from the Company's financial statements for the year ended 31 December 2000. The financial statements include the auditors' unqualified report and do not contain a statement under either sections 237(2) or 237(3) of the Companies Act 1985. The 2000 Report and Accounts will be posted to shareholders on 23 March 2001 and delivered to the Registrar of Companies after the Annual General Meeting on 25 April 2001. ====================================================================== Legal & General Group Plc P2 Consolidated Balance Sheet As at 31 December 2000 ---------------------------------------------------------------------- As at As at Notes 2000 1999 Assets £m £m Investments 9 35,077 34,143 Assets held to cover linked liabilities 70,678 65,928 Other assets 2,539 2,135 --------- --------- 108,294 102,206 ========= ========= Liabilities Shareholders' funds (i) 10 3,187 3,085 Fund for future appropriations (ii) 4,331 5,814 --------- --------- Technical provisions : : : : Technical provisions for linked liabilities: 70,566: : 65,742: Long term business provisions : 26,692: : 24,538: General insurance provisions : 350: : 365: --------- --------- 97,608 90,645 Borrowings 12 571 426 Bank customer deposits 1,307 1,031 Other creditors 1,290 1,205 --------- --------- 108,294 102,206 ========= ========= (i) Shareholders' funds include profits retained as SRC in the UK long term fund. These amounts, net of allowance for tax, form part of the embedded value of the UK long term fund which is reported in the supplementary financial statements prepared on the Achieved Profits basis. (ii) The fund for future appropriations comprises funds which have not been allocated between policyholders and shareholders at the end of the financial period and consists primarily of unrealised investment appreciation within the with-profits fund. ====================================================================== Legal & General Group Plc P3 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 1.Long term premiums and operating profit 2000 1999 Oper- Oper- Gross ating Gross ating premiums profit premiums profit £m £m £m £m UK with-profits business - Life 1,335 98 1,233 88 - Individual pensions 778 33 688 35 - Group pensions 60 4 56 8 ------- ------- ------- ------- 2,173 135 1,977 131 UK non-profit business 1,161 177 1,284 154 ------- ------- ------- ------- UK 3,334 312 3,261 285 USA 256 42 181 30 Netherlands 98 7 72 5 France 140 3 102 1 ------- ------- ------- ------- 3,828 364 3,616 321 ======= ======= ======= ======= UK life and pensions profit is included in operating profit as the accrued statutory transfer, grossed up at the corporation tax rate. Profits for international business are reported on bases consistent with MSS or US GAAP. International life and pensions premium income and results expressed at 31 December 2000 exchange rates are: Oper- Oper- Gross ating Gross ating premiums profit premiums profit £m £m £m £m USA 256 42 196 32 Netherlands 98 7 73 5 France 140 3 103 1 ====================================================================== 2.Principal sterling exchange rates used 2000 1999 United States dollar 1.49 1.61 Euro 1.59 1.61 ====================================================================== 3.Half yearly analysis of operating profit 2000 1999 Second First Second First half half half half £m £m £m £m Life and pensions 184 180 162 159 Investment management 33 29 30 13 General insurance 11 9 17 8 Other income 17 16 12 17 ------- ------- ------- ------- 245 234 221 197 ====================================================================== Legal & General Group Plc P4 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 4.General insurance result Change Oper- in Net Under- Invest- ating equal- premiums writing ment profit isation written result return (loss)provision Total 2000 £m £m £m £m £m £m Household 181 (7) 12 5 (6) (1) Healthcare and ASU* 33 0 1 1 - 1 Motor 33 (2) 3 1 - 1 Mortgage indemnity 2 18 3 21 0 21 ----- ----- ----- ----- ----- ----- UK 249 9 19 28 (6) 22 Overseas 0 (8) 0 (8) - (8) ----- ----- ----- ----- ----- ----- Total 249 1 19 20 (6) 14 ===== ===== ===== ===== ===== ===== 1999 Household 168 (4) 11 7 (5) 2 Healthcare and ASU* 14 (1) 0 (1) - (1) Motor 26 (2) 1 (1) - (1) Mortgage indemnity 3 16 4 20 0 20 ----- ----- ----- ----- ----- ----- UK 211 9 16 25 (5) 20 Overseas 0 (2) 2 0 - 0 ----- ----- ----- ----- ----- ----- Total 211 7 18 25 (5) 20 ===== ===== ===== ===== ===== ===== * Accident, Sickness and Unemployment business. Investment return is determined using longer term rates of investment return. The rates used are consistent with those used for Achieved Profits reporting. Capital supporting the business, to which the longer term rates, are applied is based on the solvency margin appropriate for the business. The investment return is calculated by applying the longer term rates of return shown below to the investment funds at the start of each quarter. 