L&G 2003 Final Results Pt 4

Legal & General Group PLC 26 February 2004 Part 4 Legal & General Investment Management - supplementary information Profits - MSS basis ------------------- In another year of volatile markets overall profits grew 6% to £53m (2002: £50m). Gross new business of £13.1bn (2002: £14.0bn) means the average new business inflows have exceeded £1bn per month for the last 6 years. Corporate Pensions operating profits increased 21% to £41m (2002: £34m). Fund management revenue grew strongly, up 10%, benefiting from the upturn in the market, new business growth, and a small increase in average pooled fund fee rates. Maintenance of tight cost controls, despite a 9% increase in client numbers to 2,425, enabled the growth in operational expenses to be contained to only 1%. The new business sales mix reflected successful implementation of the strategy to expand the actively-managed bonds and non-UK client base. Legal & General Ventures, the private equity arm, saw profits reduce to £3m (2002: £5m). Lower levels of corporate activity led to a fall in corporate finance fees. The Property fund management subsidiary continued to expand external funds under management. They are now the operator, asset manager or property manager to seven external property partnerships with total funds under management of £1.1bn. Profits increased to £3m (2002: £2m). Growth in transition management income and fund management revenue on retail and institutional products led to profits rising to £3m (2002: £1m). Other corporate income fell to £3m (2002: £8m), reflecting the impact of higher long-term interest rates on the capital value of shareholders' funds. Total funds under LGIM's management increased 18% to a record £135bn (2002: £114bn). Profits - Achieved profits basis -------------------------------- Managed pension funds business is written as a long term contract and so the results of the business are also presented on an Achieved Profits basis. The embedded value assumptions are detailed in Part 2 of this announcement. Operating profit from institutional fund management was £80m (2002: £92m). Profit before tax increased to £96m (2002: £44m), benefiting from the impact of stronger investment markets relative to embedded value assumptions. The new business contribution from managed pension funds fell slightly on lower levels of new business to £31m (2002: £32m). The contribution from in-force business fell from £14m in 2002 to £5m, as fund outflows, which were low in 2002, moved into line with long-term expectations. Fund Performance ---------------- Legal & General Investment Management delivered good investment performance across its range of actively managed funds in 2003. Almost two-thirds of our actively managed unitised funds outperformed their peer group median or index benchmark over the year. Performance was particularly strong in Fixed Interest and Far East Equities. The flagship Linked Life Distribution Fund has now delivered top quartile performance over 1,3 and 5 years. ================================================================================ Legal & General Investment Management P1 Consolidated Profit and Loss Account - Modified Statutory Solvency basis Year ended 31 December 2003 -------------------------------------------------------------------------------- 2003 2002 £m £m Profit on continuing operations Corporate pensions 41 34 Ventures 3 5 Property 3 2 Other external income 3 1 Other operational income 3 8 --------------- --------------- Profit on ordinary activities before tax 53 50 Tax charge on profit on ordinary activities (16) (14) --------------- --------------- Profit for the financial period 37 36 =============== =============== 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 basis. The Achieved Profits results are included on page 4. The results constitute non statutory accounts within the meaning of Section 240 of the Companies Act 1985 and are extracted from the Group's financial statements for the year ended 31 December 2003. The Group's 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 Investment Management P2 Funds under management Year ended 31 December 2003 -------------------------------------------------------------------------------- At 31.12.03 At 31.12.02 £m £m Total investments 135,337 113,992 =============== =============== Represented by Index tracking funds: - UK equities 42,944 35,940 - Overseas equities 21,144 17,999 - Fixed interest 16,950 15,107 - Index linked 10,650 7,481 - Cash/deposits 359 328 --------------- --------------- Total index tracking funds 92,047 76,855 Actively managed funds 43,290 37,137 --------------- --------------- 135,337 113,992 =============== =============== By fund management approach Indexed equities 64,088 53,939 Active bonds (including index linked funds) 28,883 25,035 Indexed bonds (including index linked funds) 27,959 22,916 Active equities 7,905 6,526 Property 6,022 5,137 Private equity (ventures) 480 439 --------------- --------------- 135,337 113,992 =============== =============== By source of business Institutional funds under management*: - Managed pension funds pooled 72,841 60,397 - Managed pension funds segregated 8,522 6,308 - Other 2,713 2,662 --------------- --------------- Total institutional funds under management 84,076 69,367 UK Operations (unit trusts - excluding life fund 6,948 5,094 investment) UK Operations (life and general insurance funds) 44,313 39,531 --------------- --------------- 135,337 113,992 =============== =============== * Excludes institutional investments in unit trust funds ================================================================================ Legal & General Investment Management P3 New business Year ended 31 December 2003 -------------------------------------------------------------------------------- 2003 2002 New business £m £m Managed pension funds* - Pooled funds 11,066 12,359 - Segregated funds 1,504 1,039 --------------- --------------- 12,570 13,398 Other funds** 482 569 --------------- --------------- 13,052 13,967 =============== =============== By fund management approach Active equities 0.0% 0.1% Active bonds (including cash) 11.8% 0.5% Indexed equities 59.0% 73.0% Indexed bonds (including cash) 27.3% 25.0% Property 1.7% 1.1% Private equity 0.2% 0.3% --------------- --------------- 100.0% 100.0% =============== =============== * New monies from pension fund clients of Legal & General Assurance (Pensions Management) Ltd. Corporate pensions gross new business excludes £4.0bn (2002: £2.1bn) which was held through the year on a temporary basis, generally as part of portfolio reconstruction. ** Includes segregated property, property partnerships, ventures and institutional clients excluding trusts. ================================================================================ Legal & General Investment Management P4 Consolidated Profit and Loss Account - Achieved Profits basis Year ended 31 December 2003 -------------------------------------------------------------------------------- 2003 2002 Profit on continuing operations £m £m Managed pension funds: Contribution from: New business 31 32 In-force business - expected return 13 15 - experience variances 5 14 - operating assumption changes 20 16 Development costs (1) (1) Shareholder net worth 3 7 --------------- --------------- Total 71 83 Ventures 3 5 Property 3 2 Other external income 3 1 Other operational income - 1 --------------- --------------- Operating profit from institutional fund 80 92 management Variation from longer term investment return* 16 (48) --------------- --------------- Profit on ordinary activities before tax 96 44 Tax charge on profit on ordinary activities (29) (12) --------------- --------------- Profit for the financial period 67 32 =============== =============== *The variation from longer term investment return represents the effect of the investment performance in respect of shareholder net worth and in-force business, compared with embedded value assumptions at the beginning of the period. Managed pension funds embedded value 2003 2002 £m £m At 1 January 262 252 Profit after tax 61 25 Distributions and capital movements (18) (15) --------------- --------------- At 31 December 305 262 =============== =============== comprising: Value of in-force business 162 132 Shareholder net worth 143 130 --------------- --------------- 305 262 ================================================================================ This information is provided by RNS The company news service from the London Stock Exchange

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