L&G Full Year Results 2016 Part 2

RNS Number : 8033Y
Legal & General Group Plc
08 March 2017
 

Legal & General Full Year Results 2016 Part 2

 

IFRS and Release from Operations                                                                                                                Page 25

 

Operating profit

For the year ended 31 December 2016

 

 

 

2016

2015

 

 

Notes

£m

£m

 

 

 

 

 

 

 

 

 

 

From continuing operations

 

 

 

 

Legal & General Retirement (LGR)

 

2.02

811

641

Legal & General Investment Management (LGIM)

 

2.03

366

355

Legal & General Capital (LGC)

 

2.05

257

233

Legal & General Insurance (LGI)

 

2.02

317

315

 - UK and Other

 

 

232

232

 - US

 

 

85

83

Savings

 

2.02

99

107

General Insurance

 

2.04

52

51

 

 

 

 

 

 

 

 

 

 

Operating profit from divisions

 

 

1,902

1,702

Group debt costs1

 

 

(172)

(153)

Group investment projects and expenses2

 

2.06

(102)

(86)

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

1,628

1,463

Kingswood office closure costs

 

 

(66)

(8)

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

1,562

1,455

Investment and other variances

 

2.07

13

(119)

Gains on non-controlling interests

 

 

7

19

 

 

 

 

 

 

 

 

 

 

Profit before tax attributable to equity holders

 

 

1,582

1,355

Tax expense attributable to equity holders of the company

 

2.15

(317)

(261)

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

1,265

1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the company

 

 

1,258

1,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

p

p

 

 

 

 

 

 

 

 

 

 

Earnings per share3

 

2.10

21.22

18.16

Diluted earnings per share3

 

2.10

21.13

18.04

 

 

 

 

 

 

 

 

 

 

1. Group debt costs exclude interest on non recourse financing.

2. Group investment projects and expenses in 2016 include restructuring costs of £54m (2015: £42m).

3. All earnings per share calculations are based on profit attributable to equity holders of the company.

 

This supplementary operating profit information (one of the group's key performance indicators) provides further analysis of the results reported under IFRS and the group believes it provides shareholders with a better understanding of the underlying performance of the business in the year.

 

During 2016, Insurance and LGA segments (excluding General Insurance) were combined to create the new Legal & General Insurance (LGI) segment. General Insurance is now presented as a separate segment.

 

LGR represents worldwide pension risk transfer business (including longevity insurance), individual retirement and lifetime mortgages.

 

The LGIM segment represents institutional and retail investment management and workplace savings businesses.

 

LGC represents shareholder assets invested in direct investments, and traded and treasury assets.

 

LGI represents business in retail protection, group protection, networks, Legal & General Netherlands (LGN) and protection business written in the USA (LGA). LGI comparatives include Legal & General France (LGF), which was sold during 2015.

 

Savings represents business in platforms, SIPPs and mature savings including with-profits.

 

The General Insurance segment comprises short-term protection.

 

During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to LGI from Savings, and Investment Discounts On Line Limited (the IDOL) has been transferred to LGR from LGI. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR 2015 operating profit by £2m, increase Savings 2015 operating profit by £8m and reduce LGI 2015 operating profit by £10m.

 

Operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and exceptional items. Operating profit therefore reflects longer-term economic assumptions for the group's insurance businesses and shareholder funds, except for LGC's trading businesses (which reflects IFRS profit before tax) and LGA (which excludes unrealised investment returns to align with the liability measurement under US GAAP). Variances between actual and smoothed investment return assumptions are reported below operating profit. Exceptional income and expenses which arise outside the normal course of business in the year, such as merger and acquisition, and start-up costs, are also excluded from operating profit.

 

 

 

IFRS and Release from Operations                                                                                                                Page 26

 

2.01 Reconciliation of release from operations to operating profit before tax

 

The table below provides an analysis of the release from operations by each of the group's business segments, together with a reconciliation to operating profit before tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes

 

 

 

 

Operating

 

 

 

New

Net

 

in

 

 

Operating

 

profit/

 

 

Release

business

release

Exper-

valuation

Non-cash

Inter-

profit/

Tax

(loss)

 

 

from

surplus/

from

ience

assump-

items and

national

(loss)

expense/

before

 

For the year ended

operations1

(strain)

operations

variances

tions

other

and other2

after tax

(credit)

tax

 

31 December 2016

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGR

433

159

592

34

40

6

-

672

139

811

 

LGIM

308

(22)

286

(1)

-

-

-

285

81

366

 

 - LGIM excluding Workplace

 

 

 

 

 

 

 

 

 

 

 

   Savings (admin only)

290

-

290

-

-

-

-

290

82

372

 

 - Workplace Savings (admin

 

 

 

 

 

 

 

 

 

 

 

   only)3

18

(22)

(4)

(1)

-

-

-

(5)

(1)

(6)

 

LGC

214

-

214

-

-

-

-

214

43

257

 

LGI

317

23

340

(11)

5

(29)

(79)

226

91

317

 

 - UK and Other

254

23

277

(11)

5

(29)

(57)

185

47

232

 

 - US

63

-

63

-

-

-

(22)

41

44

85

 

Savings

104

(5)

99

4

8

(32)

-

79

20

99

 

General Insurance

42

-

42

-

-

-

-

42

10

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total from divisions

1,418

155

1,573

26

53

(55)

(79)

1,518

384

1,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group debt costs

(138)

-

(138)

-

-

-

-

(138)

(34)

(172)

 

Group investment projects

 

 

 

 

 

 

 

 

 

 

 

and expenses

(24)

-

(24)

-

-

-

(59)

(83)

(19)

(102)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted total

1,256

155

1,411

26

53

(55)

(138)

1,297

331

1,628

 

Kingswood office closure costs4

-

-

-

-

-

-

(53)

(53)

(13)

(66)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

1,256

155

1,411

26

53

(55)

(191)

1,244

318

1,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Release from operations includes dividends remitted from LGN of £70m (2015: £28m) within the LGI UK and Other line and US of £63m (2015: £54m).

 

2. International and other includes £43m (2015: £34m) of restructuring costs (£54m before tax) (2015: £42m before tax) within the Group investment projects and expenses line.

 

3. This represents Workplace Savings admin only and excludes fund management profits.

 

4. The Kingswood office closure costs reflect expenditure in relation to rent and rates, as well as the write-off of previously capitalised expenditure.

 

 

 

Release from operations for LGR, LGIM, LGI and Savings represents the expected IFRS surplus generated in the year from the in-force non profit annuities, workplace savings, protection and savings businesses using best estimate assumptions. The LGIM release from operations also includes operating profit after tax from the institutional and retail investment management businesses. The LGI release from operations also includes dividends remitted from LGN and LGA and operating profit after tax from the remaining LGI businesses. The Savings release from operations includes the shareholders' share of bonuses on with-profits business and operating profit after tax from the remaining Savings businesses.

 

 

 

 

 

 

 

 

 

 

 

 

 

New business surplus/strain for LGR, LGIM, LGI and Savings represents the cost of acquiring new business and setting up prudent reserves in respect of the new business for UK non profit annuities, workplace savings, protection and savings, net of tax. The new business surplus and release from operations for LGR, LGIM, LGI and Savings exclude any capital held in excess of the prudent reserves from the liability calculation.

 

 

 

 

 

 

 

 

 

 

 

 

 

Net release from operations for LGR, LGIM, LGI and Savings is defined as release from operations less new business strain.

 

 

 

 

 

 

 

 

 

 

 

 

 

Release from operations and net release from operations for LGC and General Insurance represents the operating profit (net of tax).

 

 

 

 

 

 

 

 

 

 

 

 

 

During 2016, changes have been made to the organisational structure. The advised sales and India businesses have been transferred to LGI from Savings, and the IDOL business has been transferred to LGR from LGI. Comparatives have been amended accordingly.

 

 

 

 

 

 

 

 

 

 

 

 

 

See Note 2.02 for more detail on experience variances, changes to valuation assumptions and non-cash items.

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 27

 

2.01 Reconciliation of release from operations to operating profit before tax (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes

 

 

 

 

Operating

 

 

New

Net

 

in

 

 

Operating

 

profit/

 

Release

business

release

Exper-

valuation

Non-cash

Inter-

profit/

Tax

(loss)

 

from

surplus/

from

ience

assump-

items and

national

(loss)

expense/

before

For the year ended

operations1

(strain)

operations

variances

tions

other

and other2

after tax

(credit)

tax

31 December 2015

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGR4

374

45

419

13

114

(20)

-

526

115

641

LGIM

303

(22)

281

(1)

1

(2)

-

279

76

355

 - LGIM excluding Workplace

 

 

 

 

 

 

 

 

 

 

  Savings (admin only)

282

-

282

-

-

-

-

282

77

359

 - Workplace Savings (admin3

 

 

 

 

 

 

 

 

 

 

   only)

21

(22)

(1)

(1)

1

(2)

-

(3)

(1)

(4)

LGC

187

-

187

-

-

-

-

187

46

233

LGI4

328

25

353

(14)

(45)

(46)

(28)

220

95

315

 - UK and Other

274

25

299

(14)

(45)

(46)

(11)

183

49

232

 - US

54

-

54

-

-

-

(17)

37

46

83

Savings4

125

(9)

116

(9)

-

(23)

2

86

21

107

General Insurance

41

-

41

-

-

-

-

41

10

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total from divisions

1,358

39

1,397

(11)

70

(91)

(26)

1,339

363

1,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group debt costs

(122)

-

(122)

-

-

-

-

(122)

(31)

(153)

Group investment projects

 

 

 

 

 

 

 

 

 

 

and expenses

(19)

-

(19)

-

-

-

(50)

(69)

(17)

(86)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted total

1,217

39

1,256

(11)

70

(91)

(76)

1,148

315

1,463

Kingswood office closure costs

-

-

-

-

-

-

(6)

(6)

(2)

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

1,217

39

1,256

(11)

70

(91)

(82)

1,142

313

1,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Release from operations includes dividends remitted from LGF of £1m and LGN of £28m within the LGI UK and Other line and US of £54m.        

2. International and other includes £34m of restructuring costs (£42m before tax) within the Group investment projects and expenses line.

3. This represents Workplace Savings admin only and excludes fund management profits.

4. LGR includes the IDOL business which was previously reported in LGI, and LGI includes the advised sales and India businesses which were previously reflected in Savings. The impact of this reclassification has been to increase LGR 2015 release from operations by £2m, increase Savings 2015 release from operations by £6m and reduce LGI 2015 release from operations by £8m.

 

 

 

IFRS and Release from Operations                                                                                                                Page 28

 

2.02 Analysis of LGR, LGI and Savings operating profit

 

 

 

 

 

 

 

 

 

 

 

 

LGR

LGI

Savings

LGR

LGI

Savings

 

 

 

2016

2016

2016

2015

2015

2015

 

 

 

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net release from operations

 

592

340

99

419

353

116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience variances

 

 

 

 

 

 

 

 

   Persistency

 

2

(2)

-

4

5

(2)

 

   Mortality/morbidity1

 

47

(34)

-

18

(16)

-

 

   Expenses

 

(9)

4

7

-

2

3

 

   Project and development costs

 

(21)

2

(4)

(20)

(2)

(2)

 

   Other

 

15

19

1

11

(3)

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total experience variances

 

34

(11)

4

13

(14)

(9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes to valuation assumptions

 

 

 

 

 

 

 

 

   Persistency2

 

-

(52)

5

-

48

-

 

   Mortality/morbidity3

 

40

4

-

97

(20)

-

 

   Expenses4

 

-

53

-

17

27

(2)

 

   Reinsurance modelling5

 

-

-

-

-

(93)

-

 

   Other

 

-

-

3

-

(7)

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total valuation assumption changes

 

40

5

8

114

(45)

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movement in non-cash items

 

 

 

 

 

 

 

 

   Deferred tax

 

-

-

1

-

-

2

 

   Utilisation of brought forward trading losses

 

-

-

-

(25)

(6)

-

 

   Acquisition expense tax relief 6

 

-

(27)

(3)

-

(30)

(4)

 

   Deferred Acquisition Costs (DAC)7

 

-

-

(28)

-

-

(54)

 

   Deferred Income Liabilities (DIL)7

 

-

-

9

-

-

39

 

   Other

 

6

(2)

(11)

5

(10)

(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-cash movement items

 

6

(29)

(32)

(20)

(46)

(23)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International and other8

 

-

(79)

-

-

(28)

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit after tax

 

672

226

79

526

220

86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax gross up

 

139

91

20

115

95

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit before tax

 

811

317

99

641

315

107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The LGR mortality/morbidity experience variance reflects higher than expected annuitant deaths experience over 2016. LGI mortality/morbidity experience variance in 2016 primarily reflects adverse claims experience on the group protection book of business.

