L&G FY 2014 results part 2

RNS Number : 4568G

Legal & General Group Plc

04 March 2015

 



IFRS and Cash                                                                                                                                            29

Operating profit

For the year ended 31 December 2014

			2014	2013 1
		Notes	£m	£m
From continuing operations
Legal & General Assurance Society (LGAS)		2.02	460	444
Legal & General Retirement (LGR)		2.02	428	310
Legal & General Investment Management (LGIM)		2.04	336	304
Legal & General Capital (LGC)		2.05	203	179
Legal & General America (LGA)			56	92
Operating profit from divisions			1,483	1,329
Group debt costs2			(142)	(127)
Group investment projects and expenses3		2.06	(66)	(44)
Operating profit			1,275	1,158
Investment and other variances		2.07	(44)	(27)
Gains on non-controlling interests			7	13
Profit before tax attributable to equity holders			1,238	1,144
Tax expense attributable to equity holders of the Company		2.22	(246)	(238)
Profit for the year			992	906
Profit attributable to equity holders of the Company			985	893
			p	p
Earnings per share
Based on profit attributable to equity holders of the Company		2.08	16.70	15.20
Diluted earnings per share
Based on profit attributable to equity holders of the Company		2.08	16.54	15.00
1. Gains on non-controlling interests have been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. The impact is to increase gains on non-controlling interests and profit for the year by £10m for 2013. The profit attributable to equity holders remains unaffected. Further details are contained in Note 2.24.
2. Group debt costs exclude interest on non recourse financing. 3. Group investment projects and expenses in 2014 include restructuring costs of £31m.

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 gives shareholders a better understanding of the underlying performance of the business in the year.

During the year the Group redefined its operating profit definition, and applied this prospectively. Under the new definition, restructuring costs, while varying from year to year, are considered to be part of ongoing business activities and as such, are included within operating profit. 

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 LGA which excludes unrealised investment returns to align with the liability measurement under US GAAP. Variances between actual and smoothed 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, start-up and closure costs, are excluded from operating profit.

LGAS represents Insurance business (retail protection, group protection and general insurance) and Savings business (platforms, workplace, SIPPs, mature savings and with-profits). The LGAS segment also includes Legal & General France (LGF), Legal & General Netherlands (LGN) and emerging markets.

LGR represents Annuities (both individual and bulk purchase) and longevity insurance.

The LGIM segment represents institutional and retail investment management businesses.

LGC represents the medium term investment return (less expenses) on Group invested assets, using assumptions applied to the average balance of Group invested assets (including interest bearing intra-group balances) calculated on a monthly basis.

The LGA segment comprises protection business written in the USA.

IFRS and Cash                                                                                                                                            30

2.01 Reconciliation of operational cash to operating profit before tax

The table below provides an analysis of the operational cash generation by each of the Group's business segments, together with a reconciliation to operating profit before tax.
	Opera-				Changes					Operating
	tional		Net		in			Operating		profit/
	cash	New	cash	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	gene-	business	gene-	ience	assump-	items and	national	(loss)	expense/	before
For the year ended	ration1	strain	ration	variances	tions	other	and other2	after tax	(credit)	tax
31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGAS	472	(48)	424	(18)	32	(70)	(7)	361	99	460
- Insurance	332	(5)	327	(8)	24	(50)	(6)	287	83	370
- Savings	140	(43)	97	(10)	8	(20)	(1)	74	16	90
LGR	292	51	343	(13)	48	(32)	-	346	82	428
LGIM	262	-	262	-	-	-	-	262	74	336
LGC	162	-	162	-	-	-	-	162	41	203
LGA	46	-	46	-	-	-	(14)	32	24	56
Total from divisions	1,234	3	1,237	(31)	80	(102)	(21)	1,163	320	1,483
Group debt costs	(112)	-	(112)	-	-	-	-	(112)	(30)	(142)
Group investment projects
and expenses	(21)	-	(21)	-	-	-	(32)	(53)	(13)	(66)
Total	1,101	3	1,104	(31)	80	(102)	(53)	998	277	1,275
1. Operational cash generation includes dividends remitted from LGF of £2m (2013: £2m) and LGN of £29m (2013: £14m) within the Protection line and LGA of £46m (2013: £44m).
2. International and other includes £25m of restructuring costs (£31m before tax) (2013: £nil) within the Group investment projects and expenses line.
Operational cash generation for LGAS and LGR represents the expected surplus generated in the year from the in-force non profit Protection, Savings and Annuities businesses using best estimate assumptions. The LGAS operational cash generation also includes the shareholders' share of bonuses on with-profits business, dividends remitted from LGF and LGN and operating profit after tax from General Insurance and the remaining Savings businesses.
New business strain for LGAS and LGR represents the cost of acquiring new business and setting up regulatory reserves in respect of the new business for UK non profit Protection, Savings and Annuities, net of tax. The new business strain and operational cash generation for both LGAS and LGR exclude required solvency margin from the liability calculation.
Net cash generation for LGAS and LGR is defined as operational cash generation less new business strain.
Operational cash generation and net cash for LGIM and LGC represents the operating profit (net of tax).
The operational cash generation for LGA represents the dividends received.
See Note 2.02 for more detail on experience variances, assumption changes and non-cash items.

IFRS and Cash                                                                                                                                            31

2.01 Reconciliation of operational cash to operating profit before tax (continued)

	Opera-				Changes					Operating
	tional		Net		in			Operating		profit/
	cash	New	cash	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	gene-	business	gene-	ience	assump-	items and	national	(loss)	expense/	before
For the year ended	ration1	strain	ration	variances	tions	other	and other	after tax	(credit)	tax
31 December 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGAS	474	(73)	401	(34)	31	(69)	10	339	105	444
- Insurance	310	(15)	295	(7)	20	(47)	10	271	84	355
- Savings	164	(58)	106	(27)	11	(22)	-	68	21	89
LGR	260	33	293	9	(13)	(48)	-	241	69	310
LGIM	239	-	239	-	-	-	-	239	65	304
LGC	137	-	137	-	-	-	-	137	42	179
LGA	44	-	44	-	-	-	14	58	34	92
Total from divisions	1,154	(40)	1,114	(25)	18	(117)	24	1,014	315	1,329
Group debt costs	(97)	-	(97)	-	-	-	-	(97)	(30)	(127)
Group investment projects
and expenses	(15)	-	(15)	-	-	-	(19)	(34)	(10)	(44)
Total	1,042	(40)	1,002	(25)	18	(117)	5	883	275	1,158
1. Operational cash generation includes dividends remitted from LGF of £2m and LGN of £14m within the Protection line and LGA of £44m.

