L&G 2002 Interim Results Pt 3

Legal & General Group PLC
25 July 2002


Part 3
Legal & General Group Plc                                                                                             P1
Consolidated Profit and Loss Account
- Modified Statutory Solvency Basis
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
                                                                       Notes                                   Full year
                                                                                     30.6.02       30.6.01          2001
                                                                                                  Restated      Restated
                                                                                          £m            £m            £m
Profit on continuing operations
Life and pensions                                                        1               230           208           414
Institutional fund management                                                             23            22            41
General insurance                                                                         22            16            37
Other operational income                                                                (13)             1             1
                                                                                  ----------    ----------    ----------
                                                                                         262           247           493
Profit on discontinuing operations
Other operational income - Banking                                                         3             2             4
                                                                                  ----------    ----------    ----------
Operating profit                                                                         265           249           497
Variation from longer term investment return                                            (30)          (32)          (63)
Change in equalisation provision                                                         (3)           (3)           (6)
Shareholder retained capital (SRC) contribution                          2             (424)         (165)         (550)
Profit on sale of Fairmount Group                                                          -             8             8
                                                                                  ----------    ----------    ----------
(Loss)/profit on ordinary activities before tax                                        (192)            57         (114)
Tax credit/(charge) on (loss)/profit on
ordinary activities                                                                       10          (49)          (30)
                                                                                  ----------    ----------    ----------
(Loss)/profit for the financial period                                                 (182)             8         (144)
Dividends                                                                               (86)          (83)         (261)
                                                                                  ----------    ----------    ----------
Retained loss                                                                          (268)          (75)         (405)
========================================================================================================================
Earnings per share                                                                         p             p             p
Based on operating profit after tax                                                     3.52          3.32          6.87
Based on (loss)/profit for the financial period                                       (3.53)          0.16        (2.80)
Diluted earnings per share
Based on operating profit after tax                                                     3.45          3.31          6.55
Based on (loss)/profit for the financial period                                       (3.53)          0.16        (2.80)
Dividend per share                                                                      1.67          1.63          5.09
========================================================================================================================

These financial statements were approved by the Board on 24 July 2002 and have
been prepared for long term business using the Modified Statutory Solvency (MSS)
basis. The Achieved Profits (AP) results are included in Part 2. The results for
the year ended 2001 and the six months to 30 June 2001 have been restated
following the adoption of Financial Reporting Standard 19, (FRS19) Deferred tax
(see note 4).

Other than in respect of the FRS 19 restatement, the results for the six months
to 30 June 2002 and 30 June 2001 have been prepared on a basis which is
consistent with the financial statements for the year ended 31 December 2001,
and constitute non statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The results are unaudited, but have been subject to a review
by the auditors. The results for year ended 2001 have been taken from the
financial statements for the year ended 2001 and restated for the adoption of
FRS 19 as referred to above. The 2001 financial statements 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.

========================================================================================================================
Legal & General Group Plc                                                                                             P2
Consolidated Balance Sheet
- Modified Statutory Solvency Basis
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
                                                                                          At            At            At
                                                                      Notes          30.6.02       30.6.01      31.12.01
                                                                                                  Restated      Restated
Assets                                                                                    £m            £m            £m
Investments                                                                           34,234        34,011        34,464
Assets held to cover linked liabilities                                               72,162        70,692        70,982
Other assets                                                                           3,458         2,996         2,834
                                                                                  ----------    ----------    ----------
                                                                                     109,854       107,699       108,280
Liabilities                                                                       ==========    ==========    ==========
Shareholders' funds                                                      3             2,612         3,209         2,877
Fund for future appropriations                                                         1,078         2,497         1,845
Technical provisions                                                                 102,035        98,472        99,720
Borrowings and other creditors                                                         4,129         3,521         3,838
                                                                                  ----------    ----------    ----------
                                                                                     109,854       107,699       108,280
========================================================================================================================
Statement of Total Recognised Gains and Losses
                                                                                          At            At            At
                                                                                     30.6.02       30.6.01      31.12.01
                                                                                                  Restated      Restated
                                                                                          £m            £m            £m
(Loss)/profit for the financial period                                                 (182)             8         (144)
Exchange gains                                                                             1             6             2
                                                                                  ----------    ----------    ----------
Total recognised gains and losses                                                      (181)            14         (142)
========================================================================================================================
Legal & General Group Plc                                                                                             P3
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
1. Life and pensions operating profit
                                                                                                               Full year
                                                                                     30.6.02       30.6.01          2001
                                                                                          £m            £m            £m
With-profits business                                                                     56            69           129
Non-profit business                                                                      144           107           224
                                                                                  ----------    ----------    ----------
UK                                                                                       200           176           353
USA                                                                                       26            25            50
Netherlands                                                                                6             6            12
France                                                                                   (2)             1           (1)
                                                                                  ----------    ----------    ----------
                                                                                         230           208           414
                                                                                  ==========    ==========    ==========