 

2. The LGI persistency valuation assumption change in 2016 is the result of a review of prudence within the lapse assumption for level and decreasing term assurance products.

 

3. The mortality/morbidity valuation assumption change in LGR primarily reflects a change in the treatment to historic longevity insurance deals where future fees in excess of prudent estimates of longevity and expense experience are now included as an offset to IFRS reserves. The 2015 LGR mortality/morbidity change to valuation assumptions primarily reflected a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants.

 

4. The LGI expense valuation assumption change is the result of the reduction in unit costs following recent expense savings actions, together with a review of the prudence within renewal expenses on our protection products.

 

5. The reinsurance modelling for our UK protection business was enhanced in 2015. Recent reinsurance contracts have been written on a risk premium basis (as opposed to level premium) and the model change ensured that for these treaties, sufficient prudence was being held in later years. The one-off impact reduced operating profit by £93m in 2015. This also deferred a higher proportion of release from operations into the later years of these reinsurance contracts.

 

6. Net release from operations for LGI and Savings recognises tax relief from prior year acquisition expenses, which are spread evenly over seven years under relevant 'I-E' tax legislation in the period the cash flows actually occur. In contrast, operating profit typically recognises the value of these future cash flows in the same period as the underlying expense as deferred tax amounts. The reconciling amounts arising from these items are included in the table above. Following the removal of new retail protection business from the 'I-E' tax regime, and the removal of commission from new insured savings business under the Retail Distribution Review at the end of 2012, no material amount of deferred tax assets arise on new acquisition expenses and the value of these future cash flows for post-2013 acquisition expenses have been reflected within net release from operations. The residual prior year acquisition expenses will run off predictably to 2018.

 

7. The DAC in Savings represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.

 

8. LGI Other in 2016 reflects the difference between the dividend (release from operations) remitted from LGN and LGA of £70m and £63m respectively (2015: dividends remitted from LGN of £28m, LGF of £1m and LGA of £54m) and the LGN, LGA and India operating profit after tax (2015: LGN, LGF, LGA and India operating profit after tax).

 

 

 

 

 

 

 

 

 

 
                     

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 29

 

2.03 LGIM

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management revenue

 

 

 

 

 

744

694

Investment management expenses

 

 

 

 

 

(372)

(335)

Workplace Savings (admin only) operating loss1

 

 

 

 

 

(6)

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total LGIM operating profit

 

 

 

366

355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. This represents Workplace Savings admin only and excludes fund management profits.

 

2.04 General Insurance operating profit and combined operating ratio 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Insurance operating profit1

 

 

 

52

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Insurance combined operating ratio (%)2

 

 

 

89

89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The General Insurance operating profit includes the underwriting result and smoothed investment return.

2. The calculation of the General Insurance combined operating ratio incorporates claims, commission and expenses as a percentage of net earned premiums.

 

2.05 LGC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct investments

 

 

 

 

 

 

121

69

Traded portfolio including treasury operations

 

 

 

 

 

136

164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total LGC operating profit

 

 

257

233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.06 Group investment projects and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group investment projects and central expenses

 

 

 

 

(48)

(44)

Restructuring costs1

 

 

 

 

(54)

(42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Group investment projects and expenses

 

(102)

(86)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Restructuring costs exclude the Kingswood office closure costs which have been presented separately.

 

 

2.07 Investment and other variances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment variance1

 

 

 

 

 

 

147

(57)

M&A related2

 

 

 

 

 

 

(102)

(57)

Other3

 

 

 

 

 

 

(32)

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investment and other variances

 

 

 

 

 

 

13

(119)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. 2016 investment variance is positive, primarily driven by foreign exchange gains on US dollar assets, the outperformance of equity markets to expectations and a lack of defaults on the group's bond portfolios, partially offset by the negative impact of interest rate changes during the period. The defined benefit pension scheme variance of £29m contained within this line (2015: £(15)m) reflects the actuarial gains and losses, and valuation differences arising on annuity assets held by defined benefit pension schemes that have been purchased from Legal & General Assurance Society Limited. A segmental analysis of Investment and other variances can be found in note 2.09 (a).

2. M&A related includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. 2016 includes the £60m net loss resulting from the classification of Cofunds Plc as held for sale (£64m loss) and the disposal of Suffolk Life (£4m gain).(2015: includes the £25m net loss resulting from the disposal of subsidiary and joint venture investments during the year).

3. Other includes new business start-up costs and other non-investment related variance items.

 

 

 

IFRS and Release from Operations                                                                                                                Page 30

 

Consolidated Income Statement

For the year ended 31 December 2016

 

 

 

 

2016

2015

 

 

Notes

£m

£m

 

 

 

 

 

 

 

 

 

 

Income

 

 

 

 

Gross written premiums

 

 

10,325

6,321

Outward reinsurance premiums

 

 

(1,573)

(1,603)

Net change in provision for unearned premiums

 

 

4

21

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

 

8,756

4,739

Fees from fund management and investment contracts

 

 

1,068

1,139

Investment return

 

 

67,824

5,947

Operational income

 

 

321

876

 

 

 

 

 

 

 

 

 

 

Total income

 

2.09

77,969

12,701

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

Claims and change in insurance liabilities

 

 

17,896

5,080

Reinsurance recoveries

 

 

(2,745)

(2,466)

 

 

 

 

 

 

 

 

 

 

Net claims and change in insurance liabilities

 

 

15,151

2,614

Change in provisions for investment contract liabilities

 

 

58,578

5,615

Acquisition costs

 

 

793

838

Finance costs

 

 

198

186

Other expenses

 

 

1,569

1,893

Transfers (from)/to unallocated divisible surplus

 

 

(187)

141

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

76,102

11,287

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

1,867

1,414

Tax expense attributable to policyholder returns

 

 

(285)

(59)

 

 

 

 

 

 

 

 

 

 

Profit before tax attributable to equity holders

 

 

1,582

1,355

 

 

 

 

 

 

 

 

 

 

Total tax expense

 

 

(602)

(320)

Tax expense attributable to policyholder returns

 

 

285

59

 

 

 

 

 

 

 

 

 

 

Tax expense attributable to equity holders

 

2.15

(317)

(261)

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

1,265

1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

Non-controlling interests

 

2.24

7

19

Equity holders of the company

 

 

1,258

1,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend distributions to equity holders of the company during the year

 

2.17

830

701

Dividend distributions to equity holders of the company proposed after the year end

 

2.17

616

592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

p  

p  

 

 

 

 

 

 

 

 

 

 

Earnings per share1

 

2.10

21.22

18.16

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share1

 

2.10

21.13

18.04

 

 

 

 

 

 

 

 

 

 

1. All earnings per share calculations are based on profit attributable to equity holders of the company.

 

 

 

IFRS and Release from Operations                                                                                                                Page 31

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

 

 

 

 

 

 

2016

2015

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

1,265

1,094

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to profit or loss

 

 

 

 

 

Actuarial (losses)/gains on defined benefit pension schemes

 

 

(138)

47

 

Tax on actuarial (losses)/gains on defined benefit pension schemes

 

 

17

(11)

Actuarial gains/(losses) on defined benefit pension schemes transferred to unallocated divisible surplus

 

 

51

(17)

Tax on actuarial gains/(losses) on defined benefit pension schemes transferred to unallocated divisible surplus

 

 

(6)

4

 

 

 

 

 

 

 

 

 

 

 

 

Total items that will not be reclassified to profit or loss subsequently

 

 

(76)

23

 

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

Exchange differences on translation of overseas operations

 

 

190

25

 

Net change in financial investments designated as available-for-sale

 

 

(4)

(64)

 

Tax on net change in financial investments designated as available-for-sale

 

 

1

22

 

 

 

 

 

 

 

 

 

 

 

 

 

Total items that may be reclassified to profit or loss subsequently

 

 

187

(17)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income after tax

 

 

111

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

1,376

1,100

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

Non-controlling interests

 

 

7

19

 

Equity holders of the company

 

 

1,369

1,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 32

 

Consolidated Balance Sheet

As at 31 December 2016

 

 

 

 

 

2016

2015

 

 

 

Notes

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Goodwill

 

 

 

11

83

Purchased interest in long term businesses and other intangible assets

 

 

 

155

292

Deferred acquisition costs

 

 

 

2,105

1,887

Investment in associates and joint ventures

 

 

 

283

220

Property, plant and equipment

 

 

 

76

92

Investment property

 

 

2.14/3.04

8,150

8,082

Financial investments

 

 

2.14/3.04

418,175

354,063

Reinsurers' share of contract liabilities

 

 

 

5,593

4,120

UK deferred tax asset

 

 

2.15

5

20

Current tax recoverable

 

 

 

297

236

Other assets

 

 

 

5,022

3,618

Assets of operations classified as held for sale

 

 

2.12

2,265

3,409

Cash and cash equivalents

 

 

 

25,717

20,677

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

467,854

396,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

 

 

2.18

149

149

Share premium

 

 

2.18

981

976

Employee scheme treasury shares

 

 

 

(30)

(30)

Capital redemption and other reserves

 

 

 

212

89

Retained earnings

 

 

 

5,633

5,220

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to owners of the parent

 

 

 

6,945

6,404

Non-controlling interests

 

 

2.24

338

289

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

7,283

6,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Participating insurance contracts

 

 

2.21

5,794

5,618

Participating investment contracts

 

 

2.22

5,271

4,912

Unallocated divisible surplus

 

 

 

661

893

Value of in-force non-participating contracts

 

 

 

(206)

(184)

 

 

 

 

 

 

 

 

 

 

 

 

Participating contract liabilities

 

 

 

11,520

11,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-participating insurance contracts

 

 

2.21

60,779

49,754

Non-participating investment contracts

 

 

2.22

321,177

278,554

 

 

 

 

 

 

 

 

 

 

 

 

Non-participating contract liabilities

 

 

 

381,956

328,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core borrowings

 

 

2.19

3,071

3,092

Operational borrowings

 

 

2.20

430

536

Provisions

 

 

2.27

1,328

1,171

UK deferred tax liabilities

 

 

2.15

291

137

Overseas deferred tax liabilities

 

 

2.15

522

436

Current tax liabilities

 

 

 

117

95

Payables and other financial liabilities

 

 

2.16

37,347

22,709

Other liabilities

 

 

 

594

737

Net asset value attributable to unit holders

 

 

 

21,573

18,277

Liabilities of operations classified as held for sale

 

 

2.12

1,822

3,369

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

460,571

390,106

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

467,854

396,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 33

 

Consolidated Statement of Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee

Capital

 

Equity

 

 

 

 

 

scheme

redemption

 

 attributable

Non-

 

 

Share

Share

treasury

and other

Retained

to owners

controlling

Total

 

capital

premium

shares

reserves1

earnings

of the parent

interests

equity

For the year ended 31 December 2016

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2016

149

976

(30)

89

5,220

6,404

289

6,693

Profit for the year

-

-

-

-

1,258

1,258

7

1,265

Exchange differences on translation of

 

 

 

 

 

 

 

 

overseas operations

-

-

-

190

-

190

-

190

Actuarial losses on defined benefit

 

 

 

 

 

 

 

 

pension schemes

-

-

-

-

(121)

(121)

-

(121)

Actuarial losses on defined benefit

 

 

 

 

 

 

 

 

pension schemes transferred to

 

 

 

 

 

 

 

 

unallocated divisible surplus

-

-

-

-

45

45

-

45

Net change in financial investments

 

 

 

 

 

 

 

 

designated as available-for-sale

-

-

-

(3)

-

(3)

-

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/(expense)

 

 

 

 

 

 

 

 

for the year

-

-

-

187

1,182

1,369

7

1,376

Options exercised under share option

 

 

 

 

 

 

 

 

schemes:

 

 

 

 

 

 

 

 

- Savings related share option scheme

-

5

-

-

-

5

-

5

Shares purchased

-

-

(10)

-

-

(10)

-

(10)

Shares vested

-

-

10

(33)

-

(23)

-

(23)

Employee scheme treasury shares:

 

 

 

 

 

 

 

 

- Value of employee services

-

-

-

24

-

24

-

24

Share scheme transfers to retained earnings

-

-

-

-

6

6

-

6

Dividends

-

-

-

-

(830)

(830)

-

(830)

Movement in third party interests

-

-

-

-

-

-

42

42

Currency translation differences

-

-

-

(55)

55

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2016

149

981

(30)

212

5,633

6,945

338

7,283

 

 

 

 

 

 

 

 

 

1. Capital redemption and other reserves include Share-based payments £60m (2015: £69m), Foreign exchange £135m (2015: £nil), Capital redemption £17m (2015: £17m), Available-for-sale reserves £(1)m (2015: £2m) and Hedging reserves £1m (2015: £1m).