IFRS and Cash                                                                                                                                            32

2.02 Analysis of LGAS and LGR operating profit

							LGAS	LGR	LGAS	LGR
							2014	2014	2013	2013
							£m	£m	£m	£m
Net cash generation							424	343	401	293
Experience variances
Persistency							-	(3)	5	1
Mortality/Morbidity1							(5)	13	-	14
Expenses							(4)	(3)	(3)	-
BPA Loading							-	6	-	4
Project and development costs							(12)	(19)	(23)	(11)
Other							3	(7)	(13)	1
Total experience variances							(18)	(13)	(34)	9
Changes to valuation assumptions
Persistency2							42	-	7	-
Mortality/Morbidity3							37	61	9	(13)
Expenses							15	(5)	8	-
Other4							(62)	(8)	7	-
Total valuation assumption changes							32	48	31	(13)
Movement in non-cash items
Deferred tax							6	(11)	5	-
Utilisation of brought forward trading losses							(9)	(62)	(4)	(70)
Acquisition expense tax relief							(42)	-	(51)	-
Deferred Acquisition Costs (DAC)5							(71)	-	(63)	-
Deferred Income Liabilities (DIL)5							46	-	47	-
Other6							-	41	(3)	22
Total non-cash movement items							(70)	(32)	(69)	(48)
Other							(7)	-	10	-
Operating profit after tax							361	346	339	241
Tax gross up							99	82	105	69
Operating profit before tax							460	428	444	310
1. The mortality/morbidity experience variances in LGAS in 2014 primarily relates to adverse morbidity on one of our group protection products.
2. The persistency valuation assumption change in LGAS primarily relates to an improvement in the experience and modelling for persistency on some of our long term products.
3. The mortality/morbidity valuation assumption change in LGAS primarily relates to an improvement in the modelling for certain morbidity features on our retail protection products. The LGR mortality valuation assumption change primarily relates to the adoption of the recent CMI projection table (CMI2013) with an allowance for anticipated modelling changes that have been incorporated into the CMI2014 model.
4. The other valuation assumption change in LGAS primarily relates to a refinement in the modelling for reinsurance on certain long term policies.
5. The DAC in LGAS 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.
6. The other non-cash items in LGR primarily relates to the elimination of intra-group future profits arising from the provision of investment management services at market referenced rates.

IFRS and Cash                                                                                                                                            33

2.03 General insurance operating profit and combined operating ratio 

							2014	2013
							£m	£m
General insurance operating profit1							59	69
General insurance combined operating ratio (%)2							87	84
1. The general insurance operating profit includes the underwriting result and investment return.
2. The calculation of the general insurance combined operating ratio incorporates commission and expenses as a percentage of net earned premiums.

2.04 LGIM

							2014	2013
							£m	£m
Revenue							645	594
Expenses							(309)	(290)
Total LGIM operating profit							336	304

2.05 LGC

							2014	2013
							£m	£m
Investment return							219	185
Expenses1							(16)	(6)
Total LGC operating profit							203	179
1. LGC expenses in 2014 include £10m of management expenses previously borne by the Group and allocated as Group expenses.

2.06 Group investment projects and expenses

							2014	2013
							£m	£m
Group investment projects and central expenses							(35)	(44)
Restructuring costs							(31)	-
Total Group investment projects and expenses							(66)	(44)

2.07 Investment and other variances

							2014	2013
							£m	£m
Investment variance1							(8)	29
M&A related2							(21)	(16)
Other3							(15)	(40)
Total Investment and other variances							(44)	(27)
1. Investment variance is negative, primarily due to lower equity returns from shareholder funds. This has been partially offset by an increase in exposure to Direct Investments in LGR, which has enhanced the risk adjusted return, and favourable default experience.
2. M&A related includes gains, expenses and intangible amortisation relating to acquisitions and disposals.
3. Other includes new business start-up costs, closure costs and other non-investment related variance items. In 2013, Other included £17m of restructuring costs.

IFRS and Cash                                                                                                                                            34

Consolidated Income Statement For the year ended 31 December 2014
			2014	2013 1
		Notes	£m	£m
Revenue
Gross written premiums			10,168	6,162
Outward reinsurance premiums			(1,122)	(874)
Net change in provision for unearned premiums			1	(18)
Net premiums earned			9,047	5,270
Fees from fund management and investment contracts			1,085	1,040
Investment return			40,639	32,234
Operational income			746	720
Total revenue			51,517	39,264
Expenses
Claims and change in insurance liabilities			15,071	5,767
Reinsurance recoveries			(975)	(1,113)
Net claims and change in insurance liabilities			14,096	4,654
Change in provisions for investment contract liabilities			33,385	30,458
Acquisition costs			873	855
Finance costs			183	166
Other expenses			1,748	1,694
Transfers (from)/to unallocated divisible surplus			(181)	112
Total expenses			50,104	37,939
Profit before tax			1,413	1,325
Tax expense attributable to policyholder returns			(175)	(181)
Profit before tax attributable to equity holders			1,238	1,144
Total tax expense			(421)	(419)
Tax expense attributable to policyholder returns			175	181
Tax expense attributable to equity holders		2.22	(246)	(238)
Profit for the year			992	906
Attributable to:
Non-controlling interests			7	13
Equity holders of the Company			985	893
Dividend distributions to equity holders of the Company during the year		2.12	580	479
Dividend distributions to equity holders of the Company proposed after the year end		2.12	496	408
			p	p
Earnings per share
Based on profit attributable to equity holders of the Company		2.08	16.70	15.20
Diluted earnings per share
Based on profit attributable to equity holders of the Company		2.08	16.54	15.00

1.The Consolidated Income Statement has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the profit for the year by £10m for 2013.

IFRS and Cash                                                                                                                                            35

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

			2014	2013 1
			£m	£m
Profit for the year			992	906
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes			(94)	(145)
Actuarial losses on defined benefit pension schemes transferred to unallocated divisible surplus			38	49
Total items that will not be reclassified to profit or loss subsequently			(56)	(96)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations			12	(16)
Net change in financial investments designated as available-for-sale			26	(88)
Total items that may be reclassified to profit or loss subsequently			38	(104)
Other comprehensive expense after tax			(18)	(200)
Total comprehensive income for the year			974	706
Total comprehensive income attributable to:
Non-controlling interests			7	13
Equity holders of the Company			967	693

1. The Consolidated Statement of Comprehensive Income has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total comprehensive income for the year by £10m for 2013.

IFRS and Cash                                                                                                                                            36

Consolidated Balance Sheet

As at 31 December 2014

				2014	2013 1
			Notes	£m	£m
Assets
Goodwill				79	73
Purchased interest in long term businesses and other intangible assets				342	308
Deferred acquisition costs				1,936	1,880
Investment in associates and joint ventures				149	101
Property, plant and equipment				146	129
Investment property			2.11	8,152	6,377
Financial investments			2.11	360,614	334,540
Reinsurers' share of contract liabilities				2,906	2,897
UK deferred tax asset			2.22	54	82
Current tax recoverable				217	310
Other assets				2,249	2,121
Cash and cash equivalents				22,709	17,454
Total assets				399,553	366,272
Equity
Share capital			2.13	149	148
Share premium			2.13	969	959
Employee scheme treasury shares				(37)	(39)
Capital redemption and other reserves				117	57
Retained earnings				4,830	4,517
Shareholders' equity				6,028	5,642
Non-controlling interests				275	265
Total equity				6,303	5,907
Liabilities
Participating insurance contracts			2.17	6,579	6,972
Participating investment contracts			2.18	7,667	7,493
Unallocated divisible surplus				983	1,221
Value of in-force non-participating contracts				(208)	(248)
Participating contract liabilities				15,021	15,438
Non-participating insurance contracts			2.17	49,876	40,273
Non-participating investment contracts			2.18	288,558	278,754
Non-participating contract liabilities				338,434	319,027
Core borrowings			2.15	2,977	2,453
Operational borrowings			2.16	715	775
Provisions			2.21	1,247	1,128
UK deferred tax liabilities			2.22	180	-
Overseas deferred tax liabilities			2.22	434	362
Current tax liabilities				9	14
Payables and other financial liabilities				16,131	9,305
Other liabilities				963	1,045
Net asset value attributable to unit holders				17,139	10,818
Total liabilities				393,250	360,365
Total equity and liabilities				399,553	366,272
1. The Consolidated Balance Sheet has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total equity by £207m for 2013.

