L&G FY 2004 Results Pt4

Legal & General Group PLC 24 February 2005 Part 4 Legal & General Investment Management -supplementary information During 2004, Legal & General Investment Management consolidated its position as the largest investment manager in the UK*. High levels of net new business and rising markets have contributed to a 20% increase in funds under management to £162bn. Fund management success was also highlighted at the 2004 Professional Pensions Awards, where Legal & General Investment Management won Fixed Interest Manager of the Year and Pooled Fund Manager of the Year. Profits - MSS basis ------------------- Legal & General Investment Management has had another outstanding year with operating profits growing 25% to £69m (2003: £55m). Gross new business of £15.5bn (2003: £13.1bn) means the average annual new business inflows have exceeded £12bn in each of the last seven years. Corporate Pensions operating profits increased 24% to £51m (2003: £41m) due to an increase in fee income as a result of high net new business levels and rising equity markets, coupled with tight control of costs. The Defined Benefit pensions market saw an ongoing shift from equity to fixed interest products. Corporate Pensions were successful in winning both active and passive fixed interest mandates from new and existing clients. Active fixed interest mandates accounted for 17% of Corporate Pensions new business in 2004. There was also continuing success in the rapidly growing Defined Contribution (DC) market where Legal & General Investment Management enjoys market leading status in the investment only DC market. Funds under management for DC schemes now exceed £6bn. The Overseas Life Assurance Business continued to expand with funds under management doubling to £1.4bn. In 2004, pooled pension fund client numbers increased to 2,598 from 2,425, an increase of 7%. Legal & General Ventures, the private equity arm, saw profits increase to £4m (2003: £3m). Despite competitive pressures, Legal & General Ventures made four new investments and six exits during 2004. The Property fund management subsidiary continued to expand external funds under management. One new property partnership was launched in 2004 and we are now the operator, asset manager or property manager to eight external property partnerships, with total funds under management of £7bn. Profits remained at £3m (2003: £3m). Total funds under Legal & General Investment Management's management increased 20% to a record £162bn (2003: £135bn) which includes £105bn (2003: £84bn) of external funds. Profits - Achieved profits basis -------------------------------- Managed pension funds business is written as a long term contract and so the results of the business are also presented on an Achieved Profits basis. The embedded value assumptions are detailed in Part 2 of this announcement. Operating profit from institutional fund management increased by 26% to £103m (2003: £82m). The new business contribution from managed pension funds increased to £36m (2003: £31m), with the value added to new business ratio held in line with 2002 and 2003 levels at 24bps. Profit before tax increased to £115m (2003: £96m), benefiting from a £11m increase in experience variance as a result of a reduction in lapse rates, together with improved fee rates on existing business. Fund Performance ---------------- Our flagship Linked Life Distribution Fund, which exceeds £2bn, maintained its top quartile performance over 1, 3 and 5 years. Almost two-thirds of our actively managed fixed interest pooled funds outperformed their peer group median or index benchmark over the year. All index tracking funds were within their designated tracking tolerances in the year to December 2004. Performance of active equity funds was mixed. Our property funds had a good year with most funds beating their benchmarks. *Source: IMA Asset Management Survey May 2004 Part 4 Legal & General Investment Management P1 Consolidated Profit and Loss Account - Modified Statutory Solvency basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 £m £m Profit on continuing operations Corporate pensions 51 41 Ventures 4 3 Property 3 3 Other external income 3 3 Other operational income 8 5 ------ ------ Operating profit 69 55 Variation from longer term investment return 0 (2) ------ ------ Profit on ordinary activities before tax 69 53 Tax charge on profit on ordinary activities (21) (16) ------ ------ Profit for the financial period 48 37 ====== ====== 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 basis. The Achieved Profits results are included on page 4. The results constitute non statutory accounts