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 34

 

Consolidated Statement of Changes in Equity (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Employee

Capital

 

Equity

 

 

 

 

 

scheme

redemption

 

attributable

Non-

 

 

Share

Share

treasury

and other

Retained

to owners

controlling

Total

 

capital

premium

shares

reserves1

earnings

of the parent

interests

equity

For the year ended 31 December 2015

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2015

149

969

(37)

117

4,830

6,028

275

6,303

Profit for the year

-

-

-

-

1,075

1,075

19

1,094

Exchange differences on translation of

 

 

 

 

 

-

 

 

overseas operations

-

-

-

25

-

25

-

25

Actuarial gains on defined benefit

 

 

 

 

 

-

 

 

pension schemes

-

-

-

-

36

36

-

36

Actuarial gains on defined benefit

 

 

 

 

 

 

 

 

pension schemes transferred to

 

 

 

 

 

 

 

 

unallocated divisible surplus

-

-

-

-

(13)

(13)

-

(13)

Net change in financial investments

 

 

 

 

 

-

 

-

designated as available-for-sale

-

-

-

(42)

-

(42)

-

(42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/(expense)

 

 

 

 

 

 

 

 

for the year

-

-

-

(17)

1,098

1,081

19

1,100

Options exercised under share option scheme:

 

 

 

 

 

 

 

 

- Savings related share option scheme

-

7

-

-

-

7

-

7

Shares purchased

-

-

(3)

-

-

(3)

-

(3)

Shares vested

-

-

10

(23)

-

(13)

-

(13)

Employee scheme treasury shares:

 

 

 

 

 

-

 

 

- Value of employee services

-

-

-

26

-

26

-

26

Share scheme transfers to retained earnings

-

-

-

-

(21)

(21)

-

(21)

Dividends

-

-

-

-

(701)

(701)

-

(701)

Movement in third party interests

-

-

-

-

-

-

(5)

(5)

Currency translation differences

-

-

-

(14)

14

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2015

149

976

(30)

89

5,220

6,404

289

6,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Capital redemption and other reserves include Share-based payments £69m, Foreign exchange £nil, Capital redemption £17m, Available-for-sale reserves £2m and Hedging reserves £1m.

 

 

 

IFRS and Release from Operations                                                                                                                Page 35

 

Consolidated Cash Flow Statement

For the year ended 31 December 2016

 

 

 

 

2016

2015

 

 

Notes

£m

£m

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Profit for the year

 

 

1,265

1,094

Adjustments for non cash movements in net profit for the year

 

 

 

 

Realised and unrealised (gains)/losses on financial investments and investment properties

 

 

(53,262)

4,077

Investment income

 

 

(9,390)

(9,760)

Interest expense

 

 

198

186

Tax expense

 

 

602

320

Other adjustments

 

 

(45)

(70)

Net (increase)/decrease in operational assets

 

 

 

 

Investments held for trading or designated as fair value through profit or loss

 

 

(9,363)

1,007

Investments designated as available-for-sale

 

 

246

158

Other assets

 

 

(2,658)

(2,594)

Net increase/(decrease) in operational liabilities

 

 

 

 

Insurance contracts

 

 

12,910

(1,083)

Transfer from unallocated divisible surplus

 

 

(232)

(90)

Investment contracts

 

 

39,747

(9,524)

Value of in-force non-participating contracts

 

 

(22)

24

Other liabilities

 

 

17,023

6,645

 

 

 

 

 

 

 

 

 

 

Cash used in operations

 

 

(2,981)

(9,610)

Interest paid

 

 

(198)

(186)

Interest received

 

 

4,863

5,286

Tax paid1

 

 

(424)

(244)

Dividends received

 

 

4,676

3,931

 

 

 

 

 

 

 

 

 

 

Net cash flows from/(used in) operating activities

 

 

5,936

(823)

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Net acquisition of plant, equipment and intangibles

 

 

(45)

(24)

Acquisitions2

 

 

-

(5)

Disposal of subsidiaries3

 

2.11

(272)

(82)

Investment in joint ventures

 

 

(63)

(71)

 

 

 

 

 

 

 

 

 

 

Net cash flows from investing activities

 

 

(380)

(182)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Dividend distributions to ordinary equity holders of the company during the year

 

2.17

(830)

(701)

Proceeds from issue of ordinary share capital

 

 

5

7

Purchase of employee scheme shares (net)

 

 

-

(8)

Proceeds from borrowings

 

 

219

697

Repayment of borrowings

 

 

(342)

(527)

 

 

 

 

 

 

 

 

 

 

Net cash flows used in financing activities

 

 

(948)

(532)

 

 

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

4,608

(1,537)

Exchange gains/(losses) on cash and cash equivalents

 

 

182

(106)

Cash and cash equivalents at 1 January (before reallocation of held for sale cash)

 

 

21,066

22,709

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (before reallocation of held for sale cash)

 

 

25,856

21,066

Cash and cash equivalents classified as held for sale

 

2.12

(139)

(389)

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at 31 December

 

 

25,717

20,677

 

 

 

 

 

 

 

 

 

 

1. Tax comprises UK corporation tax paid of £249m (2015: £128m), overseas corporate taxes of £16m (2015: £36m) and withholding tax of £159m (2015: £80m).

2. Net cash flows from acquisitions includes cash paid of £nil (2015: £5m) less cash and cash equivalents acquired of £nil (2015: £nil).

3. Net cash flows from disposals includes cash received of £144m (2015: £242m) less cash and cash equivalents disposed of £416m (2015: £324m).

 

 

 

 

 

The group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows.  The closing cash position includes £944m (2015: £856m) relating to the with-profit fund policy-holders policyholders and £20,434m (2015: £16,116m) relating to unit-linked policyholders.

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 36

 

2.08 Basis of preparation

 

The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union, and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS. The group financial statements also comply with IFRS and interpretations by the IFRS Interpretations Committee as issued by the IASB and as adopted by the European Union. The group financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, available-for-sale financial assets and financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.

 

The group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The accounting policies have been consistently applied to all years presented.

 

Financial assets and financial liabilities are disclosed gross in the Consolidated Balance Sheet unless a legally enforceable right of offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the Consolidated Income Statement unless required or permitted by any accounting standard or interpretations by the IFRS Interpretations Committee.

 

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the group's foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the group's foreign operations are translated into sterling, the group's presentation currency, at the closing rate at the date of the balance sheet. The income and expenses for each income statement are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders' equity.

 

Use of estimates

The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current circumstances and future events and actions, actual results may differ from those estimates, possibly significantly. This is particularly relevant for the determination of fair values of investment property and unquoted and illiquid financial investments and the estimation of deferred acquisition costs, tax balances and insurance and investment contract liabilities. The basis of accounting for these areas, and the significant judgements used in determining them, are outlined in the respective notes to the group's 2016 Annual Report and Accounts.

 

Key technical terms and definitions

The report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive list of these definitions is contained within the glossary of the group's 2016 Annual Report and Accounts.

 

Tax attributable to policyholders and equity holders

The total tax expense shown in the group's Consolidated Income Statement includes income tax borne by both policyholders and shareholders. This has been apportioned between that attributable to policyholders' returns and equity holders' profits. This represents the fact that the group's long-term business in the UK pays tax on policyholder investment return, in addition to the corporation tax charge charged on shareholder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes.

 

For this apportionment, the equity holders' tax on long-term business is estimated by applying the statutory tax rate to profits attributed to equity holders. This is considered to approximate the corporation tax attributable to shareholders as calculated under UK tax rules. The balance of income tax associated with UK long-term business is attributed to income tax attributable to policyholders' returns and approximates the corporation tax attributable to policyholders as calculated under UK tax rules.

 

 

2.09 Segmental analysis

 

 

Reportable segments

 

The group has six reportable segments comprising LGR, LGIM, LGC, LGI, Savings and General Insurance. Central group expenses and debt costs are reported separately.

 

LGR represents worldwide pension risk transfer business (including longevity insurance), individual retirement and lifetime mortgages.

 

The LGIM segment represents institutional and retail investment management and workplace savings businesses.

 

LGC represents shareholder assets in direct investments, and traded and treasury assets.

 

LGI represents UK retail protection, group protection and network business, Legal & General Netherlands (LGN) and protection business written in the USA (LGA). LGI comparatives include Legal & General France (LGF), which was sold during 2015.

 

Savings represents business in platforms, SIPPs, mature savings and with-profits.

 

The General Insurance segment comprises short-term protection.

 

During 2016, the Insurance (excluding General Insurance) and LGA segments (excluding General Insurance) were combined to create the new Legal & General Insurance (LGI) segment. General Insurance is now presented as a separate segment.

 

During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to LGI from Savings, and the IDOL business has been transferred to LGR from LGI. Comparatives have been amended accordingly.

 

Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.

 

 

 

IFRS and Release from Operations                                                                                                                Page 37

 

2.09 Segmental analysis (continued)

(a) Profit/(loss) for the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

 

 

expenses

 

 

 

 

 

 

 

General

and debt

 

 

LGR1

LGIM

LGC

LGI1

Savings1

Insurance

costs

Total

For the year ended 31 December 2016

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

811

366

257

317

99

52

(340)

1,562

Investment and other variances2

36

(32)

162

(123)

(51)

16

5

13

Gains attributable to non-controlling interests

-

-

-

-

-

-

7

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before tax attributable to

 

 

 

 

 

 

 

 

equity holders

847

334

419

194

48

68

(328)

1,582

Tax (expense)/credit attributable to equity holders of the company

(149)

(68)

(52)

(71)

(22)

(13)

58

(317)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the year

698

266

367

123

26

55

(270)

1,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

 

 

expenses

 

 

 

 

 

 

 

General

and debt

 

 

LGR1

LGIM

LGC

LGI1

Savings1

Insurance

costs

Total

For the year ended 31 December 2015

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

641

355

233

315

107

51

(247)

1,455

Investment and other variances2

78

(20)

(116)

(44)

3

(8)

(12)

(119)

Gains attributable to non-controlling interests

-

-

-

-

-

-

19

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before tax attributable to

 

 

 

 

 

 

 

 

equity holders

719

335

117

271

110

43

(240)

1,355

Tax (expense)/credit attributable to equity holders of the company

(131)

(74)

(9)

(93)

(16)

(8)

70

(261)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the year

588

261

108

178

94

35

(170)

1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. During 2016, changes have been made to the organisational structure. The advised sales and India businesses have been transferred to LGI from Savings, and the IDOL business has been transferred to LGR from LGI. Comparatives have been amended accordingly. The impact of the reclassification has been to increase LGR 2015 operating profit by £2m and profit before tax by £1m, increase Savings 2015 operating profit by £8m and profit before tax by £8m, and reduce Insurance 2015 operating profit by £10m and profit before tax by £9m.