IFRS and Cash                                                                                                                                            37

Consolidated Statement of Changes in Equity

			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2014	148	959	(39)	57	4,517	5,642	265	5,907
Profit for the year	-	-	-	-	985	985	7	992
Exchange differences on translation of
overseas operations	-	-	-	12	-	12	-	12
Actuarial losses on defined benefit
pension schemes	-	-	-	-	(94)	(94)	-	(94)
Actuarial losses on defined benefit
pension schemes transferred to
unallocated divisible surplus	-	-	-	-	38	38	-	38
Net change in financial investments
designated as available-for-sale	-	-	-	26	-	26	-	26
Total comprehensive income
for the year	-	-	-	38	929	967	7	974
Options exercised under
share option schemes:
- Executive share option schemes	-	-	-	-	-	-	-	-
- Savings related share option scheme	1	10	-	-	-	11	-	11
Shares purchased	-	-	(7)	-	-	(7)	-	(7)
Shares vested	-	-	9	(17)	-	(8)	-	(8)
Employee scheme treasury shares:
- Value of employee services	-	-	-	20	-	20	-	20
Share scheme transfers
to retained earnings	-	-	-	-	(17)	(17)	-	(17)
Dividends	-	-	-	-	(580)	(580)	-	(580)
Movement in third party interests	-	-	-	-	-	-	3	3
Currency translation differences	-	-	-	19	(19)	-	-	-
As at 31 December 2014	149	969	(37)	117	4,830	6,028	275	6,303

IFRS and Cash                                                                                                                                            38

Consolidated Statement of Changes in Equity (continued)

			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the year ended 31 December 2013	£m	£m	£m	£m	£m	£m	£m1	£m
As at 1 January 2013	148	956	(43)	153	4,227	5,441	178	5,619
Profit for the year	-	-	-	-	893	893	13	906
Exchange differences on translation of
overseas operations	-	-	-	(16)	-	(16)	-	(16)
Actuarial losses on defined benefit
pension schemes	-	-	-	-	(145)	(145)	-	(145)
Actuarial losses on defined benefit
pension schemes transferred to
unallocated divisible surplus	-	-	-	-	49	49	-	49
Net change in financial investments
designated as available-for-sale	-	-	-	(88)	-	(88)	-	(88)
Total comprehensive income/(expense)
for the year	-	-	-	(104)	797	693	13	706
Options exercised under
share option schemes:
- Executive share option schemes	-	1	-	-	-	1	-	1
- Savings related share option scheme	-	2	-	-	-	2	-	2
Shares purchased	-	-	(12)	-	-	(12)	-	(12)
Shares vested	-	-	16	(19)	-	(3)	-	(3)
Employee scheme treasury shares:
- Value of employee services	-	-	-	28	-	28	-	28
Share scheme transfers
to retained earnings	-	-	-	-	(29)	(29)	-	(29)
Dividends	-	-	-	-	(479)	(479)	-	(479)
Movement in third party interests	-	-	-	-	-	-	74	74
Currency translation differences	-	-	-	(1)	1	-	-	-
As at 31 December 2013	148	959	(39)	57	4,517	5,642	265	5,907
1. The Consolidated Statement of Changes in Equity has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total equity by £207m for 2013.

IFRS and Cash                                                                                                                                            39

Consolidated Cash Flow Statement

For the year ended 31 December 2014

			2014	2013 1
			£m	£m
Cash flows from operating activities
Profit for the year			992	906
Adjustments for non cash movements in net profit for the year
Realised and unrealised gains on financial investments and investment properties			(30,851)	(21,456)
Investment income			(9,205)	(9,504)
Interest expense			183	166
Tax expense			421	419
Other adjustments			87	98
Net (increase)/decrease in operational assets
Investments held for trading or designated as fair value through profit or loss			5,931	1,952
Investments designated as available-for-sale			225	60
Other assets			(151)	547
Net increase/(decrease) in operational liabilities
Insurance contracts			9,228	1,384
Transfer (from)/to unallocated divisible surplus			(222)	63
Investment contracts			10,156	13,835
Value of in-force non-participating contracts			40	(6)
Other liabilities			9,811	3,883
Cash generated used in operations			(3,355)	(7,653)
Interest paid			(203)	(169)
Interest received			4,857	4,981
Tax paid2			(76)	(287)
Dividends received			4,264	4,497
Net cash flows generated from operating activities			5,487	1,369
Cash flows from investing activities
Net acquisition of plant, equipment and intangibles			(80)	(48)
Acquisitions (net of cash acquired)3			(38)	(97)
Disposal of subsidiaries			56	-
Investment in joint ventures			(77)	(68)
Net cash flows from investing activities			(139)	(213)
Cash flows from financing activities
Dividend distributions to ordinary equity holders of the Company during the year			(580)	(479)
Proceeds from issue of ordinary share capital			11	3
Purchase of employee scheme shares			(2)	(4)
Proceeds from borrowings			674	1,231
Repayment of borrowings			(181)	(1,115)
Net cash flows used in financing activities			(78)	(364)
Net increase in cash and cash equivalents			5,270	792
Exchange losses on cash and cash equivalents			(15)	-
Cash and cash equivalents at 1 January			17,454	16,662
Cash and cash equivalents at 31 December			22,709	17,454
1. The Consolidated Cash Flow Statement has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24.
2. Tax comprises UK corporation tax paid of £29m (2013: £133m), overseas corporate taxes of £24m (2013: £6m) and withholding tax of £23m (2013: £148m).
3. Net cash flows from acquisitions includes cash paid of £38m (2013: £287m) less cash and cash equivalents acquired of £nil (2013: £190m).
The Group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including those relating to the UK long-term fund policyholders.

IFRS and Cash                                                                                                                                            40

2.08 Earnings per share

(a) Earnings per share

					Profit	Earnings	Profit	Earnings
					after tax	per share1	after tax	per share1
					2014	2014	2013	2013
					£m	p	£m	p
Operating profit					998	16.92	883	15.03
Investment and other variances					(13)	(0.22)	13	0.22
Impact of change in UK tax rates					-	-	(3)	(0.05)
Earnings per share based on profit
attributable to equity holders					985	16.70	893	15.20
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 year, excluding employee scheme treasury shares.

(b) Diluted earnings per share

			Profit	Number	Earnings	Profit	Number	Earnings
			after tax	of shares1	per share	after tax	of shares1	per share
			2014	2014	2014	2013	2013	2013
			£m	m	p	£m	m	p
Profit attributable to equity holders of the Company			985	5,897	16.70	893	5,875	15.20
Net shares under options allocable for no further consideration			-	59	(0.16)	-	79	(0.20)
Diluted earnings per share			985	5,956	16.54	893	5,954	15.00
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.

IFRS and Cash                                                                                                                                            41

2.09 Acquisition

Global Index Advisors Inc.

On 19 May 2014, the Group acquired the trade and assets of Global Index Advisors Inc., an asset management advisory based in

Atlanta, US. The acquisition provides the Group with opportunities to accelerate growth into the US Defined Contribution market

								2014
								£m
Total cash and deferred contingent consideration for 100% acquisition								24
Recognised amounts of identifiable assets transferred and liabilities assumed at fair value
Intangibles								38
Deferred tax liabilities								(14)
Net assets attributable to equity holders of the Company								24
Deferred contingent consideration represents amounts payable for the trade and assets of Global Index Advisors Inc. contingent on meeting certain financial performance targets over a 1 to 2 year period. The range of undiscounted amounts the company could pay under the contingent consideration arrangements is between £nil and £6.9m.

2.10 Disposals

On 28 May 2014, the Group sold Amber Taverns, the operator of 95 community pubs in the North of England to funds managed by MxP Partners LLP and their associates for £50m. The carrying value of the company was c£37m, realising the profit on disposal of c£13m reported in the operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.

On 31 October 2014, the Group sold its estate agency franchise business, Xperience, to the well established lettings franchise business, Martin & Co. for £6m. The carrying value of the business was £1m, realising the profit on disposal of £5m reported in operational income in the Consolidated Income Statement.