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 or US GAAP.
========================================================================================================================
2. Change in SRC
                                                                                                               Full year
                                                                                     30.6.02       30.6.01          2001
                                                                                                  Restated      Restated
                                                                                          £m            £m            £m
Investment income                                                                         30            26            51
Interest expense and charges                                                             (1)             0           (1)
Realised investment gains                                                                  9            32             6
Unrealised investment depreciation                                                     (167)         (125)         (203)
                                                                                  ----------    ----------    ----------
Investment return on SRC                                                               (129)          (67)         (147)
Net capital (invested in)/released from non-profit business                            (151)             9         (179)
Distribution of operating profit from non-profit business                              (144)         (107)         (224)
                                                                                  ----------    ----------    ----------
SRC contribution before tax                                                            (424)         (165)         (550)
                                                                                  ==========    ==========    ==========
SRC at 1 January                                                                       2,631         2,293         2,293
                                                                                   '''''''''     '''''''''     '''''''''
SRC contribution before tax                                                            (424)         (165)         (550)
Tax                                                                                       87            26           101
                                                                                   '''''''''     '''''''''     '''''''''
SRC contribution after tax                                                             (337)         (139)         (449)
Change in the net asset values of SRC subsidiaries                                     (536)            12           432
Dividends received from SRC subsidiaries                                                 542             -             -
Movement in intra-group subordinated debt                                                100            50           355
                                                                                  ----------    ----------    ----------
SRC at end of period                                                                   2,400         2,216         2,631
                                                                                  ==========    ==========    ==========

On 24 December 2001 the investment management subsidiaries held within the SRC
were transferred to new shareholder owned holding companies.

SRC includes intra-group subordinated debt capital of £602m (1H01: £197m; FY01:
£502m).

========================================================================================================================
Legal & General Group Plc                                                                                             P4
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
3. Shareholders' funds                                                                                         Full year
                                                                                     30.6.02       30.6.01          2001
                                                                                                  Restated      Restated
                                                                                          £m            £m            £m
At 1 January                                                                           2,877         3,255         3,255
Total recognised gains and losses                                                      (181)            14         (142)
Dividends                                                                               (86)          (83)         (261)
Increase in share capital/premium                                                          2             3             5
Goodwill written back on sale of Fairmount Group plc                                       -            20            20
                                                                                  ----------    ----------    ----------
At end of period                                                                       2,612         3,209         2,877
                                                                                  ==========    ==========    ==========
Comprising:
Share capital                                                                            129           129           129
Share premium                                                                            149           145           147
Profit and loss account                                                                2,334         2,935         2,601
                                                                                  ----------    ----------    ----------
                                                                                       2,612         3,209         2,877
                                                                                  ==========    ==========    ==========

The number of fully paid ordinary shares of 2.5p in issue at the period end was
5,159m (1H01: 5,153m; FY01: 5,156m).

========================================================================================================================
4. Tax

FRS19, Deferred tax, has been adopted and the 2001 comparatives restated
accordingly. The principal impact is the recognition of additional deferred tax
in respect of unrealised appreciation of investments and future tax relief for
acquisition expenses. Profits after tax for 1H01 and FY01 increased by £4m and
£47m respectively. Shareholders' funds increased by £72m at 30.6.01 and £115m at
31.12.01, and the Fund for future appropriations reduced by £443m and £405m,
respectively. Deferred tax provisions have not been discounted.

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 occurence 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 30.6.02
was £690m (30.6.01, £650m; 31.12.01, £768m).

