L&G 2010 Final Results Part 3

RNS Number : 0984D

Legal & General Group Plc

17 March 2011

 



Net Cash and Capital									Page 61
3.01 Operational cash generation
The table below provides an analysis of the operational cash generated by each of the Group's business segments, together with a reconciliation to IFRS profit after tax.
								IFRS		IFRS
								profit/		profit/
	Operational	New				Investment		(loss)	Tax	(loss)
	cash	business	Net	Inter-		gains and		after	expense/	before
	generation	strain	cash	national	Variances	losses	Other	tax	(credit)	tax
Year ended 31 December 2010	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Total Risk operating profit	439	(10)	429	-	(26)	-	-	403	157	560
Total Savings operating profit	138	(70)	68	-	21	-	(9)	80	35	115
Investment management
operating profit	162	-	162	-	-	-	-	162	44	206
International	44	-	44	33	-	-	-	77	25	102
Group capital and financing	25	-	25	-	-	32	-	57	1	58
Investment projects	-	-	-	-	-	-	(28)	(28)	(11)	(39)
Operating profit	808	(80)	728	33	(5)	32	(37)	751	251	1,002
Investment variance	-	-	-	-	-	74	-	74	16	90
Impact of change in UK tax rates	-	-	-	-	-	-	(5)	(5)	5	-
Property losses attributable
to minority interests	-	-	-	-	-	-	-	-	-	-
Total	808	(80)	728	33	(5)	106	(42)	820	272	1,092
Dividends paid in the year			(238)
Net cash available for reinvestment			490
Year ended 31 December 2009
Total Risk operating profit	454	50	504	-	27	-	-	531	204	735
Total Savings operating profit	106	(77)	29	-	16	-	(8)	37	13	50
Investment management
operating profit	125	-	125	-	-	-	-	125	47	172
International	8	-	8	78	-	-	-	86	41	127
Group capital and financing	33	-	33	-	-	16	-	49	8	57
Investment projects	-	-	-	-	-	-	(23)	(23)	(9)	(32)
Operating profit	726	(27)	699	78	43	16	(31)	805	304	1,109
Investment variance	-	-	-	-	-	58	-	58	(74)	(16)
Property losses attributable
to minority interests	-	-	-	-	-	-	(19)	(19)	-	(19)
Total	726	(27)	699	78	43	74	(50)	844	230	1,074
Dividends paid in the year			(185)
Net cash available for reinvestment			514
Variances
							Risk	Savings	Risk	Savings
							£m	£m	£m	£m
			Notes				31.12.10	31.12.10	31.12.09	31.12.09
Experience variances			2.01(c)/2.02(c)				67	10	113	(1)
Changes to valuation assumptions			2.01(d)/2.02(d)				30	28	169	9
Changes to FSA reporting and capital rules			2.01(b)/2.02(b)				-	-	15	50
Movements in non-cash items			2.01(e)/2.02(e)				(122)	(21)	(229)	(64)
Other			2.01(b)/2.02(b)				(1)	4	(41)	22
Total							(26)	21	27	16
Net Cash and Capital									Page 62
3.02 Regulatory capital resources
(a)  Insurance Group's Directive (IGD)
The Group is required to measure and monitor its capital resources on a regulatory basis and to comply with the minimum capital requirements of regulators in each territory in which it operates.  At Group level, Legal & General must comply with the requirements of the IGD.  The table below shows the estimated total Group capital resources, Group capital resources requirement and the surplus based on unaudited regulatory returns.
									At	At
									31.12.10	31.12.09
									£bn	£bn
Core tier 1									5.9	4.8
Innovative tier 1									0.6	0.6
Upper tier 2									0.4	0.4
Lower tier 2									0.8	0.8
Deductions1									(1.0)	(1.0)
Group capital resources									6.7	5.6
Group capital resources requirement2									3.0	2.5
IGD surplus3									3.7	3.1
Coverage ratio (Group capital resources / Group capital resources requirement)4									2.26 times	2.24 times
1.  Deductions comprises inadmissible assets in Legal & General America of £0.8bn (2009: £0.8bn), in Society of £0.1bn (2009: £0.1bn) and in other subsidiaries of £0.1bn (2009: £0.1bn).
2.  The Group capital resources requirement includes a With-profits Insurance Capital Component (WPICC) of £0.3bn (2009: £nil).
3.  The IGD surplus is stated after accruing for the period end dividend and excludes £0.3bn of restricted assets in the Society long term fund (LTF).
4.  Coverage ratio is calculated on unrounded values.
A segmental analysis is given below.									At	At
									31.12.10	31.12.09
									£bn	£bn
Society long term fund1									2.9	2.1