within the meaning of Section 240 of the Companies Act 1985 and are extracted from the Group's financial statements for the year ended 31 December 2004. The Group's financial statements include the auditor's unqualified report and do not contain a statement under either Sections 237(2) or 237(3) of the Companies Act 1985. ================================================================================ Legal & General Investment Management P2 Funds under management Year ended 31 December 2004 -------------------------------------------------------------------------------- At 31.12.04 At 31.12.03 £m £m Total investments 162,479 135,337 ========= ========= Represented by Index tracking funds: - UK equities 49,448 42,944 - Overseas equities 26,307 21,144 - Fixed interest 20,369 16,950 - Index linked 14,544 10,650 - Cash/deposits 529 359 --------- --------- Total index tracking funds 111,197 92,047 Actively managed funds 51,282 43,290 --------- --------- 162,479 135,337 ========= ========= By fund management approach Indexed equities 75,754 64,088 Active bonds (including index linked funds) 35,538 28,883 Indexed bonds (including index linked funds) 35,442 27,959 Active equities 8,499 7,905 Property 6,851 6,022 Private equity (ventures) 395 480 --------- --------- 162,479 135,337 ========= ========= By source of business Institutional funds under management*: - Managed pension funds pooled 93,989 72,841 - Managed pension funds segregated 9,317 8,522 - Other 1,781 2,713 --------- --------- Total institutional funds under management 105,087 84,076 UK Operations (unit trusts - excluding life fund investment) 7,919 6,948 UK Operations (life and general insurance funds) 49,473 44,313 --------- --------- 162,479 135,337 ========= ========= * Excludes institutional investments in unit trust funds ================================================================================ Legal & General Investment Management P3 New business Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 Full Second First Full Second First year half half year half half £m £m £m £m £m £m New business Managed pension funds* - Pooled funds 13,951 6,341 7,610 11,066 5,859 5,207 - Segregated funds 1,228 165 1,063 1,504 1,145 359 -------- -------- -------- -------- -------- -------- 15,179 6,506 8,673 12,570 7,004 5,566 Other funds 368 298 70 482 68 414 -------- -------- -------- -------- -------- -------- 15,547 6,804 8,743 13,052 7,072 5,980 ======== ======== ======== ======== ======== ======== By fund management approach Active equities 0.1% 0.0% Active bonds (including cash) 16.2% 11.8% Indexed equities 47.9% 59.0% Indexed bonds (including cash) 34.8% 27.3% Property 0.6% 1.7% Private equity 0.4% 0.2% -------- -------- 100.0% 100.0% ======== ======== * New monies from pension fund clients of Legal & General Assurance (Pensions Management) Ltd. Corporate pensions gross new business excludes £5.0bn (2003: £4.0bn) which was held through the year on a temporary basis, generally as part of portfolio reconstruction. ================================================================================ Legal & General Investment Management P4 Consolidated Profit and Loss Account - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 Profit on continuing operations £m £m Managed pension funds: Contribution from: New business 36 31 In-force business - expected return 17 13 - experience variances 16 5 - operating assumption changes 17 20 Development costs (1) (1) Shareholder net worth 6 5 ------ ------ Total 91 73 Ventures 4 3 Property 3 3 Other external income 3 3 Other operational income 2 - ------ ------ Operating profit from institutional fund management 103 82 Variation from longer term investment return* 12 14 ------ ------ Profit on ordinary activities before tax 115 96 Tax charge on profit on ordinary activities (35) (29) ------ ------ Profit for the financial period 80 67 ====== ====== * The variation from longer term investment return represents the effect of the investment performance in respect of shareholder net worth and in-force business, compared with embedded value assumptions at the beginning of the period. Managed pension funds embedded value 2004 2003 £m £m At 1 January 305 262 Profit after tax 72 61 Distributions and capital movements (20) (18) ------ ------ At 31 December 357 305 ====== ====== comprising: Value of in-force business 194 162 Shareholder net worth 163 143 ------ ------ 357 305 ================================================================================ This information is provided by RNS The company news service from the London Stock Exchange

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