2. 2016 Investment and other variances - Savings includes the £60m net loss resulting from the disposal of subsidiaries during the period (2015: LGI and Savings include the £43m loss and £18m gain respectively resulting from the disposal of subsidiary and joint venture investments during the year).

 

 

 

IFRS and Release from Operations                                                                                                                Page 38

 

2.09 Segmental analysis (continued)

(b) Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC

 

 

 

 

 

 

General

and

 

 

LGR1

LGIM

LGI1

Savings1

Insurance

other2

Total

For the year ended 31 December 2016

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal income

-

270

-

-

-

(270)

-

External income

13,851

49,856

2,237

4,362

326

7,337

77,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

13,851

50,126

2,237

4,362

326

7,067

77,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC

 

 

 

 

 

 

General

and

 

 

LGR1

LGIM

LGI1,3

Savings1

Insurance

other2

Total

For the year ended 31 December 2015

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal income

-

267

-

-

-

(267)

-

External income

2,554

5,514

2,516

2,473

349

(705)

12,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

2,554

5,781

2,516

2,473

349

(972)

12,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to LGI from Savings, and the IDOL business has been transferred to LGR from LGI. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR 2015 external income by £26m, reduce Savings 2015 external income by £5m and reduce LGI 2015 external income by £21m.

2. LGC and other includes LGC, inter-segmental eliminations and group consolidation adjustments.

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 39

 

2.10 Earnings per share

(a) Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted

Adjusted

 

 

Adjusted

Adjusted

 

Profit

Earnings

profit

earnings

Profit

Earnings

profit

earnings

 

after tax

per share1

after tax

per share1,2

after tax

per share1

after tax

per share1,2

 

2016

2016

2016

2016

2015

2015

2015

2015

 

£m

p

£m

p

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit after tax

1,244

20.98

1,244

20.98

1,142

19.29

1,142

19.29

Investment and other variances

14

0.24

72

1.22

(67)

(1.13)

(42)

(0.71)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share based on profit

 

 

 

 

 

 

 

 

attributable to equity holders

1,258

21.22

1,316

22.20

1,075

18.16

1,100

18.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Earnings per share is calculated by dividing profit after tax derived from continuing operations by the weighted average number of ordinary shares in issue during the period, excluding employee scheme treasury shares.

2. Adjusted earnings per share has been calculated after excluding the net loss after tax, £58m, resulting from the disposal of Suffolk Life and the classification of Cofunds as held for sale (2015: excluding the £25m net loss after tax resulting from the disposal of subsidiary and joint venture investments).

 

 

(b) Diluted earnings per share

 

 

 

 

 

 

 

Adjusted

Adjusted

 

 

 

 

Number

Profit

Earnings

 profit

earnings

 

 

 

 

of shares

after tax

per share1

after tax

per share1,2

 

 

 

 

2016

2016

2016

2016

2016

 

 

 

 

m

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the company

5,929

1,258

21.22

1,316

22.20

Net shares under options allocable for no further consideration

24

-

(0.09)

-

(0.09)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

5,953

1,258

21.13

1,316

22.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted

Adjusted

 

 

 

 

Number

Profit

Earnings

 profit

earnings

 

 

 

 

of shares

after tax

per share1

after tax

per share1,2

 

 

 

 

2015

2015

2015

2015

2015

 

 

 

 

m

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the company

5,920

1,075

18.16

1,100

18.58

Net shares under options allocable for no further consideration

38

-

(0.12)

-

(0.12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

5,958

1,075

18.04

1,100

18.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees.

2. Adjusted earnings per share has been calculated after excluding the net loss after tax, £58m, resulting from the disposal of Suffolk Life and the classification of Cofunds as held for sale (2015: excluding the £25m net loss after tax resulting from the disposal of subsidiary and joint venture investments).

 

 

 

IFRS and Release from Operations                                                                                                                Page 40

 

2.11 Disposals

 

During 2016, the group made the following disposals:

 

- Suffolk Life Group Limited was sold to Curtis Banks Group plc for £45m (excluding transaction costs). The carrying value of the investment was £40m, realising a profit on disposal of £5m (excluding transaction costs) reported in operational income in the Consolidated Income Statement. The disposal of Suffolk Life Group Limited was not classified as a discontinued operation as it does not represent a major line of business or geographical segment of the group.

 

 - The investment in ABI Alpha Limited was sold to a management buyout led by CBPE Capital with cash proceeds for the group's investment of £29m. The carrying value of the investment was £23m, realising a profit on disposal of £6m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.

 

 - Air Energi is no longer controlled by the group following its merger with Swift WWR to create Airswift. The group now holds less than 50% of Airswift and therefore has classified the investment as an associate, included in financial investments. The investment has been revalued to fair value, increasing the carrying value of the investment by £13m which has been reported in operational income in the Consolidated Income Statement. The majority of the profit on merger is allocated to the with-profits fund.

 

- The investment in The Liberation Group was sold to Caledonia Investments Plc with cash proceeds for the group's investment of £70m. The carrying value of the investment was £68m, realising a profit on disposal of £2m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.

 

- On 2 December 2016 the group transferred its portfolio of insurance and investment contracts originated by Legal & General Deutschland (LGD) to Canada Life Europe (CLAE) via a Part VII transfer. £120m of insurance liabilities together with the financial assets held to back them were transferred, and no consideration was received for the transfer. There has been no impact on profit.

 

 

 

IFRS and Release from Operations                                                                                                                Page 41

 

2.12 Held for sale

 

In November, the group reached an agreement in principle with Chesnara plc (Chesnara) to sell Legal & General Netherland Levensvervekering Maatschappij N.V. (LGN) to Chesnara for €160million.

 

On 1 January 2017, the group completed the disposal of Cofunds Limited (Cofunds) to Aegon for £147.5m, before transaction costs. The sale included the Investor Portfolio Service (IPS) platform as well as Cofunds' retail and institutional business.

 

Accordingly, the assets and liabilities of LGN and Cofunds have been assessed separately as disposal groups and have been classified as held for sale as at 31 December 2016. An impairment loss arising on classification of Cofunds as held for sale of £64m is recognised in other expenses in the Consolidated Balance Sheet. Cofunds forms part of the Savings segment in note 2.09.

 

Neither LGN nor Cofunds is considered to be a discontinued operation as neither represent a major line of business or geographical segment of the group.

In addition, two investment properties with a combined valuation of £91m have been classified as held for sale as we have entered into advanced sale negotiations.

 

 

 

 

 

 

 

2016

20151

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets classified as held for sale

 

 

 

 

 

 

Purchased interest in long term business and other intangible assets

 

 

85

28

DAC

 

 

 

 

 

 

12

-

Property, plant and equipment

 

 

 

 

 

 

11

1

Investment property

 

 

 

 

 

 

95

1,140

Financial investments

 

 

1,861

1,801

Reinsurers' share of contract liabilities

 

 

 

 

 

 

1

39

Cash and cash equivalents

 

 

 

 

 

 

139

389

Other assets2

 

 

62

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets of the disposal groups

 

 

 

2,266

3,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities classified as held for sale

 

 

 

Insurance contract liabilities

 

 

 

1,709

-

Investment contract liabilities

 

 

 

 

 

 

-

3,235

Operational borrowings

 

 

 

 

 

 

-

102

Tax liabilities

 

 

 

 

 

 

26

5

Payables and other financial liabilities

 

 

 

 

 

 

28

10

Other liabilities2

 

 

147

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities of the disposal groups

 

 

1,910

3,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net assets of the disposal groups

 

 

356

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. At 2015, Suffolk Life Group Limited was classified as held for sale.

2. Included in other assets is £1m, and in other liabilities, £88m, which are balances with other group entities which are eliminated on the Consolidated Balance Sheet.

 

2.13 Post balance sheet events

 

On 1 January 2017 the group sold Cofunds Limited to Aegon. The sale includes the Investor Portfolio Services (IPS) platform as well as Cofunds' retail and institutional business. The assets and liabilities of Cofunds Limited have been assessed as a disposal group and have been classified as held for sale as at 31 December 2016. 

 

 

 

IFRS and Release from Operations                                                                                                                Page 42

 

2.14 Financial investments and investment property

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

 

 

 

 

 

191,025

166,892

Unit trusts

 

 

 

 

 

 

6,969

6,021

Debt securities1

 

 

 

 

 

 

204,970

169,720

Accrued interest

 

 

 

 

 

 

1,528

1,456

Derivative assets2

 

 

 

 

 

 

13,121

9,509

Loans and receivables

 

 

 

 

 

 

562

465

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial investments

 

 

 

 

 

 

418,175

354,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment property3

 

 

 

 

 

 

8,150

8,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total financial investments and investment property

 

 

 

426,325

362,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. A detailed analysis of debt securities, which shareholders are directly exposed to, is disclosed in note 4.06.

2. Derivatives are used to ensure efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities and include £8,294m (2015: £5,795m) held on behalf of unit linked policyholders.

3. A detailed analysis of investment property, which shareholders are directly exposed to, is disclosed in note 4.07.

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 43

 

2.15 Tax

(a) Tax charge in the Consolidated Income Statement

 

The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax attributable to equity holders

 

 

 

 

1,582

1,355

Tax calculated at 20.00% (2015: 20.25%)

 

 

 

 

316

274

 

 

 

 

 

 

 

 

 

Adjusted for the effects of:

 

 

 

 

 

 

 

 

Recurring reconciling items:

 

 

 

 

 

 

 

 

Income not subject to tax

 

 

 

 

(12)

(11)

Higher/(lower) rate of tax on profits taxed overseas

 

 

 

 

 

7

16

Non-deductible expenses/(additional allowances)

 

 

 

 

 

4

(8)

Differences between taxable and accounting investment gains

 

(11)

(3)

 

 

 

 

 

 

 

 

 

Non-recurring reconciling items:

 

 

 

 

 

 

 

 

Income not subject to tax

 

 

 

 

(1)

-

Non-deductible expenses1

 

17

4

Differences between taxable and accounting investment gains2

 

(14)

(7)

Adjustments in respect of prior years

 

13

(5)

Impact of reduction in UK corporate tax rate to 17% from 2020 on deferred tax balances3

 

(2)

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax attributable to equity holders

 

 

 

 

 

 

317

261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity holders' effective tax rate4

 

 

 

 

 

 

20.0%

19.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Includes costs relating to M&A activity which are non-deductible for tax purposes.

2. £14m relates to a deferred tax asset recognised on losses crystallised in the year.

3. Following the 2016 Finance Act, the rate of corporation tax will reduce progressively to 17% by 1 April 2020. The 19% rate will apply from 1 April 2017 and the 17% rate from 1 April 2020 onwards. The enacted rates of 20-17% have been used in the calculation of UK deferred tax assets and liabilities.

4. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders. Refer to note 2.08 for detail on the methodology of the split of policyholder and equity holders' tax.

 

 

 

IFRS and Release from Operations                                                                                                                Page 44

 

2.15 Tax

(b) Deferred tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

Deferred tax (liabilities)/assets

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred acquisition expenses

(429)

(359)

   - UK

 

 

 

 

 

 

(45)

(51)

   - Overseas

 

 

 

 

 

 

(384)

(308)

Difference between the tax and accounting value of insurance contracts

(286)

(324)

   - UK

 

 

 

 

 

 

(123)

(83)

   - Overseas

 

 

 

 

 

 

(163)

(241)

Realised and unrealised gains on investments

 

(255)

(154)

Excess of depreciation over capital allowances

 

15

18

Excess expenses1

 

49

74

Accounting provisions and other

 

(51)

(19)

Trading losses2

 

80

165

Pension fund deficit

 

 

 

82

72

Purchased interest in long-term business

 

 

 

(13)

(26)

 

 

 

 

 

 

 

 

 

Net deferred tax liabilities

 

(808)

(553)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Presented on the Consolidated Balance Sheet as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 - UK deferred tax asset3

 

 

 

 

5

20

 - UK deferred tax liability3

 

(291)

(137)

 - Overseas deferred tax liability4

 

(522)

(436)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The reduction in the UK deferred tax asset on excess expenses reflects the unwind of the spread acquisition expenses.