2.11 Financial investments and Investment property

							2014	2013 1
							£m	£m
Equities							162,177	166,663
Unit trusts							7,529	7,426
Debt securities2							178,766	153,742
Accrued interest							1,604	1,633
Derivative assets3							10,035	4,746
Loans and receivables							503	330
Financial investments							360,614	334,540
Investment property							8,152	6,377
Total financial investments and investment property							368,766	340,917
1. Financial investments and Investment property and fair value hierarchy have been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24.
2. Detailed analysis of debt securities which shareholders are directly exposed to are disclosed in Note 4.05.
3. 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 £6,011m (2013: £2,391m) held on behalf of unit linked policyholders.

IFRS and Cash                                                                                                                                            42

2.12 Dividends 

						Per		Per
					Dividend	share1	Dividend	share1
					2014	2014	2013	2013
					£m	p	£m	p
Ordinary share dividends paid in the year
- Prior year final dividend					408	6.90	337	5.69
- Current year interim dividend					172	2.90	142	2.40
					580	9.80	479	8.09
Ordinary share dividend proposed2					496	8.35	408	6.90
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 on the Consolidated Balance Sheet.

2.13 Share capital and share premium

				2014			2013
				Number of	2014		Number of	2013
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 2014					5,917,066,636		148	959
Options exercised under share option schemes
- Executive share option scheme						-	-	-
- Savings related share option scheme					25,003,593		1	10
As at 31 December 2014					5,942,070,229		149	969
							Share	Share
						Number of	capital	premium
Issued share capital, fully paid						shares	£m	£m
As at 1 January 2013					5,912,782,826		148	956
Options exercised under share option schemes
- Executive share option scheme						1,422,327	-	1
- Savings related share option scheme					2,861,483		-	2
As at 31 December 2013					5,917,066,636		148	959
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 Cash                                                                                                                                            43

2.14 Segmental analysis of profit/(loss) for the year
						Group
						expenses
						and debt
	LGAS	LGR	LGIM	LGC	LGA	costs	Total
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m
Operating profit/(loss)	460	428	336	203	56	(208)	1,275
Investment and other variances1	(7)	67	(12)	(37)	(13)	(42)	(44)
Gains attributable to non-controlling interests	-	-	-	-	-	7	7
Profit/(loss) before tax attributable to equity holders	453	495	324	166	43	(243)	1,238
Tax (expense)/credit attributable to equity holders
of the Company2	(102)	(97)	(70)	(9)	(19)	51	(246)
Profit/(loss) for the year	351	398	254	157	24	(192)	992
						Group
						expenses
						and debt
	LGAS	LGR	LGIM	LGC	LGA	costs	Total
For the year ended 31 December 2013	£m	£m	£m	£m	£m	£m	£m
Operating profit/(loss)	444	310	304	179	92	(171)	1,158
Investment and other variances	(73)	63	(6)	60	(13)	(58)	(27)
Gains attributable to non-controlling interests3	-	-	-	-	-	13	13
Profit/(loss) before tax attributable to equity holders	371	373	298	239	79	(216)	1,144
Tax (expense)/credit attributable to equity holders
of the Company	(83)	(83)	(65)	(27)	(43)	63	(238)
Profit/(loss) for the year	288	290	233	212	36	(153)	906
1. Positive investment and other variances for LGR are primarily due to favourable default experience and an increase in exposure to Direct Investments which has enhanced the risk adjusted return. Negative investment and other variances for LGC reflect lower equity returns from shareholder funds.
2. The low tax charge for LGC primarily reflects the impact of non-taxable income and recognition of losses.
3. The segmental analysis of profit/(loss) for the year has been restated to reflect the adoption by the Group of IFRS 10 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase profit for the year by £10m for 2013.

IFRS and Cash                                                                                                                                            44

2.15 Core Borrowings
				Carrying	Fair	Carrying	Fair
				amount	value	amount	value
				2014	2014	2013	2013
				£m	£m	£m	£m
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)				658	642	680	650
5.875% Sterling undated subordinated notes (Tier 2)				416	431	418	438
4.0% Euro subordinated notes 2025 (Tier 2)				472	482	498	531
10% Sterling subordinated notes 2041 (Tier 2)				310	424	309	417
5.5% Sterling subordinated notes 2064 (Tier 2)				588	666	-	-
Client fund holdings of Group debt1				(28)	(31)	(13)	(13)
Total subordinated borrowings				2,416	2,614	1,892	2,023
Senior borrowings
Sterling medium term notes 2031-2041				609	800	608	721
Client fund holdings of Group debt1				(48)	(62)	(47)	(55)
Total senior borrowings				561	738	561	666
Total core borrowings				2,977	3,352	2,453	2,689
1. £76m (2013: £60m) of the Group's subordinated and senior borrowings are currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.
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 regulatory purposes these securities are treated as innovative tier 1 capital.

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 capital for regulatory purposes.

4.0% Euro subordinated notes 2025

In 2005, Legal & General Group Plc issued €600m of 4.0% Euro dated subordinated notes. The proceeds were swapped into sterling. The notes are callable at par on 8 June 2015 and each year thereafter. If not called, the coupon from 8 June 2015 will reset to a floating rate of interest based on prevailing three month Euribor plus 1.7% pa. These notes mature on 8 June 2025 and are treated as tier 2 capital for regulatory 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 and are treated as tier 2 capital for regulatory purposes.

5.5% Sterling subordinated notes 2064

On 19 June 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 and are treated as tier 2 capital for regulatory purposes.

IFRS and Cash                                                                                                                                            45

2.16 Operational Borrowings
					Carrying	Fair	Carrying	Fair
					amount	value	amount	value
					2014	2014	2013 1	2013 1
					£m	£m	£m	£m
Short term operational borrowings
Euro Commercial paper					73	73	173	173
Bank loans/other					13	13	16	16
Total short term operational borrowings					86	86	189	189
Non recourse borrowings
US Dollar Triple X securitisation 2037					286	240	268	230
Suffolk Life unit linked borrowings					120	120	116	116
LGV 6/LGV 7 Private Equity Fund Limited Partnership					136	136	131	131
Consolidated Property Limited Partnerships					148	148	129	129
Total non recourse borrowings					690	644	644	606
Group holding of operational borrowings2					(61)	(52)	(58)	(49)
Total operational borrowings					715	678	775	746
1. Operational Borrowings has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24.
2. Group investments in operational borrowings have been eliminated from the Group 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 short term operational borrowings of £86m (2013: £189m). 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 is secured on the cash flows related to that tranche of business.

Suffolk Life unit linked borrowings

All of these non recourse borrowings are in relation to commercial properties held within SIPP plans and the borrowings solely relate to client investments.

LGV 6/LGV 7 Private Equity Fund Limited Partnerships

These borrowings are non recourse bank borrowings.

Consolidated Property Limited Partnerships

These borrowings are non recourse bank borrowings.

Syndicated credit facility

As at 31 December 2014, the Group had in place a £1bn syndicated committed revolving credit facility provided by a number of its key relationship banks, £0.04bn matures in October 2017 and £0.96bn matures in October 2018. No amounts were outstanding at 31 December 2014.

