L&G FY 2004 Results Pt3

Legal & General Group PLC 24 February 2005 Part 3 Legal & General Group Plc P1 Consolidated Profit and Loss Account - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- Notes 2004 2003 Restated £m £m Profit on continuing operations Life and pensions 1 466 443 Institutional fund management 69 55 General insurance 32 36 Other operational income 34 18 --------- --------- Operating profit on continuing operations 601 552 Profit on discontinuing operations General insurance - Gresham 7 5 --------- --------- Operating profit 608 557 Variation from longer term investment return 32 56 Change in equalisation provision (7) (7) Shareholder retained capital (SRC) movement 2 13 (137) --------- --------- Profit on ordinary activities before tax 646 469 Tax charge on profit on ordinary activities 3 (182) (65) --------- --------- Profit for the financial period 464 404 Dividends (329) (318) --------- --------- Retained profit 135 86 ================================================================================ Earnings per share 4 p p Based on operating profit after tax 6.75 6.10 Based on profit for the financial period 7.15 6.22 Diluted earnings per share Based on operating profit after tax 6.61 6.00 Based on profit for the financial period 7.00 6.12 Dividend per share 5.06 4.90 ================================================================================ These financial statements were approved by the Board on 23 February 2005 and have been prepared for long term business using the Modified Statutory Solvency (MSS) basis. The Achieved Profits (AP) results are included in Part 2. The results constitute non statutory accounts within the meaning of Section 240 of the Companies Act 1985 and are extracted from the Group's financial statements for the year ended 31 December 2004. Urgent Issues Task Force abstract 38 'Accounting for ESOP trusts' has been adopted, and the shareholders investment return for Institutional fund management has been reported as a longer term rate of return within operating profit. 2003 comparatives have been restated accordingly. The Group's financial statements for 2004 include the auditor's unqualified report and do not contain a statement under either Sections 237(2) or 237(3) of the Companies Act 1985. ================================================================================ Legal & General Group Plc P2 Consolidated Balance Sheet - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- Notes At 31.12.04 At 31.12.03 Restated Assets £m £m Investments 38,336 35,268 Assets held to cover linked liabilities 108,297 84,308 Other assets 5,002 5,349 --------- --------- 151,635 124,925 ========= ========= Liabilities Shareholders' funds 5 3,376 3,248 Fund for future appropriations 2,456 1,498 Technical provisions 139,534 117,341 Borrowings and other creditors 6,269 2,838 --------- --------- 151,635 124,925 ================================================================================ Statement of Total Recognised Gains and Losses 2004 2003 £m £m Profit for the financial period 464 404 Exchange losses (7) (11) --------- --------- Total recognised gains and losses 457 393 ================================================================================ Legal & General Group Plc P3 Notes to Financial Statements - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 1. 'Life and pensions operating profit 2004 2003 £m £m With-profits business 67 74 Non profit business 324 295 --------- --------- UK 391 369 USA 55 57 Netherlands 20 17 France 0 0 --------- --------- 466 443 ========= ========= UK life and pensions operating profit is the accrued distributable transfer, grossed up at the corporate tax rate, and for non profit business is augmented by the distribution in respect of the intra-group subordinated debt capital included within the SRC. Profits for international life and pensions business are reported on bases consistent with MSS. ================================================================================ 2. Change in SRC 2004 2003 £m £m Investment income 60 73 Interest expense and charges (2) (2) Realised investment gains 100 20 Unrealised investment appreciation 51 230 --------- --------- Investment return on SRC 209 321 Net capital released from/(invested in) non-profit business 128 (163) Distribution of operating profit from non-profit business (324) (295) --------- --------- SRC movement before tax 13 (137) ========= ========= SRC at 1 January 2,212 2,259 ######### ######### SRC movement before tax : 13 : : (137): Tax credit : 8 : : 90 : ######### ######### SRC movement after tax 21 (47) --------- --------- SRC at end of period 2,233 2,212 SRC includes intra-group subordinated debt capital of £602m. ================================================================================ Legal & General Group Plc P4 Notes to Financial Statements - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 3. Analysis of tax 2004 2004 2003 2003 Profit Tax Profit Tax before (charge)/ before (charge)/ tax credit tax credit Profit on continuing operations £m £m £m £m UK life and pensions 391 (117) 369 (110) International life and pensions 75 (25) 74 (28) -------- -------- -------- -------- 466 (142) 443 (138) Institutional fund management 69 (21) 55 (16) General insurance 32 (9) 36 (12) Other operational income 34 4 18 6 -------- -------- -------- -------- Operating profit on continuing operations 601 (168) 552 (160) Profit on discontinuing operations General insurance - Gresham Insurance Company 7 (2) 5 (1) -------- -------- -------- -------- Operating profit 608 (170) 557 (161) Variation from longer term investment return 32 (22) 56 4 Change in equalisation provision (7) 2 (7) 2 SRC movement 13 8 (137) 90 -------- -------- -------- -------- Profit on ordinary activities and tax 646 (182) 469 (65) ======== ======== ======== ======== Although the SRC has been recognised as profit in these financial statements, there has been no corresponding recognition in the FSA regulatory returns, on which the taxation of life assurance business is currently based. As the payment of incremental tax on this profit