2. Trading losses include UK trade and US operating losses of £5m (2015: £6m) and £75m (2015: £159m) respectively. The reduction in the deferred tax asset primarily reflects utilisation of brought forward US operating losses against US profits.

3. On the Consolidated Balance Sheet, the net UK deferred tax liability has been split between an asset of £5m and a liability of £291m where the relevant items cannot be offset.

4. Overseas deferred tax liability is wholly comprised of US balances as at 31 December 2016 (2015: US £424m; LGN £12m).

 

 

 

IFRS and Release from Operations                                                                                                                Page 45

 

2.16 Payables and other financial liabilities

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

 

 

 

9,014

8,047

Repurchase agreements1

 

 

 

 

 

 

23,163

13,343

Other2

 

 

 

 

 

 

5,170

1,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payables and other financial liabilities

 

 

 

 

 

37,347

22,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due within 12 months

 

 

 

 

 

 

34,517

20,027

Due after 12 months

 

 

 

 

 

 

2,830

2,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements.

2. Other financial liabilities include obligations in respect of collateral received from derivative contracts of £2.7bn (2015: £0.1bn). Other also includes the present value of future commission costs which have contingent settlement provisions of £177m (2015: £175m).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value hierarchy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortised

 

 

 

 

Total

Level 1

Level 2

Level 3

cost

As at 31 December 2016

 

 

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

9,014

884

8,130

-

-

Repurchase agreements

 

 

 

23,163

-

-

-

23,163

Other

 

 

 

5,170

806

8

177

4,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payables and other financial liabilities

 

 

37,347

1,690

8,138

177

27,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortised

 

 

 

 

Total

Level 1

Level 2

Level 3

cost

As at 31 December 2015

 

 

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

8,047

1,451

6,596

-

-

Repurchase agreements

 

 

 

13,343

-

-

-

13,343

Other

 

 

 

1,319

5

12

175

1,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payables and other financial liabilities

 

 

22,709

1,456

6,608

175

14,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future commission costs are modelled using expected cash flows, incorporating expected future persistency. They have therefore been classified as level 3 liabilities. The entire movement in the balance has been reflected in the Consolidated Income Statement during the year. A reasonably possible alternative persistency assumption would have the effect of increasing the liability by £5m (2015: £6m).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Significant transfers between levels

 

There have been no significant transfers between levels 1, 2 and 3 for the year ended 31 December 2016 (2015: no significant transfers between levels 1, 2 and 3).

 

 

 

IFRS and Release from Operations                                                                                                                Page 46

 

2.17 Dividends 

 

 

 

 

 

 

Per

 

Per

 

 

 

 

 

Dividend

share1

Dividend

share1

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary share dividends paid in the year:

 

 

 

 

 - Prior year final dividend

 

 

 

 

592

9.95

496

8.35

 - Current year interim dividend

 

 

 

 

238

4.00

205

3.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

830

13.95

701

11.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary share dividend proposed2

 

 

 

 

616

10.35

592

9.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.

2. The dividend proposed is not included as a liability in the Consolidated Balance Sheet.

 

 

2.18 Share capital

 

(i) Share capital and share premium

 

 

 

 

 

2016

 

 

2015

 

 

 

 

 

Number of

2016

 

Number of

2015

Authorised share capital

 

shares

£m

 

shares

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December: ordinary shares of 2.5p each

9,200,000,000

230

9,200,000,000

230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

Share

 

 

 

 

 

 

Number of

capital

premium

Issued share capital, fully paid

 

 

 

 

 

shares

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2016

 

 

 

 

5,948,788,480

149

976

Options exercised under share option schemes:

 

 

 

 

 

- Savings related share option scheme

 

 

 

 

5,867,986

-

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2016

 

 

 

 

5,954,656,466

149

981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

Share

 

 

 

 

 

 

Number of

capital

premium

Issued share capital, fully paid

 

 

 

 

 

shares

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2015

 

 

 

 

5,942,070,229

149

969

Options exercised under share option schemes:

 

 

 

 

 

- Savings related share option scheme

 

 

 

 

6,718,251

-

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2015

 

 

 

 

5,948,788,480

149

976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.

 

 

 

 

 

 

 

 

 

The holders of the company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company.

 

 

 

IFRS and Release from Operations                                                                                                                Page 47

 

2.19 Core Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

Fair

Carrying

Fair

 

 

 

 

amount

value

amount

value

 

 

 

 

2016

2016

2015

2015

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated borrowings

 

 

 

 

 

 

 

6.385% Sterling perpetual capital securities (Tier 1)

 

 

 

615

609

637

631

5.875% Sterling undated subordinated notes (Tier 2)

 

 

 

411

418

413

426

10% Sterling subordinated notes 2041 (Tier 2)

 

 

 

310

403

310

398

5.5% Sterling subordinated notes 2064 (Tier 2)

 

 

 

589

603

589

570

5.375% Sterling subordinated notes 2045 (Tier 2)

 

 

 

602

627

602

611

Client fund holdings of group debt1

 

 

 

(31)

(31)

(26)

(27)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total subordinated borrowings

 

 

 

2,496

2,629

2,525

2,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior borrowings

 

 

 

 

 

 

 

Sterling medium term notes 2031-2041

 

 

 

609

845

609

779

Client fund holdings of group debt1

 

 

 

(34)

(34)

(42)

(54)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total senior borrowings

575

811

567

725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total core borrowings

3,071

3,440

3,092

3,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All of the group's core borrowings are measured using amortised cost. The presented fair values of the group's core borrowings reflect quoted prices in active markets and they are classified as level 1 in the fair value hierarchy.

 

Subordinated borrowings

 

6.385% Sterling perpetual capital securities

In 2007, Legal & General Group Plc issued £600m of 6.385% Sterling perpetual capital securities. These securities are callable at par on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset to three month LIBOR plus 1.93% pa. For Solvency II purposes these securities are treated as tier 1 own funds.

 

5.875% Sterling undated subordinated notes

In 2004, Legal & General Group Plc issued £400m of 5.875% Sterling undated subordinated notes. These notes are callable at par on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019 will be reset to the prevailing five year benchmark gilt yield plus 2.33% pa. These notes are treated as tier 2 own funds for Solvency II purposes.

 

10% Sterling subordinated notes 2041

In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. The notes are callable at par on 23 July 2021 and every five years thereafter. If not called, the coupon from 23 July 2021 will be reset to the prevailing five year benchmark gilt yield plus 9.325% pa. These notes mature on 23 July 2041. They are treated as tier 2 own funds for Solvency II purposes.

 

5.5% Sterling subordinated notes 2064

In 2014, Legal & General Group Plc issued £600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June 2044 and every five years thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% pa. These notes mature on 27 June 2064. They are treated as tier 2 own funds for Solvency II purposes.

 

5.375% Sterling subordinated notes 2045

On 27 October 2015, Legal & General Group Plc issued £600m of 5.375% dated subordinated notes. The notes are callable at par on 27 October 2025 and every five years thereafter. If not called, the coupon from 27 October 2025 will be reset to the prevailing five year benchmark gilt yield plus 4.58% pa. These notes mature on 27 October 2045. They are treated as tier 2 own funds for Solvency II purposes.

 

 

 

IFRS and Release from Operations                                                                                                                Page 48

 

2.20 Operational borrowings

 

 

 

 

 

Carrying

Fair

Carrying

Fair

 

 

 

 

amount

value

amount

value

 

 

 

 

2016

2016

2015

2015

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short term operational borrowings

 

 

 

 

Euro Commercial paper

 

 

 

216

216

15

15

Bank loans and overdrafts

 

 

 

6

6

2

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total short term operational borrowings

222

222

17

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non recourse borrowings

 

 

 

 

 

 

 

US Dollar Triple X securitisation 2037

 

 

 

-

-

302

258

Suffolk Life unit linked borrowings1

 

 

 

-

-

-

-

LGV 6/LGV 7 Private Equity Fund Limited Partnership

-

-

98

98

Consolidated Property Limited Partnerships

208

208

184

184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non recourse borrowings

208

208

584

540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group holding of operational borrowings2

 

 

 

-

-

(65)

(56)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operational borrowings

430

430

536

501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Group investments in operational borrowings have been eliminated from the Consolidated Balance Sheet.

 

 

 

 

 

 

 

 

 

The presented fair values of the group's operational borrowings reflect observable market information and have been classified as level 2 in the fair value hierarchy.

 

Short term operational borrowings

 

Short term assets available at the holding company level exceeded the amount of the non-unit linked short term operational borrowings of £216m (2015: £15m). Short term operational borrowings comprise Euro Commercial paper, bank loans and overdrafts.

 

Non recourse borrowings

 

US Dollar Triple X securitisation 2037

In 2006, a subsidiary of LGA issued US$450m of non recourse debt in the US capital markets to meet the Triple X reserve requirements of part of the US term insurance written after 2005 and 2006. It was secured on the cash flows related to that tranche of business. On 15 June 2016, this securitisation was redeemed at par.

 

LGV 6/LGV 7 Private Equity Fund Limited Partnerships

These borrowings were non recourse bank borrowings.

 

Consolidated Property Limited Partnerships

These borrowings are non recourse bank borrowings.

 

Syndicated credit facility

 

As at 31 December 2016, the group had in place a £1.00bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2021. No amounts were outstanding at 31 December 2016.

 

 

 

IFRS and Release from Operations                                                                                                                Page 49

 

2.21 Insurance contract liabilities

(a) Analysis of insurance contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-

 

Re-

 

 

 

 

 

Gross

insurance

Gross

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

Notes

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating insurance contracts

 

 

2.21(b)(iii)

5,794

(1)

5,618

(1)

Non-participating insurance contracts

 

 

2.21(c)(iv)

60,511

(5,297)

49,470

(3,861)

General insurance contracts

 

 

2.21(v)

268

(9)

284

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance contract liabilities

 

 

 

66,573

(5,307)

55,372

(3,870)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the year, the group continued utilising prospective reinsurance arrangements which resulted in a profit of £535m (2015: £503m). This profit has been reflected in the Consolidated Income Statement for the year and arises from new reinsurance arrangements or the reinsurance of new business under existing arrangements.

 

 

(b) Movement in participating insurance contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-

 

Re-

 

 

 

 

 

Gross

insurance

Gross

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January             

 

 

 

5,618

(1)

6,579

(1)

New liabilities in the year

 

 

 

40

-

52

-

Liabilities discharged in the year

 

 

 

(749)

-

(977)

-

Unwinding of discount rates

 

 

 

27

-

40

-

Effect of change in non-economic assumptions

 

 

 

(3)

-

5

-

Effect of change in economic assumptions

 

 

 

642

-

81

-

Disposals1

 

 

 

-

-

(171)

-

Modelling and methodology changes

 

 

 

 

202

-

-

-

Other

 

 

 

17

-

9

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December

 

 

 

 

5,794

(1)

5,618

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Reflects the disposal of Legal & General France during 2015.