IFRS and Cash                                                                                                                                            46

2.17 Insurance contract liabilities

(a) Analysis of insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
				Notes	£m	£m	£m	£m
Participating insurance contracts				2.17(b)	6,579	(1)	6,972	(1)
Non-participating insurance contracts				2.17(c)	49,589	(2,587)	39,975	(2,596)
General insurance contracts				2.17(d)	287	(8)	298	(5)
Insurance contract liabilities					56,455	(2,596)	47,245	(2,602)

(b) Movement in participating insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
					£m	£m	£m	£m
As at 1 January					6,972	(1)	8,116	(1)
New liabilities in the year					61	-	75	-
Liabilities discharged in the year					(1,159)	-	(1,606)	-
Unwinding of discount rates					54	-	79	-
Effect of change in non-economic assumptions					(5)	-	4	-
Effect of change in economic assumptions					561	-	291	-
Other					95	-	13	-
As at 31 December					6,579	(1)	6,972	(1)

IFRS and Cash                                                                                                                                            47

2.17 Insurance contract liabilities (continued)

(c) Movement in non-participating insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
					£m	£m	£m	£m
As at 1 January					39,975	(2,596)	37,445	(2,277)
New liabilities in the year					7,325	(446)	3,872	(334)
Liabilities discharged in the year					(2,469)	259	(2,307)	167
Unwinding of discount rates					1,493	(145)	1,308	(134)
Effect of change in non-economic assumptions					(569)	362	77	(25)
Effect of change in economic assumptions					3,844	(3)	(430)	-
Foreign exchange adjustments					(10)	(18)	10	7
As at 31 December					49,589	(2,587)	39,975	(2,596)

(d) Analysis of General insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
					£m	£m	£m	£m
Outstanding claims					61	(1)	66	-
Claims incurred but not reported					30	-	37	-
Unearned premiums					196	(7)	195	(5)
General insurance contract liabilities					287	(8)	298	(5)

(e) Movement in General insurance claim liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
					£m	£m	£m	£m
As at 1 January					103	-	104	-
Claims arising					182	(2)	175	-
Claims paid					(183)	1	(156)	-
Adjustments to prior year liabilities					(11)	-	(20)	-
As at 31 December					91	(1)	103	-

IFRS and Cash                                                                                                                                            48

2.18 Investment contract liabilities

(a) Analysis of investment contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
			Note		£m	£m	£m	£m
Participating investment contracts					7,667	14	7,493	-
Non-participating investment contracts					288,558	(324)	278,754	(295)
Investment contract liabilities			2.18(b)		296,225	(310)	286,247	(295)

(b) Movement in investment contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2014	2014	2013	2013
					£m	£m	£m	£m
As at 1 January					286,247	(295)	272,361	(213)
Reserves in respect of new business					30,645	(334)	30,816	(237)
Amounts paid on surrenders and maturities during the year					(53,311)	60	(47,055)	66
Investment return and related benefits					33,126	259	30,369	89
Management charges					(309)	-	(295)	-
Foreign exchange adjustments					(177)	-	51	-
Other					4	-	-	-
As at 31 December					296,225	(310)	286,247	(295)

Change in provisions for investment contract liabilities represents the total gross and reinsurance investment return and related benefits of  £33,385m (2013: £30,458m).
Fair value movements of £33,198m (2013: £30,095m) are included within the income statement arising from movements in investment contract liabilities designated as fair value through profit and loss.

IFRS and Cash                                                                                                                                            49

2.19 IFRS sensitivity analysis

							Impact on
							pre-tax	Impact on
							Group profit	Group equity
							net of re-	net of re-
							insurance	insurance
							2014	2014
							£m	£m
Economic sensitivity
Long-term insurance
1% increase in interest rates							120	54
1% decrease in interest rates							(245)	(146)
1% increase in long term inflation expectations							(193)	(152)
Credit spread widens by 100bps with no change in expected defaults							(177)	(212)
10% decrease in listed equities							(155)	(126)
10% fall in property values							(130)	(102)
10bps increase in credit default assumption							(370)	(290)
10bps decrease in credit default assumption							344	270
Non-economic sensitivity
Long-term insurance
1% decrease in annuitant mortality							(170)	(133)
5% increase in assurance mortality							(56)	(44)
Default of largest external reinsurer							(657)	(516)
General Insurance
Single storm event with 1 in 200 year probability							(74)	(59)
Subsidence event - worst claims ratio in last 30 years							(54)	(43)
5% decrease in overall claims ratio							8	6
5% surplus over claims liabilities							5	4

The table shows the impacts on Group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario for the Group. The participating funds have been excluded in the above sensitivity analysis as the impact of the sensitivities on IFRS profit and equity is offset by the movement in the unallocated divisible surplus (UDS). The shareholders' share of with-profit bonus declared in the year is relatively insensitive to market movements due to the smoothing policies applied.

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 of the Group's experience 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.

The interest rate sensitivity assumes a 100 basis point change in the gross redemption yield on fixed interest securities together with a 100 basis point change in the real yields on variable securities.  For the UK long term 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. Modelling improvements have been made in the year which more accurately isolate the impacts of discrete assumptions changes. This, coupled with the increase in the Group's annuity liabilities have led to an increase in the reported 2014 sensitivities for interest rates and inflation. 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 1% pa increase in inflation resulting in a 1% pa reduction in real yield and no change to the nominal yield. In addition the expense inflation rate is increased by 1% 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 the sensitivity to the default of the Group's largest external reinsurer, the reinsurer stress shown is equal to the technical provisions ceded to the external reinsurer and represents the impact of the default of largest external reinsurer at an entity level.

IFRS and Cash                                                                                                                                            50

2.20 Foreign exchange rates

Principal rates of exchange used for translation are:
Year end exchange rates							At 31.12.14	At 31.12.13
United States Dollar							1.56	1.66
Euro							1.29	1.20
							01.01.14 -	01.01.13 -
Average exchange rates							31.12.14	31.12.13
United States Dollar							1.65	1.57
Euro							1.24	1.18

2.21 Provisions

(a) Analysis of provisions
							2014	2013
							£m	£m
Retirement benefit obligations							1,217	1,113
Other provisions							30	15
							1,247	1,128
(b) Retirement benefit obligations
					Fund and		Fund and
					Scheme	Overseas	Scheme	Overseas
					2014	2014	2013	2013
					£m	£m	£m	£m
Gross pension obligations included in provisions					(1,215)	(2)	(1,113)	-
Annuity obligations insured by Society					723	-	646	-
Gross defined benefit pension deficit					(492)	(2)	(467)	-
Deferred tax on defined benefit pension deficit					98	-	93	-
Net defined benefit pension deficit					(394)	(2)	(374)	-

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. At 31 December 2014, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at £394m (2013: £374m). These amounts have been recognised in the financial statements with £248m charged against shareholder equity (2013: £236m) and £146m against the unallocated divisible surplus (2013: £138m). IFRS and Cash                                                                                                                                            51 2.22 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:
							2014	2013
							£m	£m
Profit before tax attributable to equity holders							1,238	1,144
Tax calculated at 21.5% (2013: 23.25%)							266	266
Effects of:
Adjustments in respect of prior years							8	4
Income not subject to tax, such as dividends							(9)	(6)
Change in valuation of tax losses							(6)	(19)
Higher rate of tax on profits taxed overseas							8	23
Additional allowances/non-deductible expenses							(7)	(11)
Impact of reduction in UK corporate tax rate to 20% (2013: 20%/21%) on deferred tax balances							-	3
Differences between taxable and accounting investment gains e.g. RPI relief							(15)	(19)
Other							1	(3)
Tax attributable to equity holders							246	238
Equity holders' effective tax rate1							19.9%	20.8%
1. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.