2000 1999 % % UK equities 7.7 p.a. 7.1 p.a. UK gilts 5.1 p.a. 4.5 p.a. ====================================================================== Legal & General Group Plc P5 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 5.Investment return 2000 1999 £m £m Investment income 61 62 Interest expense and charges (10) (7) Realised investment gains (losses) 19 (1) Unrealised investment (losses) gains (19) 8 -------- -------- 51 62 ======== ======== reported as: Allocated to general insurance operating profit 19 18 Variation from longer term general insurance investment return (see note 4) (5) 3 Shareholders' other income 37 41 The investment return shown represents the return on the general insurance and shareholders' funds excluding that in respect of SRC and non-insurance operations (primarily Legal & General Bank). ====================================================================== 6.Other income 2000 1999 £m £m Shareholders' other income (excluding SRC) - Investment return on shareholders' funds 46 47 - Interest expense on core debt (9) (6) -------- -------- 37 41 - Other operations 1 (2) - Unallocated corporate expenses (5) (10) -------- -------- 33 29 ====================================================================== Legal & General Group Plc P6 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 7.Change in SRC in the UK Long Term Fund 2000 1999 £m £m Investment income 42 50 Interest expense and charges (1) (1) Realised investment gains 106 97 Unrealised investment (losses)gains (171) 142 ------- ------- Investment return on SRC (24) 288 Net capital released from non-profit business 231 126 Accrued transfer to shareholders in respect of non-profit business included in operating profit (177) (154) ------- ------- Change in SRC before tax 30 260 ====================================================================== 8.Tax 2000 1999 Profit Tax Profit Tax before (charge) before (charge) tax credit tax credit £m £m £m £m Life and pensions 364 (97) 321 (79) Investment management 62 (21) 43 (12) General insurance 20 (6) 25 (1) Other income 33 (16) 29 9 ------- ------- ------- ------- Operating profit and related tax 479 (140) 418 (83) Variation from longer term general insurance investment return (5) 1 3 (1) Change in equalisation provision (6) 2 (5) 2 Change in SRC 30 (44) 260 (7) ------- ------- ------- ------- Profit on ordinary activities and related tax 498 (181) 676 (89) ======= ======= ======= ======= The tax on UK life and pensions business and the change in SRC (excluding investment return) is determined by grossing up the statutory transfers and the net of tax amounts respectively at the UK corporation tax rate of 30% (1999: 30.25%). ====================================================================== Legal & General Group Plc P7 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 9.Funds under management 2000 1999 Long term Other Long term Other business business business business £m £m £m £m Land and buildings 3,394 188 3,299 199 Shares, variable yield securities and unit trusts 13,610 1,459 14,337 1,448 Debt securities and other fixed income securities 12,728 723 12,055 1,019 Loans secured by mortgages 14 1,275 13 1,009 Other loans and investments 98 286 100 80 Deposits with credit institutions 863 439 339 245 -------- -------- -------- -------- Total investments 30,707 4,370 30,143 4,000 ======= ========= ======== ======== Held within the UK long term fund 3,137 2,718 Held outside the UK long term fund 1,233 1,282 --------- --------- 4,370 4,000 ========= ========= Total Total £m £m Total investments 35,077 34,143 Assets held to cover linked liabilities 70,678 65,928 --------- --------- Funds included in the consolidated balance sheet 105,755 100,071 