 

 

(c) Movement in non-participating insurance contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-

 

Re-

 

 

 

 

 

Gross

insurance

Gross

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January             

 

 

 

49,470

(3,861)

49,589

(2,587)

New liabilities in the year

 

 

 

6,273

(613)

2,866

(768)

Liabilities discharged in the year

 

 

 

(2,890)

86

(2,744)

(39)

Unwinding of discount rates

 

 

 

1,574

(129)

1,451

(93)

Effect of change in non-economic assumptions

 

 

 

51

(43)

(384)

157

Effect of change in economic assumptions

 

 

 

6,870

(546)

(1,335)

(513)

Foreign exchange adjustments

 

 

 

795

(66)

27

(18)

Transfer of liabilities classified as held for sale

 

 

 

(1,709)

1

-

-

Modelling and methodology changes

 

 

 

 

61

(127)

-

-

Other

 

 

 

16

1

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December

 

 

 

 

60,511

(5,297)

49,470

(3,861)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 50

 

2.22 Investment contract liabilities

(a) Analysis of investment contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-

 

Re-

 

 

 

 

 

Gross

insurance

Gross

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

Note

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating investment contracts

 

 

 

5,271

-

4,912

-

Non-participating investment contracts

 

 

 

321,177

(286)

278,554

(250)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment contract liabilities

 

 

2.22(b)

 

326,448

(286)

283,466

(250)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

(b) Movement in investment contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-

 

Re-

 

 

 

 

 

Gross

insurance

Gross

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January             

 

 

 

 

283,466

(250)

296,225

(310)

Reserves in respect of new business

 

 

27,832

(27)

37,639

(598)

Amounts paid on surrenders and maturities during the year

 

 

(43,217)

35

(46,557)

164

Investment return and related benefits

 

 

 

58,622

(44)

5,160

455

Management charges

 

 

 

 

(251)

-

(303)

-

Foreign exchange adjustments

 

 

-

-

(162)

-

Disposals1

 

 

-

-

(5,321)

-

Transfer to held for sale

 

 

 

 

-

 

(3,235)

39

Other

 

 

 

 

(4)

-

20

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December

 

 

 

 

326,448

(286)

283,466

(250)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Reflects the disposal of Legal & General France and Legal & General International (Ireland) during 2015.

 

 

 

IFRS and Release from Operations                                                                                                                Page 51

 

2.23 IFRS sensitivity analysis

 

 

 

 

 

 

Impact on

 

Impact on

 

 

 

 

 

 

pre-tax

Impact on

pre-tax

Impact on

 

 

 

 

 

group profit

group equity

group profit

group equity

 

 

 

 

 

net of re-

net of re-

net of re-

net of re-

 

 

 

 

 

insurance

insurance

insurance

insurance

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic sensitivity

 

 

 

 

 

 

 

 

Long-term insurance

 

 

 

 

 

 

 

 

100bps point increase in interest rates

 

 

 

 

173

42

48

(36)

100bps point decrease in interest rates

 

 

 

 

(280)

(120)

(168)

(49)

 

 

 

 

 

 

 

 

 

100bps point increase in long term inflation expectations

 

 

(90)

(72)

(38)

(31)

 

 

 

 

 

 

 

 

 

Credit spread widens by 100bps with no change in expected defaults

(19)

(100)

(102)

(138)

10% decrease in listed equities

 

 

 

 

(127)

(164)

(124)

(103)

10% fall in property values

 

 

 

 

(116)

(102)

(81)

(65)

 

 

 

 

 

 

 

 

 

10bps increase in credit default assumption

 

 

 

(426)

(339)

(324)

(258)

10bps decrease in credit default assumption

 

 

 

437

348

366

292

 

 

 

 

 

 

 

 

 

Non-economic sensitivity

 

 

 

 

 

 

 

 

Long-term insurance

 

 

 

 

 

 

 

 

1% decrease in annuitant mortality

 

 

 

 

(200)

(202)

(132)

(105)

5% increase in assurance mortality

 

 

 

 

(62)

(47)

(64)

(49)

General insurance

 

 

 

 

 

 

 

 

Single storm event with 1 in 200 year probability

 

 

 

(62)

(50)

(67)

(54)

Subsidence event - worst claims ratio in last 30 years

 

 

 

(61)

(49)

(72)

(57)

 

 

 

 

 

 

 

 

 

 

The table shows the impacts on group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario. The shareholders' share of with-profit bonus declared in the year is relatively insensitive to market movements due to the smoothing policies applied.

 

The interest rate sensitivity assumes a 100bps change in the gross redemption yield on fixed interest securities together with a 100bps change in the real yields on variable securities. For the UK with-profit funds, valuation interest rates are assumed to move in line with market yields adjusted to allow for the impact of PRA regulations. The interest rate sensitivities reflect the impact of the regulatory restrictions on the reinvestment rate used to value the liabilities of the long term business. No yield floors have been applied in the estimation of the stresses, despite the current low interest rate environment.

 

Interest rate and inflation expectation have historically shown positive correlation and have therefore been presented next to each other.

 

The inflation stress adopted is a 100bps pa increase in inflation resulting in a 100bps pa reduction in real yield and no change to the nominal yield. In addition the expense inflation rate is increased by 100bps pa.

 

In the sensitivity for credit spreads, corporate bond yields have increased by 100bps, gilt and approved security yields are unchanged, and there has been no adjustment to the default assumptions.

 

The equity stress is a 10% fall in listed equity market values. The property stress adopted is a 10% fall in property market value. Rental income is assumed to be unchanged; however the vacant possession value is stressed down by 10% in line with the market value stress. Where property is being used to back liabilities, the valuation interest rate used to place a value on the liabilities moves with the implied change in property yields.

 

The annuitant mortality stress is a 1% reduction in the mortality rates for immediate and deferred annuitants with no change to the mortality improvement rates. The assurance mortality stress represents an increase in mortality/morbidity rates for assurance contracts by 5%.

 

The credit default stress assumes a +/-10bps stress to the current credit default assumption for unapproved corporate bonds which will have an impact on the valuation interest rates used to discount liabilities. The credit default assumption is set based on the credit rating of the individual bonds in the asset portfolio and their outstanding term using Moody's global credit default rates.

 

For any single event with claims in excess of £30m (2015: £30m) but less than £509m (2015: £496m) the ultimate cost to Legal & General Insurance Limited would be £30m plus 50% of the £5m XS £30m layer (2015: £30m plus 50% of the £5m XS £30m layer) plus the cost of the reinsurance reinstatement premium. The ultimate cost to the group is greater as a proportion of the catastrophe reinsurance cover is placed with Legal & General Assurance Society Limited, which is exposed to 75% of claims between £35m and £100m, 75% of claims between £100m and £250m and 45% of claims between £250m and £478m.  The impact of a 1 in 500 year modelled windstorm and coastal flood event would exceed the upper limit of the catastrophe cover by approximately £280m (2015: £270m), with an estimated total cost to Legal & General Insurance Limited of £335m (2015: £330m) and to the group of £590m (2015: £563m).

 

The above sensitivity analyses do not reflect management actions which could be taken to reduce the impacts. The group seeks to actively manage its asset and liability position. A change in market conditions may lead to changes in the asset allocation or charging structure which may have a more, or less, significant impact on the value of the liabilities. The analyses also ignore any second order effects of the assumption change, including the potential impact on the group asset and liability position and any second order tax effects. In calculating the alternative values, all other assumptions are left unchanged, though in practice, items may be correlated. The sensitivity of the profit and equity to changes in assumptions may not be linear. These results should not be extrapolated to changes of a much larger order, which could be significantly more or less than the amounts shown above.

 

 

 

IFRS and Release from Operations                                                                                                                Page 52

 

2.24 Non-controlling interests

 

Non-controlling interests represent third party interests in direct equity investments as well as investments in private equity and property investment vehicles which are consolidated in the group's results. The majority of the non-controlling interests in 2016 are in relation to investments in the Leisure Fund Unit Trust, the Performance Retail Unit Trust, the Legal & General UK Property Ungeared Fund Limited Partnership, and Thorpe Park Developments Limited.

 

 

2.25 Foreign exchange rates

 

Principal rates of exchange used for translation are:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period end exchange rates

 

 

 

 

 

 

At 31.12.16

At 31.12.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Dollar

 

 

 

 

 

 

1.24

1.47

Euro

 

 

 

 

 

 

1.17

1.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01.01.16 -

01.01.15 -

Average exchange rates

 

 

 

 

 

 

31.12.16

31.12.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Dollar

 

 

 

 

 

 

1.36

1.53

Euro

 

 

 

 

 

 

1.22

1.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.26  Related party transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no material transactions between key management and the Legal & General group of companies during the period. All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. Contributions to the post-employment defined benefit plans were £75m (2015: £93m) for all employees.

 

 

 

 

 

 

 

 

 

At 31 December 2016 and 31 December 2015 there were no loans outstanding to officers of the company.

 

 

 

 

 

 

 

 

 

Key management personnel compensation

 

 

 

 

 

 

 

The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

 

 

 

 

 

9

10

Social security costs

 

 

 

 

 

 

2

2

Post-employment benefits

 

 

 

 

 

 

-

1

Share-based incentive awards

 

 

 

 

 

 

5

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key management personnel compensation

 

 

 

 

 

16

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of key management personnel

 

 

 

 

 

 

15

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS and Release from Operations                                                                                                                Page 53

 

2.27 Provisions

(a) Analysis of provisions

 

 

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

1,239

1,131

Other provisions

 

 

 

 

 

 

89

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,328

1,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Retirement benefit obligations

 

 

 

 

 

 

 

 

 

 

 

Fund and

 

Fund and

 

 

 

 

 

 

Scheme

Overseas

Scheme

Overseas

 

 

 

 

 

2016

2016

2015

2015

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross pension obligations included in provisions

(1,234)

(5)

(1,126)

(5)

Annuity obligations insured by Society

 

779

-

746

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross defined benefit pension deficit

 

 

(455)

(5)

(380)

(5)

Deferred tax on defined benefit pension deficit

 

81

1

72

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net defined benefit pension deficit

 

 

(374)

(4)

(308)

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme are defined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributions to, such arrangements. The schemes were closed to future accrual on 31 December 2015. At 31 December 2016, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at £374m (2015: £308m). These amounts have been recognised in the financial statements with £236m charged against shareholder equity (2015: £194m) and £138m against the unallocated divisible surplus (2015: £114m).

 

2.28 Contingent liabilities, guarantees and indemnities

 

Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance between actual experience from that assumed may result in those liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the interpretation of policyholder contracts, or the circumstances in which policyholders have entered into them. The extent of these liabilities is influenced by a number of factors including the actions and requirements of the PRA, FCA, ombudsman rulings, industry compensation schemes and court judgments.

 

Various group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant members of the group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with certainty, the extent and the timing of the financial impact of these claims, litigation or issues.

 

In 1975, Legal & General Assurance Society Limited (the Society) was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee in respect of policies issued through the ILU's Policy Signing Office on behalf of NRG Victory Reinsurance Company Ltd (Victory), a company which was then a subsidiary of the Society. In 1990, Nederlandse Reassurantie Groep Holding NV (the assets and liabilities of which have since been assumed by Nederlandse Reassurantie Groep NV under a statutory merger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Society may have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would not apply to policies written or renewed after the acquisition. Nederlandse Reassurantie Groep NV is now owned by Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. Whether the Society has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability is uncertain. The Society has made no payment or provision in respect of this matter.

 

Group companies have given warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of group companies in support of their business activities including Pension Protection Fund compliant guarantees in respect of certain group companies' liabilities under the group pension fund and scheme. LGAS has provided indemnities, a liquidity and expense risk agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group's matching adjustment reorganisation pursuant to Solvency II.