Society shareholder capital									2.2	2.2
General insurance									0.1	0.1
France									0.2	0.2
Netherlands									0.2	0.2
Nationwide Life									0.1	0.1
USA									0.5	0.2
Investment management									0.3	0.3
Other2									1.1	0.9
Innovative tier 1									0.6	0.6
Tier 2									1.2	1.2
Debt									(2.7)	(2.5)
Group capital resources									6.7	5.6
Society long term fund1									2.6	2.1
Other									0.4	0.4
Group capital resources requirement									3.0	2.5
1. The Society LTF capital requirement of £2.6bn (2009: £2.1bn) is met by £2.9bn (2009: £2.1bn) of capital resources in the LTF.
2. Other includes corporate assets held within the Group's Treasury function.
Net Cash and Capital									Page 63
3.02 Regulatory capital resources (continued)
(a)  Insurance Group's Directive (IGD) (continued)
A reconciliation of the Group capital resources on an IGD basis to the capital and reserves attributable to the equity holders of the Company on an IFRS basis is given below.
									At	At
									31.12.10	31.12.09
									£bn	£bn
Capital and reserves attributable to equity holders on an IFRS basis									4.8	4.2
Innovative tier 1									0.6	0.6
Tier 2									1.2	1.2
Proposed dividends									(0.2)	(0.2)
Additional capital available from Society									1.1	0.6
Adjustment to reflect regulatory value of the USA operation									(0.8)	(0.8)
Other regulatory adjustments									-	-
Group capital resources									6.7	5.6
(b)  With-profits realistic balance sheet
The table below summarises the realistic position of the with-profits part of Society's LTF:
									At	At
									31.12.10	31.12.09
									£bn	£bn
With-profits surplus									0.9	0.8
Risk capital margin									0.2	0.2
Surplus									0.7	0.6
Society is required to maintain a surplus in the with-profits part of the fund on a realistic basis (peak 2).  The risk capital margin is calculated based on the most onerous capital requirement calculated after performing five stresses specified by the FSA. The surplus includes the present value of future shareholder transfers of £0.4bn (2009: £0.3bn) as a liability in the calculation.
(c)  Society capital surplus
Society is required to measure and monitor its capital resources on a regulatory basis.
							31.12.10	31.12.10	31.12.09	31.12.09
							Long		Long
							term	General	term	General
							business	insurance	business	insurance
							£bn	£bn	£bn	£bn
Available capital resources - Tier 1							5.6	0.1	4.8	0.1
Insurance capital requirement							2.3	0.1	2.1	0.1
Capital requirements of regulated related undertakings							0.2	-	0.2	-
With-profits Insurance Capital Component							0.3	-	-	-
Capital resources requirement							2.8	0.1	2.3	0.1
Regulatory capital surplus							2.8	-	2.5	-
Movement in Society long term insurance capital requirement
									At	At
									31.12.10	31.12.09
Pillar 1 capital requirement									£bn	£bn
Protection									0.6	0.6
Annuities									0.9	0.8
Non profit pensions and unit linked bonds									0.1	0.1
Non profit									1.6	1.5
With-profits									0.7	0.6
Long term insurance capital requirement									2.3	2.1
On a regulatory basis (peak 1), Society long term business regulatory capital surplus of £2.8bn (2009: £2.5bn) comprises capital resources within the long term fund of £2.9bn (2009: £2.1bn) and capital resources outside the long term fund of £2.7bn (2009: £2.7bn) less the capital resources requirement of £2.8bn (2009: £2.3bn).
The With-profits Insurance Capital Component (WPICC) is an additional capital requirement calculated if the surplus in the with-profits fund on a peak 2 basis is lower than on a peak 1 basis and represents the difference in the surplus between the two bases.  It is calculated based on the most onerous risk capital margin stress referred to in 3.02 (b).  A further adjustment is made to the peak 2 surplus to remove the present value of future shareholder transfers which is treated as a liability in Society's with-profits realistic surplus.  At 31 December 2010, this adjustment amounted to £0.4bn (2009: £0.3bn).

 

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