Segregated funds 4,565 4,027 Unit trusts, ISAs and PEPs (excluding cash ISAs) 3,867 3,450 --------- --------- Total funds under management 114,187 107,548 ========= ========= representing: Managed in the UK - active portfolios 34,751 35,414 - index tracking portfolios 74,913 67,817 - for international subsidiaries 1,089 964 --------- --------- 110,753 104,195 Mortgages and other 1,735 1,636 --------- --------- 112,488 105,831 Managed by international subsidiaries 1,699 1,717 --------- --------- 114,187 107,548 ========= ========= (i) Assets managed for external pension and institutional fund clients total £66,368m (1999: £61,320m). (ii) The reported asset mix shown above does not reflect the use of derivatives. The effect of outstanding futures contracts is to change the mix as if the value as reported for shares, variable yield securities and unit trusts for long term business decreased by £69m (1999: £383m) and for shareholders' and general insurance funds it increased by £54m (1999: £94m decrease). In both cases, deposits would be changed by corresponding amounts . The effect on other derivatives is not considered significant enough to be separately reported. ====================================================================== Legal & General Group Plc P8 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 10.Shareholders' funds 2000 1999 £m £m At 1 January 3,085 2,700 Total recognised gains and losses 334 590 Dividends (243) (212) Increase in share capital/premium - conversion of bonds 3 1 - exercise of share options 8 6 -------- -------- At 31 December 3,187 3,085 ======== ======== Comprising: Share capital 129 128 Share premium 142 132 Profit and loss account -------- -------- -SRC : 2,006: : 1,981: -Other : 910: : 844: -------- -------- 2,916 2,825 -------- -------- 3,187 3,085 ======== ======== The number of fully paid ordinary shares of 2.5p in issue was 5,149m (1999: 5,129m), including 10m (1999: 13m) shares held within the Employee Share Ownership Trust. ====================================================================== 11.Segmental analysis of shareholders' funds 2000 1999 £m £m Life and Pensions - UK (SRC)* 1,805 1,818 - USA 483 377 - Netherlands 15 15 - France 43 40 -------- -------- 2,346 2,250 Investment management 134 92 General insurance 76 69 Banking 92 96 Corporate funds 539 578 -------- -------- 3,187 3,085 ======== ======== * Excluding SRC funds of £201m (1999: £163m) in respect of the net assets of subsidiaries. ====================================================================== Legal & General Group Plc P9 Notes to Financial Statements Year ended 31 December 2000 ---------------------------------------------------------------------- 12.Borrowings 2000 1999 Long Long term Other term Other busi- busi- busi- busi- ness ness Total ness ness Total £m £m £m £m £m £m Core debt 27 265* 292 31 110 141 Mortgage related borrowings 5 274 279 8 277 285 ------- ------- ------- ------- ------- ------- Total borrowings 32 539 571 39 387 426 ======= ======= ======= ======= ======= ======= * Includes £147m attributable to SRC. ======================================================================= 13.UK Long Term Fund as at 31 December 2000 1999 £bn £bn With-profits business 27.0 26.9 Non-profit business 9.4 8.6 ------- ------- Sub-fund : 0.3 : : 0.3 : SRC : 2.0 : : 2.0 : ------- ------- 2.3 2.3 ------- ------- Value of fund 38.7 37.8 ======= ======= Assets of the fund are valued at market value. The sub-fund, together with the SRC, represents the amount of accumulated profits retained in the Long Term Fund from non-profit business. Earnings on the sub-fund may, at the discretion of directors of the Legal & General Assurance Society Limited, be used to support with-profits business. ========================================================================== Legal & General Group Plc P10 Consolidated cash flow statement (excluding long term business and SRC) Year ended 31 December 2000 ----------------------------------------------------------------------- 2000 1999 £m £m Net cash inflow from operating activities 55 115 Interest paid on core debt (9) (6) Tax (paid)received (12) 36 Capital expenditure: net payments (3) - Dividends paid (223) (193) Financing ------- ------- - Issue of share capital : 11 : : 7 : - Increase in core debt : 131 : : 30 : ------- ------- 