 

 

 

IFRS and Release from Operations                                                                                                                Page 54

 

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Asset and premium flows                                                                                                                               Page 55

 

3.01 Legal & General investment management total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

 

 

 

 

 

 

 

fixed

Solu-

Real

Active

Total

Advisory

Total

For the year

 

Index

income

tions1

assets

equities

AUM

assets

assets

ended 31 December 2016

 

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

 

274.3

106.8

338.2

18.3

8.5

746.1

10.5

756.6

External inflows7

 

35.2

10.8

19.9

1.4

-

67.3

-

67.3

External outflows7

 

(45.0)

(6.5)

(12.4)

(1.2)

(0.2)

(65.3)

-

(65.3)

Overlay/advisory net flows

 

-

-

27.2

-

-

27.2

(5.4)

21.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows3

 

(9.8)

4.3

34.7

0.2

(0.2)

29.2

(5.4)

23.8

Internal net flows

 

(0.3)

1.5

-

0.7

0.1

2.0

-

2.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

(10.1)

5.8

34.7

0.9

(0.1)

31.2

(5.4)

25.8

Cash management movements5

 

-

(0.7)

-

-

-

(0.7)

-

(0.7)

Market and other movements3,7

 

55.6

22.9

39.0

0.4

(0.3)

117.6

2.7

120.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 20166

 

319.8

134.8

411.9

19.6

8.1

894.2

7.8

902.0

 

 

 

 

 

 

 

 

 

 

Assets attributable to:

 

 

 

 

 

 

 

 

 

External

 

 

 

 

 

 

796.7

7.8

804.5

Internal

 

 

 

 

 

 

97.5

-

97.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets attributable to:

 

 

 

 

 

 

 

 

 

UK

 

 

 

 

 

 

716.8

-

716.8

International

 

 

 

 

 

 

177.4

7.8

185.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

 

 

 

 

 

 

 

 

fixed

Solu-

Real

Active

Total

Advisory

Total

 

For the year ended

 

Index

income

tions1

assets

equities

AUM

assets

assets

 

31 December 2015

 

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

 

274.8

102.9

293.3

14.5

8.2

693.7

14.8

708.5

 

External inflows2,7

 

33.4

12.0

23.1

1.6

-

70.1

 

70.1

 

External outflows7

 

(38.8)

(4.3)

(6.6)

(0.9)

-

(50.6)

 

(50.6)

 

Overlay/advisory net flows

 

-

-

18.2

-

-

18.2

(4.6)

13.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows3

 

(5.4)

7.7

34.7

0.7

-

37.7

(4.6)

33.1

 

Internal net flows

 

(0.7)

(1.9)

-

0.9

(0.4)

(2.1)

-

(2.1)

 

Disposal of LGF4

 

-

(2.3)

-

-

-

(2.3)

-

(2.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

(6.1)

3.5

34.7

1.6

(0.4)

33.3

(4.6)

28.7

 

 

 

 

 

 

 

 

 

 

 

 

Cash management movements5

 

-

0.8

-

-

-

0.8

-

0.8

 

Market and other movements3,7

 

5.6

(0.4)

10.2

2.2

0.7

18.3

0.3

18.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 20156

 

274.3

106.8

338.2

18.3

8.5

746.1

10.5

756.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets attributable to:

 

 

 

 

 

 

 

 

 

 

External

 

 

 

 

 

 

661.0

10.5

671.5

 

Internal

 

 

 

 

 

 

85.1

-

85.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets attributable to:

 

 

 

 

 

 

 

 

 

 

UK

 

 

 

 

 

 

623.7

-

623.7

 

International

 

 

 

 

 

 

122.4

10.5

132.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Solutions include liability driven investments, multi-asset funds and included £251.8bn at 31 December 2016 (31 December 2015: £226.2bn) of derivative notionals associated with the Solutions business.

 

2. In 2015 Solutions external inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.

 

3. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2016 was £52.6bn (31 December 2015: £59.9bn), and the movement in these assets is included in market and other movements for Solutions assets.

 

4. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prévoyance.

 

5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

 

6. Total assets under management have been reconciled to the financial investments and investment property held on the Consolidated Balance Sheet in note 3.04.

 

7. Switches between asset classes are included in the gross inflows and outflows, and moved out of Market and other movements. 2015 has been restated for full comparative purposes.

 

 

 

 

Asset and premium flows                                                                                                                               Page 56

 

3.02 Legal & General investment management total assets half yearly progression

 

 

 

 

Active

 

 

 

 

 

 

 

 

 

 

fixed

Solu-

Real

Active

Total

Advisory

Total

 

For the year ended

 

Index

income

tions1

assets

equities

AUM

assets

assets

 

31 December 2016

 

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

 

274.3

106.8

338.2

18.3

8.5

746.1

10.5

756.6

 

External inflows4

 

17.6

4.8

9.3

0.8

-

32.5

-

32.5

 

External outflows4

 

(20.0)

(2.2)

(6.6)

(0.7)

(0.1)

(29.6)

-

(29.6)

 

Overlay/ advisory net flows

 

-

-

6.7

-

-

6.7

(0.3)

6.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows2

 

(2.4)

2.6

9.4

0.1

(0.1)

9.6

(0.3)

9.3

 

Internal net flows

 

(0.4)

0.7

(0.1)

0.1

-

0.3

-

0.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

(2.8)

3.3

9.3

0.2

(0.1)

9.9

(0.3)

9.6

 

Cash management movements3

 

-

(0.6)

-

-

-

(0.6)

-

(0.6)

 

Market and other movements4

 

28.9

16.3

41.6

(0.1)

(0.6)

86.1

1.4

87.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2016

 

300.4

125.8

389.1

18.4

7.8

841.5

11.6

853.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External inflows4

 

17.6

6.0

10.6

0.6

-

34.8

-

34.8

 

External outflows4

 

(25.0)

(4.3)

(5.8)

(0.5)

(0.1)

(35.7)

-

(35.7)

 

Overlay / advisory net flows

-

-

20.5

-

-

20.5

(5.1)

15.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows2

 

(7.4)

1.7

25.3

0.1

(0.1)

19.6

(5.1)

14.5

 

Internal net flows

 

0.1

0.8

0.1

0.6

0.1

1.7

-

1.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

(7.3)

2.5

25.4

0.7

-

21.3

(5.1)

16.2

 

Cash management movements3

 

-

(0.1)

-

-

-

(0.1)

-

(0.1)

 

Market and other movements4

 

26.7

6.6

(2.6)

0.5

0.3

31.5

1.3

32.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

 

319.8

134.8

411.9

19.6

8.1

894.2

7.8

902.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Solutions include liability driven investments, multi-asset funds, and include £251.8bn at 31 December 2016 (30 June 2016: £244.0bn) of derivative notionals associated with the Solutions business.

 

2. External net flows exclude movements in short term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2016 was £52.6bn (30 June 2016: £71.0bn) and the movement in these assets is included in market and other movements for Solutions assets.

 

3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

 

4. Switches between asset classes are included in the gross inflows and outflows, and moved out of Market and other movements.

 

 

 

 

Asset and premium flows                                                                                                                               Page 57

 

3.02 Legal & General investment management total assets half yearly progression

 

 

 

 

Active

 

 

 

 

 

 

 

 

 

 

fixed

Solu-

Real

Active

Total

Advisory

Total

 

For the year ended

 

Index

income

tions1

assets

equities

AUM

assets

assets

 

31 December 2015

 

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

 

274.8

102.9

293.3

14.5

8.2

693.7

14.8

708.5

 

External inflows7

 

15.9

5.3

8.9

0.8

-

30.9

-

30.9

 

External outflows7

 

(22.7)

(2.5)

(3.4)

(0.3)

-

(28.9)

-

(28.9)

 

Overlay/ advisory net flows

 

-

-

11.8

-

-

11.8

(3.5)

8.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows3

 

(6.8)

2.8

17.3

0.5

-

13.8

(3.5)

10.3

 

Internal net flows

 

(0.3)

(0.8)

-

0.4

(0.3)

(1.0)

-

(1.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

(7.1)

2.0

17.3

0.9

(0.3)

12.8

(3.5)

9.3

 

 

 

-

-

-

-

-

-

-

-

 

 

 

-

-

-

-

-

-

-

-

 

Cash management movements5

 

-

1.7

-

-

-

1.7

-

1.7

 

Market and other movements3,7

 

7.0

(0.2)

(2.4)

1.3

0.7

6.4

-

6.4

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2015

 

274.7

106.4

308.2

16.7

8.6

714.6

11.3

725.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External inflows7

 

17.5

6.7

14.2

0.8

-

39.2

-

39.2

 

External outflows7

 

(16.1)

(1.8)

(3.2)

(0.6)

-

(21.7)

-

(21.7)

 

Overlay/ advisory net flows

 

-

-

6.4

-

-

6.4

(1.1)

5.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External net flows3

 

1.4

4.9

17.4

0.2

-

23.9

(1.1)

22.8

 

Internal net flows

 

(0.4)

(1.1)

-

0.5

(0.1)

(1.1)

-

(1.1)

 

Disposal of LGF4

 

-

(2.3)

-

-

-

(2.3)

-

(2.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net flows

 

1.0

1.5

17.4

0.7

(0.1)

20.5

(1.1)

19.4

 

Market and other

 

 

 

 

 

 

 

 

 

 

Cash management movements5

 

-

(0.9)

-

-

-

(0.9)

-

(0.9)

 

Market and other movements3,7

 

(1.4)

(0.2)

12.6

0.9

-

11.9

0.3

12.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 20156

 

274.3

106.8

338.2

18.3

8.5

746.1

10.5

756.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Solutions include liability driven investments, multi-asset funds, and include £226.2bn at 31 December 2015 (30 June 2015: £208.1bn) of derivative notionals associated with the Solutions business.

 

2. Solutions external inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.

 

3. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2015 was £59.9bn (30 June 2015: £48.2bn), and the movement in these assets is included in market and other movements for Solutions assets.

 

4. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prévoyance.

 

5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

 

6. Total assets under management have been reconciled to the financial investments and investment property on the Consolidated Balance Sheet in note 3.04.

 

7. Switches between asset classes are included in the gross inflows and outflows, and moved out of Market and other movements. 2015 has been restated for full comparative purposes.

 

 

 

 

Asset and premium flows                                                                                                                               Page 58

 

3.02 Legal & General investment management total assets half yearly progression (continued)

 

 

 

 

 

 

 

 

 

As at

As at

As at

As at

 

 

 

 

 

 

 

 

31.12.16

30.06.16

31.12.15

30.06.15

 

 

 

 

 

 

 

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets attributable to:1

 

 

 

 

 

 

 

 

 

 

External

 

 

 

 

 

 

 

804.5

761.4

671.5

636.1

Internal

 

 

 

 

 

 

 

97.5

91.7

85.1

89.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets attributable to:1

 

 

 

 

 

 

 

 

 

 

UK

 

 

 

 

 

 

 

716.8

689.6

623.7

598.8

International

 

 

 

 

 

 

185.2

163.5

132.9

127.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Total assets at 31 December 2016 include £7.8bn of advisory assets (31 December 2015: £10.5bn).

 

 

3.03 Legal & General investment management total external assets under management net flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

6

6

6

 

 

 

 

 

months

months

months

months

 

 

 

 

 

to

to

to

to

 

 

 

 

 

31.12.16

30.06.16

31.12.15

30.06.15

 

 

 

 

 

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGIM total external AUM net flows1

 

 

 

 

19.5

9.6

23.9

13.8

Attributable to:

 

 

 

 

 

 

 

 

International

 

 

 

 

7.8

6.7

4.1

5.4

 

 

 

 

 

 

 

 

 

UK Institutional

 

 

 

 

 

 

 

 

- Defined contribution

 

 

 

 

1.2

0.8

1.9

1.0

- Defined benefit2

 

 

 

 

9.8

1.4

17.0

7.1

 

 

 

 

 

 

 

 

 

UK Retail

 

 

 

 

0.7

0.7

0.9

0.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and cash management movements.

2. In the six months to 31 December 2015, Solutions external inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.             

 

 

3.04 Assets under management reconciliation to Consolidated Balance Sheet financial assets

 

 

 

As at

As at

 

 

 

30.12.16

31.12.15

 

 

 

£bn

£bn

 

 

 

 

 

 

 

 

 

 

Assets under management

 

 

894.2

746.1

Derivative notionals1

 

 

(251.8)

(226.2)

Third party assets2

 

 

(234.7)

(157.9)

Derivative liabilities

 

 

9.0

8.0

Other3

 

 

9.6

(7.9)

 

 

 

 

 

 

 

 

 

 

Total group financial investments and investment property

 

 

426.3

362.1

 

 

 

 

 

 

 

 

 

 

1. Derivative notionals are included in the assets under management but not for IFRS reporting and are thus removed.

2. Third party assets are those that LGIM manage on behalf of others, for which the group does not have the risks or rewards and thus are not incldued on the IFRS balance sheet.