(b) Deferred Tax
							2014	2013
(i) UK deferred tax (liabilities)/ assets							£m	£m
Realised and unrealised gains on investments							(168)	(160)
Excess of depreciation over capital allowances							19	24
Excess expenses1							105	192
Deferred acquisition expenses							(61)	(72)
Difference between the tax and accounting value of insurance contracts							(143)	(70)
Accounting provisions							3	8
Trading losses2							45	93
Pension fund deficit							98	93
Purchased interest in long term business							(24)	(26)
Net UK deferred tax (liabilities)/ assets3							(126)	82
(ii) Overseas deferred tax (liabilities)/ assets
Realised and unrealised gains on investments							(53)	(33)
Deferred acquisition expenses							(295)	(241)
Difference between the tax and accounting value of insurance contracts							(242)	(229)
Accounting provisions							(20)	(17)
Trading losses							186	158
Purchased interest in long term business							(10)	-
Net Overseas deferred tax liabilities							(434)	(362)
1. The reduction in the deferred tax asset on excess expenses reflects the full utilisation of excess management expenses together with the unwind of the spread acquisition expenses relating to changes in the I-E legislation.
2. The reduction in the deferred tax asset primarily reflects utilisation of brought forward trading losses against LGAS and LGR taxable profits (£71m) partly offset by additional tax losses.
3. The move to a net deferred tax liability provision in the UK reflects the continued utilisation of tax losses and corresponding reduction in deferred tax asset while the deferred tax liability on actuarial reserves has increased. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of £54m and a liability of £180m where the relevant items cannot be offset.

IFRS and Cash                                                                                                                                            52

2.23 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 and 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 indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions. 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.

IFRS and Cash                                                                                                                                            53

2.24 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 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, unless otherwise stated.

The Group presents its balance sheet in order of liquidity. This is considered to be more relevant than a before and after 12 months presentation, given the long term nature of the Group's core business. However, for each asset and liability line item which combines amounts expected to be recovered or settled before and after 12 months from the balance sheet date, disclosure of the split is made by way of a note.

Financial assets and financial liabilities are disclosed gross in the 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 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; the estimation of deferred acquisition costs; tax balances; and the estimation of 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 financial statements.

Reportable segments

Under the requirements of IFRS 8, 'Operating segments', operating and reportable segments are presented in a manner consistent with the internal reporting provided to the chief operating decision maker, which has been identified as the Board of Legal & General Group Plc.

The Group has five reportable segments comprising Legal & General Assurance Society (LGAS), Legal & General Retirement (LGR), Legal & General Investment Management (LGIM), Legal & General America (LGA), and Legal & General Capital (LGC).

LGAS represents Protection business (retail protection, group protection and general insurance) and Savings business (platforms, workplace, SIPPs, mature savings and with-profits). The LGAS segment also includes Legal & General France (LGF), Legal & General Netherlands (LGN) and emerging markets.

LGR represents Annuities (both individual and bulk purchase) and longevity insurance.

The LGIM segment represents institutional and retail investment management businesses.

The LGC segment includes shareholders' equity supporting the non-profit LGR and LGAS businesses held within Society and Legal & General Pensions Limited (LGPL) and capital held by the Group's treasury function.

The LGA segment comprises protection business written in the USA.

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

IFRS and Cash                                                                                                                                            54

2.24 Basis of preparation (continued)

Changes to accounting policy - IASB consolidation project                                                                                                                                                                                                                                                                                                                                      

On 1 January 2014 the application of IFRS 10, 'Consolidated Financial Statements', and IFRS 11, 'Joint Arrangements' became compulsory for entities reporting in the EU.                                                                                                                                                                 

IFRS 10, 'Consolidated Financial Statements' defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. This states that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The application of IFRS 10 has resulted in the Group consolidating a small number of investment vehicles which were not previously consolidated. There is no material impact on the profit reported for the year ended 31 December 2013 or 31 December 2014. The effect on profit, total equity and cash flow previously reported at 31 December 2013 is shown below. The prior year information in Notes 2.11 and 2.16 has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'.

IFRS 11, 'Joint Arrangements' defines and establishes accounting principles for joint arrangements. Based on how rights and obligations are shared by parties to the arrangements, it distinguishes between two such types: joint ventures and joint operations. As all of our joint arrangements are classified as joint ventures the adoption of this Standard has no impact upon the Group.

IFRS 12, 'Disclosures of Interests in Other Entities' requires an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows. The additional requirements of this standard are reflected within the Group's 2014 Annual Report and Accounts.

							As
							previously	IFRS 10
							reported	Impact	Restated
							31.12.13	31.12.13	31.12.13
Consolidated Income Statement							£m	£m	£m
Investment return							32,221	13	32,234
Finance costs							(163)	(3)	(166)
Profit for the year							896	10	906
Attributable to:
Non-controlling interests							3	10	13
Equity holders of the Company							893	-	893
Consolidated Balance Sheet
Assets
Investment property							6,060	317	6,377
Financial investments							331,802	2,738	334,540
Other assets							2,115	6	2,121
Cash and cash equivalents							17,407	47	17,454
Shareholders' equity
Non-controlling interests							58	207	265
Liabilities
Operational borrowings							704	71	775
Payables and other financial liabilities							8,931	374	9,305
Other liabilities							1,032	13	1,045
Net asset value attributable to unit holders							8,375	2,443	10,818

Consolidated Cash Flow Statement
Net cash flows from operating activities						1,332	37	1,369
Cash and cash equivalents at 1 January						16,652	10	16,662
Cash and cash equivalents at 31 December						17,407	47	17,454

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 2014 Annual Report and Accounts. Assets and premium flows                                                                                                                          55 3.01 Legal & General investment management assets
			Active
		Index	fixed	Solu-		Active	Total	Overlay	Advisory	Total
For the year ended		funds	income	tions1	Property	equities	AUM	assets2	assets	assets
31 December 2014		£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
As at 1 January 2014		269.8	89.4	70.4	11.3	8.6	449.5	162.1	-	611.6
Acquisition of GIA assets		-	-	-	-	-	-	-	13.4	13.4
External inflows		22.8	5.5	7.6	1.4	0.1	37.4			37.4
External outflows		(39.1)	(3.8)	(6.6)	(0.5)	(0.1)	(50.1)			(50.1)
Overlay / advisory net flows		-	-	-	-	-	-	18.8	(0.2)	18.6
External net flows3		(16.3)	1.7	1.0	0.9	-	(12.7)	18.8	(0.2)	5.9
Internal net flows		0.3	(0.5)	1.3	0.7	(0.1)	1.7	-	-	1.7
Total net flows		(16.0)	1.2	2.3	1.6	(0.1)	(11.0)	18.8	(0.2)	7.6
Cash management movements4		-	(1.6)	-	-	-	(1.6)	-	-	(1.6)
Market and other movements3		21.0	14.8	26.0	0.7	(0.3)	62.2	13.7	1.6	77.5
As at 31 December 2014		274.8	103.8	98.7	13.6	8.2	499.1	194.6	14.8	708.5
Assets attributable to:
External							409.1	194.6	14.8	618.5
Internal							90.0	-	-	90.0
Assets attributable to:
UK							388.6	191.1	-	579.7
International5							110.5	3.5	14.8	128.8
1. Solutions includes liability driven investments and multi-asset funds.
2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 31 December 2014 is £46.5bn and the movement in these assets is included in market and other movements for
overlay assets.
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
5. International assets include £37.5bn of assets transferred from our London office to our Chicago office.

