L&G 2003 Final Results Pt 3

Legal & General Group PLC
26 February 2004


Part 3
Legal & General Group Plc                                                   P1
Consolidated Profit and Loss Account - Modified Statutory Solvency Basis
Year ended 31 December 2003
--------------------------------------------------------------------------------
                                           Notes
                                                          2003            2002
                                                            £m              £m
Profit on continuing operations
Life and pensions                            1             443             421
Institutional fund management                               53              50
General insurance                                           41              46
Other operational income                                    18             (24)
                                                 --------------- ---------------
Operating profit on continuing operations                  555             493

Profit on discontinued operations
Other operational income - Banking                           -               4
                                                 --------------- ---------------
Operating profit                                           555             497
Variation from longer term investment return                58             (63)
Change in equalisation provision                            (7)             (5)
Shareholder retained capital (SRC)           2            (137)           (571)
contribution
Profit on sale of banking operations                         -              36
                                                 --------------- ---------------
Profit/(loss) on ordinary activities                       469            (106)
before tax
                                                 *************** ***************
Tax charge on operating profit                   :        (160): :        (148):
Tax credit on other losses                       :          95 : :          74 :
                                                 *************** ***************
Tax charge on profit/(loss) on                             (65)            (74)
ordinary activities
                                                 --------------- ---------------
Profit/(loss) for the financial period                     404            (180)
Dividends                                                 (318)           (297)
                                                 --------------- ---------------
Retained profit/(loss)                                      86            (477)
================================================================================

Earnings per share                                           p               p
Based on operating profit after tax on                    6.09            5.88
continuing operations
Based on profit/(loss) for the                            6.22           (3.07)
financial period

Diluted earnings per share
Based on operating profit after tax on                    5.99            5.78
continuing operations
Based on profit/(loss) for the                            6.12           (3.07)
financial period

Dividend per share                                        4.90            4.78
================================================================================

These financial statements were approved by the Board on 25 February 2004 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 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 2003. The financial statements include
the auditor's unqualified report and do 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
Year ended 31 December 2003
--------------------------------------------------------------------------------
                                           Notes   At 31.12.03     At 31.12.02
                                                                    Restated *
Assets                                                      £m              £m
Investments                                             35,280          32,442
Assets held to cover linked liabilities                 84,308          69,723
Other assets                                             5,349           4,528
                                                 --------------- ---------------
                                                       124,937         106,693
                                                 =============== ===============

Liabilities
Shareholders' funds                          3           3,260           3,184
Fund for future appropriations                           1,498             516
Technical provisions                                   117,341          98,858
Borrowings and other creditors                           2,838           4,135
                                                 --------------- ---------------
                                                       124,937         106,693
                                                 =============== ===============

* Prior year compative figures have been adjusted to reclassify
Institutional pension fund temporary monies as Borrowings and other creditors
rather than as Technical provisions. There is no adjustment to the reported
results.
================================================================================
Statement of Total Recognised Gains and Losses
                                                   At 31.12.03     At 31.12.02
                                                            £m              £m
Profit/(loss) for the financial period                     404            (180)
Exchange losses                                            (11)             (8)
                                                 --------------- ---------------
Total recognised gains and losses                          393            (188)
================================================================================

Legal & General Group Plc                                                   P3
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2003
--------------------------------------------------------------------------------
1. Life and pensions operating profit
                                                          2003            2002
                                                            £m              £m
With-profits business                                       74              91
Non-profit business                                        295             275
                                                 --------------- ---------------
UK                                                         369             366
USA                                                         57              52
Netherlands                                                 17               8
France                                                       0              (5)
                                                 --------------- ---------------
                                                           443             421
                                                 =============== ===============

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
included within the SRC. Profits for international life and pensions business
are reported on bases consistent with MSS or US GAAP.
================================================================================
2. Change in SRC
                                                          2003            2002
                                                            £m              £m
Investment income                                           73              60
Interest expense and charges                                (2)             (2)
Realised investment gains/(losses)                          20             (23)
Unrealised investment appreciation/(depreciation)          230            (377)
                                                 --------------- ---------------
Investment return on SRC                                   321            (342)
Net capital (invested in)/released                        (163)             46
from non-profit business
Distribution of operating profit from                     (295)           (275)
non-profit business
                                                 --------------- ---------------
SRC contribution before tax                               (137)           (571)
                                                 =============== ===============

SRC at 1 January                                         2,259           2,631
                                                 *************** ***************
SRC contribution before tax                      :        (137): :        (571):
Tax credit                                       :          90 : :          63 :
                                                 *************** ***************
SRC contribution after tax                                 (47)           (508)
Change in the net asset values of SRC                        0              36
subsidiaries
Movement in intra-group subordinated                         0             100
debt
                                                 --------------- ---------------
SRC at end of period                                     2,212           2,259
                                                 =============== ===============