3. Other includes assets that are managed by third parties on behalf of the group, cash and broker balances.

 

 

 

Asset and premium flows                                                                                                                               Page 59

 

3.05 Assets under administration

 

 

 

 

 

 

 

LGIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consol-

 

 

 

 

 

 

 

 

 

Mature

idation

 

 

 

Retail

 

 

 

 

Suffolk

Retail

adjust-

Total

Nethe-

Work-

Invest-

 

 

For the year ended

Platforms1,2

Life

Savings3

ment4

Savings

rlands

place

ments5

Annuities

 

31 December 2016

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

76.9

8.6

29.6

(6.8)

108.3

1.6

14.7

22.6

43.4

 

Gross inflows1

24.2

0.5

0.8

(0.1)

25.4

0.2

4.4

6.7

7.3

 

Gross outflows

(25.5)

(0.3)

(3.8)

0.5

(29.1)

(0.2)

(1.1)

(6.7)

 

 

Payments to pensioners

-

-

-

-

-

-

-

-

(3.0)

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

(1.3)

0.2

(3.0)

0.4

(3.7)

-

3.3

-

4.3

 

Market and other movements

8.0

-

4.1

(0.3)

11.8

0.2

2.8

2.8

6.7

 

Disposals6

-

(8.8)

-

1.8

(7.0)

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

83.6

-

30.7

(4.9)

109.4

1.8

20.8

25.4

54.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consol-

 

France

 

 

 

 

 

 

 

Mature

idation

 

and

 

Retail

 

 

 

 

Suffolk

Retail

adjust-

Total

Nethe-

Work-

Invest-

 

 

For the year ended

Platforms1,2

Life

Savings3

ment4

Savings

rlands

place

ments5

Annuities

 

31 December 2015

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

71.9

7.7

36.0

(6.9)

108.7

4.4

11.1

21.3

44.2

 

Gross inflows1

8.7

1.2

1.1

(0.5)

10.5

0.4

3.3

5.9

3.0

 

Gross outflows

(5.2)

(0.5)

(4.1)

0.8

(9.1)

(0.3)

(0.7)

(5.7)

-

 

Payments to pensioners

-

-

-

-

-

-

-

-

(2.6)

 

Disposals7

-

-

(2.8)

-

(2.8)

(2.7)

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

3.5

0.7

(5.8)

0.3

(1.4)

(2.6)

2.6

0.2

0.4

 

Market and other movements

1.5

0.2

(0.6)

(0.2)

1.0

(0.2)

1.0

1.1

(1.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

76.9

8.6

29.6

(6.8)

108.3

1.6

14.7

22.6

43.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Platforms gross inflows include Cofunds institutional net flows. Total 2016 Platforms comprise £83.6bn of which £39.4bn (31 December 2015: £37.5bn) are retail assets and £44.2bn (31 December 2015: £39.4bn) are assets held on behalf of institutional clients. 

 

2. Platforms AUA comprise: ISAs £21.4bn (31 December 2015: £19.9bn); onshore bonds £2.8bn (31 December 2015: £3.0bn); offshore bonds £0.1bn (31 December 2015: £0.1bn); platform SIPPs £3.9bn (31 December 2015: £3.5bn) and non-wrapped funds £54.0bn (31 December 2015: £50.4bn).

 

3. Mature Retail Savings products include with-profits products, bonds and retail pensions.

 

 

 

4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.

 

5. Retail Investments include £2.4bn (31 December 2015: £2.0bn) of LGIM unit trust assets held on the Cofunds platform and £3.7bn (31 December 2015: £3.2bn) of LGIM unit trust assets held on the IPS platform.

 

6. Suffolk Life was sold on 25 May 2016 to Curtis Banks Group plc.

 

7. £2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015. £2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prévoyance.

 

 

 

 

Asset and premium flows                                                                                                                               Page 60

 

3.06 Assets under administration half-yearly progression

 

 

 

 

 

 

 

LGIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consol-

 

 

 

 

 

 

 

 

 

Mature

idation

 

 

 

Retail

 

 

 

 

Suffolk

Retail

adjust-

Total

Nethe-

Work-

Invest-

 

 

For the year ended

Platforms1,2

Life

Savings3

ment4

Savings

rlands

place

ments5

Annuities7

 

31 December 2016

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

76.9

8.6

29.6

(6.8)

108.3

1.6

14.7

22.6

43.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross inflows1

2.2

0.5

0.5

(0.2)

3.0

0.1

2.3

3.0

4.0

 

Gross outflows

(2.9)

(0.3)

(1.8)

0.3

(4.7)

(0.1)

(0.5)

(3.2)

-

 

Payments to pensioners

-

-

-

-

-

-

-

-

(1.4)

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

(0.7)

0.2

(1.3)

0.1

(1.7)

-

1.8

(0.2)

2.6

 

Market and other movements

1.3

-

1.1

-

2.4

0.2

0.8

0.9

5.0

 

Disposals6

-

(8.8)

 

1.8

(7.0)

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2016

77.5

-

29.4

(4.9)

102.0

1.8

17.3

23.3

51.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross inflows1

22.0

-

0.3

0.1

22.4

0.1

2.1

3.7

3.3

 

Gross outflows

(22.6)

-

(2.0)

0.2

(24.4)

(0.1)

(0.6)

(3.5)

-

 

Payments to pensioners

-

-

-

-

-

-

-

-

(1.6)

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

(0.6)

-

(1.7)

0.3

(2.0)

-

1.5

0.2

1.7

 

Market and other movements

6.7

-

3.0

(0.3)

9.4

-

2.0

1.9

1.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

83.6

-

30.7

(4.9)

109.4

1.8

20.8

25.4

54.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Platforms gross inflows include Cofunds institutional net flows. Total 2016 Platforms comprise £39.4bn (30 June 2016: £37.2bn) of retail assets and £44.2bn (30 June 2016: £40.3bn) of assets held on behalf of institutional clients.

 

2. Platforms AUA comprise: ISAs £21.4bn (30 June 2016: £20.1bn); onshore bonds £2.8bn (30 June 2016: £2.8bn); offshore bonds £0.1bn (30 June 2016: £0.1bn); platform SIPPs £3.9bn (30 June 2016: £3.6bn) and non-wrapped funds £54.0bn (30 June 2016: £49.5bn).

 

3. Mature Retail Savings products include with-profits products, bonds and retail pensions.

 

4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.

 

5. At 31 December 2016 Retail Investments include £2.4bn (30 June 16: £1.8bn) of LGIM unit trust assets held on the Cofunds platform and £3.7bn (30 June 2016: £3.4bn) of LGIM unit trust assets held on the IPS platform.

 
 

6. Suffolk Life was sold on 25 May 2016 to Curtis Banks Group plc.

 

7. Annuities exclude LGRE and LGA assets.

 

 

 

 

Asset and premium flows                                                                                                                               Page 61

 

3.06 Assets under administration half-yearly progression

 

 

 

 

 

 

 

LGIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consol-

 

France

 

 

 

 

 

 

 

Mature

idation

 

and

 

Retail

 

 

 

 

Suffolk

Retail

adjust-

Total

Nether-

Work-

Invest-

 

 

For the year ended

Platforms1,2

Life

Savings3

ment4

Savings

lands

place

ments5

Annuities

 

31 December 2015

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

£bn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

71.9

7.7

36.0

(6.9)

108.7

4.4

11.1

21.3

44.2

 

Gross inflows1

3.8

0.6

0.7

(0.2)

4.9

0.2

1.2

3.0

1.4

 

Gross outflows

(2.7)

(0.3)

(2.2)

0.4

(4.8)

(0.2)

(0.3)

(3.0)

-

 

Payments to pensioners

-

-

-

-

-

-

-

-

(1.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

1.1

0.3

(1.5)

0.2

0.1

-

0.9

-

0.2

 

Market and other movements

1.6

0.3

0.3

(0.2)

2.0

(0.2)

1.1

1.2

(1.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2015

74.6

8.3

34.8

(6.9)

110.8

4.2

13.1

22.5

43.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross inflows1

4.9

0.6

0.4

(0.3)

5.6

0.2

2.1

2.9

1.6

 

Gross outflows

(2.5)

(0.2)

(1.9)

0.4

(4.2)

(0.1)

(0.4)

(2.7)

-

 

Payments to pensioners

-

-

-

-

-

-

-

-

(1.4)

 

Disposals6

-

-

(2.8)

-

(2.8)

(2.7)

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net flows

2.4

0.4

(4.3)

0.1

(1.4)

(2.6)

1.7

0.2

0.2

 

Market and other movements

(0.1)

(0.1)

(0.9)

-

(1.1)

-

(0.1)

(0.1)

(0.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

76.9

8.6

29.6

(6.8)

108.3

1.6

14.7

22.6

43.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Platforms gross inflows include Cofunds institutional net flows. Total 2015 Platforms comprise £37.5bn (30 June 2015: £37.9bn) of retail assets and £39.4bn (30 June 2015: £36.7bn) of assets held on behalf of institutional clients.

 

2. Platforms AUA comprise ISAs: £19.9bn (June 2015: £20.0bn); onshore bonds £3.0bn (June 2015 £3.2bn); offshore bonds £0.1bn (June 2015 £0.1bn); platform SIPPs £3.5bn (June 2015 £3.4bn) and non-wrapped funds £50.4bn (June 2015 £46.7bn).

 

3. Mature Retail Savings products include with-profits products, bonds and retail pensions.

 

4. Consolidation adjustment represents Suffolk Life (until disposal) and Mature Retail Savings assets included in the Platforms column.

 

5. At 31 December 2015 Retail Investments included £2.0bn (June 2015: £1.8bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (June 2015: £3.3bn) of LGIM unit trust assets held on our IPS platform.

 

6. £2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015.  £2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prevoyance.

 

 

 

 

Asset and premium flows                                                                                                                               Page 62

 

3.07 LGR new business

 

 

 

 

 

 

6

6

6

6

 

 

 

 

 

months

months

months

months

 

 

 

 

 

to

to

to

to

 

 

 

 

 

31.12.16

30.06.16

31.12.15

30.06.15

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backbook acquisitions

 

 

 

 

-

2,945

-

-

Pension risk transfer

 

 

 

 

 

 

 

 

   - UK

 

 

 

 

2,698

640

831

1,146

   - USA

 

 

 

 

302

45

295

-

   - Netherlands

 

 

 

 

-

-

145

-

Individual Annuities

 

 

 

 

220

158

147

180

Lifetime Mortgage Advances

 

 

 

 

389

231

164

37

Longevity Insurance1

 

 

 

 

900

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total LGR new business

 

 

 

 

4,509

4,019

1,582

1,363

 

 

 

 

 

 

 

 

 

1. Represents a reinsured longevity insurance deal transacted in December 2016. The figure quoted represents the notional size of the transaction and  is based on the present value of the fixed leg cash flows discounted at the LIBOR curve. The first year's fixed cash flow is £25m.

 

 

3.08 Insurance new business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

6

6

6

 

 

 

 

 

months

months

months

months

 

 

 

 

 

to

to

to

to

 

 

 

 

 

31.12.16

30.06.16

31.12.15

30.06.15

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK Retail Protection

 

 

 

 

88

82

83

79

UK Group Protection

 

 

 

 

22

36

29

40

France Protection1

 

 

 

 

-

-

-

30

Netherlands Protection

 

 

 

 

2

2

2

3

US Protection

 

 

 

 

34

28

29

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Insurance new business

 

 

 

 

146

148

143

193

 

 

 

 

 

 

 

 

 

1. Legal & General Holdings (France) S.A. was sold on 31 December 2015 to APICIL Prévoyance.

 

 

 

3.09 Gross written premiums on Insurance business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

6

6

6

 

 

 

 

 

months

months

months

months

 

 

 

 

 

to

to

to

to

 

 

 

 

 

31.12.16

30.06.16

31.12.15

30.06.15

 

 

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK Retail Protection

 

 

 

 

597

582

567

545

UK Group Protection

 

 

 

 

100

233

101

229

General Insurance

 

 

 

 

170

156

173

164

France Protection

 

 

 

 

-

-

83

85

Netherlands Protection

 

 

 

 

27

25

22

24

US Protection

 

 

 

 

477

420

387

386

Longevity Insurance

 

 

 

 

160

161

162

164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross written premiums on insurance business

 

 

 

 

1,531

1,577

1,495

1,597

 

 

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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