			Active
		Index	fixed	Solu-		Active	Total	Overlay		Total
For the year ended		funds	income	tions1	Property	equities	AUM	assets2		assets
31 December 2013		£bn	£bn	£bn	£bn	£bn	£bn	£bn		£bn
As at 1 January 2013		243.2	82.2	64.0	8.9	7.7	406.0	136.7		542.7
External inflows		31.3	8.7	8.6	1.0	0.1	49.7			49.7
External outflows		(31.8)	(2.7)	(5.2)	(0.3)	(0.4)	(40.4)			(40.4)
Overlay net flows		-	-	-	-	-	-	11.2		11.2
External net flows3		(0.5)	6.0	3.4	0.7	(0.3)	9.3	11.2		20.5
Internal net flows		0.7	(1.7)	0.8	0.2	(0.2)	(0.2)	-		(0.2)
Total net flows		0.2	4.3	4.2	0.9	(0.5)	9.1	11.2		20.3
Cash management movements4		-	-	-	-	-	-	-		-
Market and other movements3		26.4	2.9	2.2	1.5	1.4	34.4	14.2		48.6
As at 31 December 2013		269.8	89.4	70.4	11.3	8.6	449.5	162.1		611.6
Assets attributable to:
External							370.2	162.1		532.3
Internal							79.3	-		79.3
Assets attributable to:
UK							390.3	160.1		550.4
International							59.2	2.0		61.2
1. Solutions includes liability driven investments and multi-asset funds.
2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 31 December 2013 is £32.8bn and the movement in these assets is included in market and other movements for
overlay assets.
4.Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Assets and premium flows                                                                                                                          56

3.01 Legal & General investment management assets (continued)
							12	12
							months	months
							to	to
							31.12.14	31.12.13
							£bn	£bn
LGIM total assets net flows							7.6	20.3
Attributable to:
International1							8.5	15.8
UK Institutional							(1.5)	5.8
UK Retail2							0.8	0.4
Annuities3							2.5	1.4
Mature Businesses							(2.7)	(3.1)
1. 2013 International net flows includes £2.9bn of Legal & General France assets. 2. 2014 UK Retail net flows include £0.7bn of assets previously managed externally. 3. Pension funds already managed by LGIM that switch into LGR annuities are excluded.

Assets and premium flows                                                                                                                          57

3.02 Legal & General investment management assets quarterly progression
			Active
		Index	fixed	Solu-		Active	Total	Overlay	Advisory	Total
For the year ended		funds	income	tions1	Property	equities	AUM	assets2	assets	assets
31 December 2014		£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2014		269.8	89.4	70.4	11.3	8.6	449.5	162.1	-	611.6
External inflows		4.7	1.4	2.1	0.3	-	8.5			8.5
External outflows		(5.7)	(0.5)	(1.2)	(0.1)	-	(7.5)			(7.5)
Overlay net flows		-	-	-	-	-	-	5.2	-	5.2
External net flows3		(1.0)	0.9	0.9	0.2	-	1.0	5.2	-	6.2
Internal net flows		0.1	2.0	0.3	0.5	(0.1)	2.8	-	-	2.8
Total net flows		(0.9)	2.9	1.2	0.7	(0.1)	3.8	5.2	-	9.0
Cash management movements4		-	-	-	-	-	-	-	-	-
Market and other movements3		1.5	2.9	4.9	(0.1)	0.1	9.3	1.0	-	10.3
At 31 March 2014		270.4	95.2	76.5	11.9	8.6	462.6	168.3	-	630.9
External inflows		5.8	1.5	2.6	0.3	0.1	10.3			10.3
External outflows		(13.4)	(1.4)	(0.9)	(0.1)	(0.1)	(15.9)			(15.9)
Overlay / advisory net flows		-	-	-	-	-	-	7.1	0.1	7.2
External net flows3		(7.6)	0.1	1.7	0.2	-	(5.6)	7.1	0.1	1.6
Internal net flows		0.1	(1.3)	0.7	0.2	(0.1)	(0.4)	-	-	(0.4)
Total net flows		(7.5)	(1.2)	2.4	0.4	(0.1)	(6.0)	7.1	0.1	1.2
Acquisition of GIA assets		-	-	-	-	-	-	-	13.4	13.4
Cash management movements4		-	0.2	-	-	-	0.2	-	-	0.2
Market and other movements3		5.8	3.0	(0.7)	0.5	(0.3)	8.3	(0.5)	0.2	8.0
At 30 June 2014		268.7	97.2	78.2	12.8	8.2	465.1	174.9	13.7	653.7
External inflows		5.4	1.0	1.3	0.3	-	8.0			8.0
External outflows		(8.6)	(0.8)	(1.4)	(0.2)	-	(11.0)			(11.0)
Overlay / advisory net flows		-	-	-	-	-	-	2.5	-	2.5
External net flows3		(3.2)	0.2	(0.1)	0.1	-	(3.0)	2.5	-	(0.5)
Internal net flows		(0.2)	(0.9)	0.1	(0.1)	(0.1)	(1.2)	-	-	(1.2)
Total net flows		(3.4)	(0.7)	-	-	(0.1)	(4.2)	2.5	-	(1.7)
Cash management movements4		-	(0.7)	-	-	-	(0.7)	-	-	(0.7)
Market and other movements3		5.2	1.7	9.5	0.4	(0.2)	16.6	7.9	0.5	25.0
At 30 September 2014		270.5	97.5	87.7	13.2	7.9	476.8	185.3	14.2	676.3
External inflows		6.9	1.6	1.6	0.5	-	10.6			10.6
External outflows		(11.4)	(1.1)	(3.1)	(0.1)	-	(15.7)			(15.7)
Overlay / advisory net flows		-	-	-	-	-	-	4.0	(0.3)	3.7
External net flows3		(4.5)	0.5	(1.5)	0.4	-	(5.1)	4.0	(0.3)	(1.4)
Internal net flows		0.3	(0.3)	0.2	0.1	0.2	0.5	-	-	0.5
Total net flows		(4.2)	0.2	(1.3)	0.5	0.2	(4.6)	4.0	(0.3)	(0.9)
Cash management movements4		-	(1.1)	-	-	-	(1.1)	-	-	(1.1)
Market and other movements3		8.5	7.2	12.3	(0.1)	0.1	28.0	5.3	0.9	34.2
At 31 December 2014		274.8	103.8	98.7	13.6	8.2	499.1	194.6	14.8	708.5
1. Solutions includes liability driven investments and multi-asset funds.
2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 31 December 2014 is £46.5bn (Q1 2014: £33.8bn; Q2 2014: £33.3bn; Q3 2014: £41.2bn), and the
movement in these assets is included in market and other movements for overlay assets.
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Assets and premium flows                                                                                                                          58 3.02 Legal & General investment management assets quarterly progression (continued)
				Active
			Index	fixed	Solu-		Active	Total	Overlay	Total
For the year ended			funds	income	tions1	Property	equities	AUM	assets2	assets
31 December 2013			£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2013			243.2	82.2	64.0	8.9	7.7	406.0	136.7	542.7
External inflows			11.0	1.3	1.1	0.1	-	13.5		13.5
External outflows			(7.1)	(0.5)	(1.1)	-	(0.1)	(8.8)		(8.8)
Overlay net flows			-	-	-	-	-	-	2.5	2.5
External net flows3			3.9	0.8	-	0.1	(0.1)	4.7	2.5	7.2
Internal net flows			0.1	(0.7)	0.1	-	-	(0.5)	-	(0.5)
Total net flows			4.0	0.1	0.1	0.1	(0.1)	4.2	2.5	6.7
Cash management movements5			-	0.5	-	-	-	0.5	-	0.5
Market and other movements3			20.1	2.0	7.3	0.3	0.8	30.5	3.8	34.3
At 31 March 2013			267.3	84.8	71.4	9.3	8.4	441.2	143.0	584.2
External inflows			6.2	1.0	4.6	0.2	-	12.0		12.0
External outflows			(7.9)	(0.7)	(0.7)	(0.1)	(0.3)	(9.7)		(9.7)
Overlay net flows			-	-	-	-	-	-	3.2	3.2
External net flows3			(1.7)	0.3	3.9	0.1	(0.3)	2.3	3.2	5.5
Internal net flows			0.4	(0.8)	0.6	-	-	0.2	-	0.2
Total net flows			(1.3)	(0.5)	4.5	0.1	(0.3)	2.5	3.2	5.7
Cash management movements5			-	0.5	-	-	-	0.5	-	0.5
Market and other movements3			(3.9)	(1.9)	(5.0)	-	(0.4)	(11.2)	(0.5)	(11.7)
At 30 June 2013			262.1	82.9	70.9	9.4	7.7	433.0	145.7	578.7
External inflows4			8.0	4.4	2.2	0.4	0.1	15.1		15.1
External outflows			(8.3)	(0.6)	(1.7)	(0.1)	-	(10.7)		(10.7)
Overlay net flows			-	-	-	-	-	-	3.3	3.3
External net flows3			(0.3)	3.8	0.5	0.3	0.1	4.4	3.3	7.7
Internal net flows			-	0.6	-	0.1	(0.1)	0.6	-	0.6
Total net flows			(0.3)	4.4	0.5	0.4	-	5.0	3.3	8.3
Cash management movements5			-	(1.0)	-	-	-	(1.0)	-	(1.0)
Market and other movements3			3.2	1.4	0.1	0.6	0.3	5.6	2.4	8.0
At 30 September 2013			265.0	87.7	71.5	10.4	8.0	442.6	151.4	594.0
External inflows			6.1	2.0	0.7	0.3	-	9.1		9.1
External outflows			(8.5)	(0.9)	(1.7)	(0.1)	-	(11.2)		(11.2)
Overlay net flows			-	-	-	-	-	-	2.2	2.2
External net flows3			(2.4)	1.1	(1.0)	0.2	-	(2.1)	2.2	0.1
Internal net flows			0.2	(0.8)	0.1	0.1	(0.1)	(0.5)	-	(0.5)
Total net flows			(2.2)	0.3	(0.9)	0.3	(0.1)	(2.6)	2.2	(0.4)
Cash management movements5			-	-	-	-	-	-	-	-
Market and other movements3			7.0	1.4	(0.2)	0.6	0.7	9.5	8.5	18.0
At 31 December 2013			269.8	89.4	70.4	11.3	8.6	449.5	162.1	611.6
1. Solutions includes liability driven investments and multi-asset funds.
2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 31 December 2013 is £32.8bn (Q1 2013: £22.4bn; Q2 2013: £21.9bn; Q3 2013: £24.3bn), and the
movement in these assets is included in market and other movements for overlay assets.
4. Includes £2.9bn of Legal & General France assets.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Assets and premium flows                                                                                                                          59 3.02 Legal & General investment management assets quarterly progression (continued)
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.14	30.09.14	30.06.14	31.03.14	31.12.13	30.09.13	30.06.13	31.03.13
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
LGIM total assets net flows	(0.9)	(1.7)	1.2	9.0	(0.4)	8.3	5.7	6.7
Attributable to:
International1	1.3	1.3	2.5	3.4	1.8	6.4	0.6	7.0
UK Institutional	(2.6)	(1.7)	(0.2)	3.0	(1.6)	1.1	5.6	0.7
UK Retail2	0.3	-	0.2	0.3	0.1	0.3	0.3	(0.3)
Annuities3	(0.3)	(0.1)	(0.3)	3.2	(0.1)	1.4	0.1	-
Mature Businesses	0.4	(1.2)	(1.0)	(0.9)	(0.6)	(0.9)	(0.9)	(0.7)
1. Q3 2013 International net flows include £2.9bn of Legal & General France assets.
2. Q2 2014 UK Retail net flows include £0.7bn of assets previously managed externally.
3. Pension funds already managed by LGIM that switch into LGR annuities are excluded.