========================================================================================================================
Legal & General Group Plc                                                                                             P5
Notes to Financial Statements
- Modified Statutory Solvency Basis
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
5.Segmental analysis of shareholders' funds
                                                                                          At            At            At
                                                                                     30.6.02       30.6.01      31.12.01
                                                                                                  Restated      Restated
                                                                                          £m            £m            £m
Life and Pensions
- UK (SRC)*                                                                            2,329         1,988         2,563
- USA                                                                                    461           461           462
- Netherlands                                                                             23            15            17
- France                                                                                  39            41            40
                                                                                  ----------    ----------    ----------
                                                                                       2,852         2,505         3,082
Institutional fund management                                                            165           134           148
General insurance                                                                         95            88            91
Banking                                                                                   96            93            93
Corporate funds**                                                                      (596)           389         (537)
                                                                                  ----------    ----------    ----------
Shareholders' funds on the MSS basis                                                   2,612         3,209         2,877
Less: Purchased interests in long term business included in above                       (27)          (43)          (30)
AP long term in-force business asset                                                   2,190         2,145         2,147
                                                                                  ----------    ----------    ----------
Shareholders' funds on the AP basis                                                    4,775         5,311         4,994
                                                                                  ==========    ==========    ==========

* Including £602m (1H01: £197m; FY01: £502m) of intra-group subordinated debt
capital attributed to the SRC.

** Corporate funds include the convertible debt of £515m (1H01: £Nil; FY01:
£515m) and the senior debt which has been onlent to the UK Long Term Fund (LTF)
of £602m (1H01: £197m; FY01: £502m).

========================================================================================================================
6. UK Long Term Fund
                                                                                          At            At            At
                                                                                     30.6.02       30.6.01      31.12.01
                                                                                                  Restated      Restated
                                                                                         £bn           £bn           £bn
With-profits business                                                                   24.3          25.8          25.2
Non-profit business                                                                     11.1           9.5          10.5
                                                                                   '''''''''     '''''''''     '''''''''
Sub-fund                                                                                 0.2           0.3           0.2
SRC                                                                                      2.4           2.2           2.6
                                                                                   '''''''''     '''''''''     '''''''''
                                                                                         2.6           2.5           2.8
                                                                                  ----------    ----------    ----------
Value of fund                                                                           38.0          37.8          38.5
                                                                                  ==========    ==========    ==========
Assets of the fund are valued at market value.
========================================================================================================================
Legal & General Group Plc                                                                                             P6
Consolidated Cash Flow Statement
(excluding long term business)
Six months ended 30 June 2002
------------------------------------------------------------------------------------------------------------------------
                                                                                                               Full year
                                                                                     30.6.02       30.6.01          2001
                                                                                          £m            £m            £m
Net cash inflow/(outflow) from operating
activities                                                                               210           177          (79)
Interest paid                                                                           (21)          (12)          (24)
Tax received/(paid)                                                                        5           (4)          (20)
Capital expenditure - net receipts                                                         0             2             0
Capital injection into Legal & General Bank Ltd                                          (6)             -             -
Disposal of Fairmount Group                                                                -             -            34
Acquisition of investment management
subsidiaries from the LTF                                                                  -             -         (570)
Dividends paid                                                                         (178)         (166)         (250)
Financing                                                                               (38)           177           837
                                                                                  ----------    ----------    ----------
                                                                                        (28)           174          (72)
                                                                                  ==========    ==========    ==========
Cash flows (not including long term business)
were invested/(divested) as follows:
Decrease in cash holdings                                                               (11)           (3)           (6)
Net (sale)/purchase of investments                                                      (17)           177          (66)
                                                                                  ----------    ----------    ----------
Net (divestment)/investment                                                             (28)           174          (72)
                                                                                  ==========    ==========    ==========
Reconciliation of profit before tax
to operating cash flow
(Loss)/profit on ordinary activities before tax                                        (192)            57         (114)
Profit/(loss) relating to long term business                                             187          (59)           108
Cash received from/(paid to) long term business                                          143           168         (137)
Other items                                                                               72            11            64
                                                                                  ----------    ----------    ----------
Net cash inflow/(outflow) from operating activities                                      210           177          (79)
========================================================================================================================








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