SRC includes intra-group subordinated debt capital of £602m (2002: £602m).
================================================================================
                       
Legal & General Group Plc                                                   P4
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2003
--------------------------------------------------------------------------------
3. Shareholders' funds
                                                   At 31.12.03     At 31.12.02
                                                                      Restated
                                                            £m              £m
At 1 January                                             3,184           2,877
Total recognised gains and losses                          393            (188)
Dividends                                                 (318)           (297)
Increase in share capital/premium                            1             792
                                                 --------------- ---------------
At 31 December                                           3,260           3,184
                                                 =============== ===============
Comprising:
Share capital                                              163             163
Share premium                                              906             905
Profit and loss account                                  2,191           2,116
                                                 --------------- ---------------
                                                         3,260           3,184
                                                 =============== ===============

The number of fully paid ordinary shares of 2.5p in issue at the period end was
6,504m (2002: 6,502m).

The weighted average number of shares used for calculating earnings per share
was 6,490m (2002: 5,868m), diluted 6,790m (2002: 6,167m).
================================================================================

4. Tax

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 was £668m
(2002: £655m).
================================================================================

Legal & General Group Plc                                                   P5
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2003
--------------------------------------------------------------------------------
5. Segmental analysis of shareholders' funds
                                                   At 31.12.03     At 31.12.02
                                                            £m              £m
UK solvency capital
                                                 *************** ***************
SRC *                                            :       2,212 : :       2,259 :
General insurance                                :         120 : :         101 :
Other **                                         :       1,905 : :       1,767 :
                                                 *************** ***************
UK solvency capital                                      4,237           4,127
International shareholders' funds
                                                 *************** ***************
- USA                                            :         443 : :         453 :
- Netherlands                                    :          36 : :          24 :
- France                                         :          45 : :          36 :
                                                 *************** ***************
                                                           524             513
Institutional fund management                              176             161
Corporate funds ***                                     (1,677)         (1,617)
                                                 --------------- ---------------
Shareholders' funds on the MSS basis                     3,260           3,184
Less: Purchased interests in long term                     (29)            (39)
business included in above
AP long term in-force business asset                     2,365           1,916
                                                 --------------- ---------------
Shareholders' funds on the AP basis                      5,596           5,061
                                                 =============== ===============

* Including £602m (2002: £602m) of intra-group subordinated debt capital
attributed to the SRC.

** Includes the net proceeds of £788m from the 2002 rights issue.

*** Includes £518m (2002: £516m) of convertible debt and £602m (2002: £602m) of
senior debt which has been onlent to the UK LTF.
================================================================================
6. UK Long Term Fund
                                                   At 31.12.03     At 31.12.02
                                                           £bn             £bn
With-profits business                                     25.3            23.0
Non-profit business                                       14.3            11.6
                                                 *************** ***************
Sub-fund                                         :         0.2 : :         0.2 :
SRC                                              :         2.2 : :         2.3 :
                                                 *************** ***************
                                                           2.4             2.5
                                                 --------------- ---------------
Value of fund                                             42.0            37.1
================================================================================

Legal & General Group Plc                                                   P6
Consolidated Cash Flow Statement (excluding long term business)
Year ended 31 December 2003
--------------------------------------------------------------------------------
                                                          2003            2002
                                                            £m              £m
Net cash inflow from operating activities                  407             520
Interest paid                                              (58)            (52)
Tax (received)/paid                                         (2)             18
Capital expenditure - net payments                           -              (1)
Net cash received on disposal of                             -              20
banking subsidiaries
Acquisition of subsidiaries from the LTF                     -            (107)
Dividends paid                                            (313)           (263)
                                                 *************** ***************
Issue of share capital                           :           1 : :         792 :
(Decrease)/increase in total borrowing           :         (76): :         249 :
Decrease in mortgage related borrowing           :           0 : :         (31):
                                                 *************** ***************
Financing                                                  (75)          1,010
                                                 --------------- ---------------
                                                           (41)          1,145
                                                 =============== ===============

Cash flows (not including long term business) were invested/(divested) as
follows:
Increase in cash holdings                                    2               4
Net (sale)/purchase of investments                         (43)          1,141
                                                 --------------- ---------------
Net (divestment)/investment                                (41)          1,145
                                                 =============== ===============

Reconciliation of profit before tax to operating cash flow
Profit/(loss) on ordinary activities before tax            469            (106)
(Loss)/profit relating to life and pensions business      (308)            113
Long term business profit included in                      (40)            (34)*
Institutional fund management
Cash received from life and pensions business              275             132
Cash received from Institutional fund management            24               -
Increase in other operating creditors                       19             199
Other items                                                (32)            216*
                                                 --------------- ---------------
Net cash inflow from operating activities                  407             520
                                                 =============== ===============
* Profits relating to Institutional fund management have been separately 
classified.
================================================================================


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