depends upon a future event, the occurrence of which is under the company's control, no event giving rise to the need to provide deferred tax has occurred. Accordingly no additional deferred tax has been provided. The maximum amount of such deferred tax not provided at 31.12.04 was £630m (2003: £668m). ================================================================================ Legal & General Group Plc P5 Notes to Financial Statements - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 4. Earnings per share (EPS) Weighted Earnings average Profit/ per number (loss) share of shares £m p m Year ended 31.12.04 Operating profit after tax on continuing operations 433 6.67 6,491 Operating profit after tax on discontinuing operations 5 0.08 Variation from longer term investment return 10 0.15 Change in equalisation provision (5) (0.07) Change in SRC 21 0.32 --------- --------- --------- Profit for the period/EPS 464 7.15 6,491 Net shares under options allocable for no further consideration - (0.01) 22 Convertible bonds outstanding 12 (0.14) 285 --------- --------- --------- Diluted profit for the period/EPS 476 7.00 6,798 ========= ========= ========= Year ended 31.12.03 Operating profit after tax on continuing operations 392 6.04 6,490 Operating profit after tax on discontinuing operations 4 0.06 Variation from longer term investment return 60 0.92 Change in equalisation provision (5) (0.08) Change in SRC (47) (0.72) --------- --------- --------- Profit for the financial year/EPS 404 6.22 6,490 Net shares under options allocable for no further consideration - - 15 Convertible bonds outstanding 12 (0.10) 285 --------- --------- --------- Diluted profit for the financial year/EPS 416 6.12 6,790 ================================================================================ Legal & General Group Plc P6 Notes to Financial Statements - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 5. Shareholders' funds At 31.12.04 At 31.12.03 Restated £m £m At 1 January as originally published 3,248 3,184 Prior year adjustment in respect of UITF 38* - (13) --------- --------- 3,248 3,171 Total recognised gains and losses 457 393 Dividends (329) (318) Increase in share capital/premium 1 1 Allocation of ESOT shares* (1) 1 --------- --------- At 31 December 3,376 3,248 ========= ========= Comprising: Share capital 163 163 Share premium 907 906 ESOT reserve* (13) (12) Profit and loss account 2,319 2,191 --------- --------- 3,376 3,248 ========= ========= The number of fully paid ordinary shares of 2.5p in issue at the period end was 6,506m (2003: 6,504m). * UITF abstract 38 'Accounting for ESOP trusts' requires that own shares held within the Employee Share Ownership Trust (ESOT) should be accounted for as a deduction from shareholders' funds rather than be disclosed as an investment as was previously required. The 2003 amounts have been restated accordingly. ================================================================================ Legal & General Group Plc P7 Notes to Financial Statements - Modified Statutory Solvency Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 6. Segmental analysis of shareholders' funds At 31.12.03 At 31.12.04 restated £m £m UK solvency capital ######### ######### SRC * : 2,233 : : 2,212 : Society shareholder capital (SSC) ** : 1,972 : : 1,905 : :---------: :---------: Society solvency capital : 4,205 : : 4,117 : General insurance : 149 : : 120 : ######### ######### UK solvency capital 4,354 4,237 International shareholders' funds - USA 475 443 - Netherlands 48 36 - France 48 45 --------- --------- 4,925 4,761 Institutional fund management 199 176 Corporate funds *** (1,748) (1,689) --------- --------- Shareholders' funds on the MSS basis 3,376 3,248 Less: Purchased interests in long term business included in above (24) (29) AP long term in-force business asset 2,764 2,365 --------- --------- Shareholders' funds on the AP basis 6,116 5,584 ========= ========= * Including £602m of intra-group subordinated debt capital attributed to the SRC. ** Includes £788m from the 2002 rights issue and aggregate investment returns of £188m (2003: £139m). ***Includes the convertible debt of £521m (2003: £518m) and £602m of senior debt which has been onlent to the UK LTF. ================================================================================ 7. UK Long Term Fund At 31.12.04 At 31.12.03 £bn £bn With-profits business 26.8 25.3 Non profit business 17.6 14.3 ######### ######### Sub-fund : 0.2 : : 0.2 : SRC : 2.2 : : 2.2 : ######### ######### 2.4 2.4 --------- --------- Value of fund 46.8 42.0 ================================================================================ Legal & General Group Plc P8 Consolidated Cash Flow Statement (excluding long term business) Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 Restated £m £m Net cash inflow from operating activities 437 407 Interest paid (63) (58) Tax paid (8) (2) Dividends paid (321) (313) ######### ######### Issue of share capital : 1 : : 1 : (Increase)/decrease in shares held by the ESOT : (1): : 1 : Increase/(decrease) in borrowing : 59 : : (76): ######### ######### Financing 59 (74) --------- --------- 104 (40) ========= ========= Cash flows (not including long term business) were invested/(divested) as follows: (Increase)/decrease in cash holdings (4) 2 Net purchase/(sale) of investments 108 (42) --------- --------- Net investment/(divestment) 104 (40) ========= ========= Reconciliation of profit before tax to operating cash flow Profit on ordinary activities before tax 646 469 Profit relating to life and pensions business (479) (308) Long term business profit included in Institutional fund management (51) (40) Cash received from life and pensions business 233 275 Cash received from Institutional fund management 28 24 Increase in other operating creditors 35 19 Other items 25 (32) --------- --------- Net cash inflow from operating activities 437 407 =============================================================================== This information is provided by RNS The company news service from the London Stock Exchange

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