142 37 ------- ------- (50) (11) ======= ======= Cash flows (not including long term business) were invested as follows: Increase in cash holdings 3 0 -------- -------- Shares, variable yield securities : : : : and unit trusts : (1): : 2 : Debt securities and other : : : : fixed income securities : (302): : 283 : Other loans and investments : 193 : : (217): Deposits with credit institutions : 57 : : (79): -------- -------- Net portfolio divestment (53) (11) -------- -------- Net divestment (50) (11) ======== ======== Reconciliation of profit before tax to operating cash flow Profit on ordinary activities before tax 498 676 - Profits relating to long term business and SRC (454) (617) - Cash received from long term business 49 180 - Other items (38) (124) -------- -------- Net cash inflow from operating activities 55 115 ======================================================================= Legal & General Group Plc P11 New business Year ended 31 December 2000 ----------------------------------------------------------------------- Life and pensions 2000 1999 Annual Single Annual Single £m £m £m £m Life 160 751 150 634 Pensions 86 1,205 84 1,327 ------- ------- ------- ------- UK 246 1,956 234 1,961 USA 62 1 63 1 Netherlands 7 54 5 35 France 5 107 5 71 ------- ------- ------- ------- Insurance total 320 2,118 307 2,068 Retail investment business UK 27 672 23 877 France - 41 - 31 ------- ------- ------- ------- Total new business 347 2,831 330 2,976 ======= ======= ======= ======= Equivalent premium income (EPI) is calculated for total new business, including unit trusts, ISAs (excluding cash ISAs) and PEPs, and comprises the new annual premiums together with 10% of single premiums. EPI from insurance business has increased from £514m in 1999 to £532m in 2000. EPI from total new business in the same period has increased from £628m in 1999 to £630m in 2000. New international insurance premiums expressed at 31 December 2000 exchange rates 2000 1999 Annual Single Annual Single £m £m £m £m USA 62 1 68 1 Netherlands 7 54 5 36 France 5 107 5 72 ========================================================================== Legal & General Group Plc P12 New UK business Year ended 31 December 2000 ----------------------------------------------------------------------- New UK annual premiums 2000 1999 Full Second First Full Second First year half half year half half £m £m £m £m £m £m Life: Mortgage related 112 55 57 107 62 45 Savings 1 1 0 2 1 1 Protection 16 10 6 17 9 8 Group risk 31 17 14 24 14 10 Pensions: Individual pensions 77 35 42 73 33 40 Group pensions 9 6 3 11 7 4 Investments: ISAs/PEPs (excluding cash ISAs) 27 16 11 23 19 4 ------- ------- ------- ------- ------- ------- Total New UK Annual Business 273 140 133 257 145 112 ======= ======= ======= ======= ======= ======= New UK single premiums Bonds: With-profits 648 381 267 448 215 233 Other 103 43 60 186 99 87 Pensions: Individual pensions 342 185 157 260 125 135 Annuities - individual 426 237 189 304 167 137 Annuities - bulk purchase 258 167 91 573 276 297 Other group business 68 35 33 70 40 30 DSS rebates 111 85 26 120 76 44 Investments: ISAs/PEPs (excluding cash ISAs) 403 107 296 601 133 468 Unit trusts 269 125 144 276 152 124 ------- ------- ------- ------- ------- ------- Total New UK Single Business 2,628 1,365 1,263 2,838 1,283 1,555 ======= ======= ======= ======= ======= ======= New UK EPI Total individual life and pensions EPI 369 194 175 331 174 157 Total investments EPI 94 39 55 111 48 63 ------- ------- ------- ------- -------- ------- Total individual EPI 463 233 230 442 222 220 Total group EPI 73 43 30 99 52 47 ------- ------- ------- ------- ------- ------- Total UK EPI 536 276 260 541 274 267 ======= ======= ======= ======= ======= ======= Institutional fund management* UK Managed Funds 11,367 6,105 5,262 12,756 6,792 5,964 UK Other 1,310 703 607 342 302 40 ------- ------- ------- ------- ------- ------- 12,677 6,808 5,869 13,098 7,094 6,004 ======= ======= ======= ======= ======= ======= * Institutional fund management new business comprises new monies from external clients for both pooled and segregated pension funds and other business not invested in retail products. ========================================================================== MORE TO FOLLOW

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