3.03 Assets under administration
						Consol-
		Mature			Overseas	idation		Retail
		Retail	Work-	Suffolk	LGAS	adjust-	Total	Invest-
For the year ended	Platforms1	Savings2	place	Life	Savings	ment3	LGAS	ments4	Annuities
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
As at 1 January 2014	64.1	36.3	8.7	6.6	4.5	(6.8)	113.4	20.5	34.4
Gross inflows5	10.1	1.4	2.8	1.3	0.4	(0.5)	15.5	4.4	6.5
Gross outflows	(4.7)	(4.4)	(0.6)	(0.5)	(0.4)	0.7	(9.9)	(4.8)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(2.1)
Net flows	5.4	(3.0)	2.2	0.8	-	0.2	5.6	(0.4)	4.4
Market and other
movements	2.4	2.7	0.2	0.3	(0.1)	(0.3)	5.2	1.2	5.4
As at 31 December 2014	71.9	36.0	11.1	7.7	4.4	(6.9)	124.2	21.3	44.2
						Consol-
		Mature			Overseas	idation		Retail
		Retail	Work-	Suffolk	LGAS	adjust-	Total	Invest-
For the year ended	Platforms1	Savings2	place	Life	Savings	ment3	LGAS	ments4	Annuities
31 December 2013	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
As at 1 January 2013	8.6	36.2	6.0	5.1	4.5	(1.4)	59.0	18.6	32.2
Gross inflows5	11.0	1.4	2.1	1.3	0.1	(0.3)	15.6	3.6	4.0
Gross outflows	(3.1)	(5.1)	(0.6)	(0.4)	(0.1)	0.5	(8.8)	(3.7)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(1.9)
Net flows	7.9	(3.7)	1.5	0.9	-	0.2	6.8	(0.1)	2.1
Cofunds acquisition	45.7	-	-	-	-	(5.4)	40.3	-	-
Market and other
movements	1.9	3.8	1.2	0.6	-	(0.2)	7.3	2.0	0.1
As at 31 December 2013	64.1	36.3	8.7	6.6	4.5	(6.8)	113.4	20.5	34.4
1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. Retail Investments include £1.7bn (2013: £1.5bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (2013: £3.2bn) of LGIM unit trust assets held
on our IPS platform.
5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise £38.3bn (2013: £36.3bn) of retail assets and £33.6bn (2013: £27.8bn).
of assets held on behalf of institutional clients.
Assets and premium flows                                                                                                                          60 3.04 Assets under administration quarterly progression
						Consol-
		Mature			Overseas	idation		Retail
		Retail	Work-	Suffolk	LGAS	adjust-	Total	Invest-
For the year ended	Platforms1	Savings2	place	Life	Savings	ment3	LGAS	ments4	Annuities
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2014	64.1	36.3	8.7	6.6	4.5	(6.8)	113.4	20.5	34.4
Gross inflows5	2.6	0.4	0.7	0.3	0.1	(0.1)	4.0	1.0	3.3
Gross outflows	(1.1)	(1.1)	(0.2)	(0.1)	(0.1)	0.2	(2.4)	(0.9)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.5	(0.7)	0.5	0.2	-	0.1	1.6	0.1	2.8
Market and other
movements	-	0.5	(0.1)	0.1	(0.1)	(0.1)	0.3	0.2	1.1
At 31 March 2014	65.6	36.1	9.1	6.9	4.4	(6.8)	115.3	20.8	38.3
Gross inflows5	2.2	0.3	0.6	0.3	0.1	(0.1)	3.4	0.9	0.2
Gross outflows	(1.2)	(1.1)	(0.1)	(0.1)	(0.1)	0.2	(2.4)	(1.5)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.0	(0.8)	0.5	0.2	-	0.1	1.0	(0.6)	(0.3)
Market and other
movements	0.8	0.6	(0.1)	0.1	0.1	-	1.5	0.4	0.5
At 30 June 2014	67.4	35.9	9.5	7.2	4.5	(6.7)	117.8	20.6	38.5
Gross inflows5	2.8	0.4	0.7	0.4	0.1	(0.2)	4.2	1.2	0.4
Gross outflows	(1.3)	(1.2)	(0.2)	(0.2)	(0.1)	0.2	(2.8)	(1.3)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.6)
Net flows	1.5	(0.8)	0.5	0.2	-	-	1.4	(0.1)	(0.2)
Market and other
movements	0.1	0.4	0.1	0.1	(0.1)	(0.1)	0.5	0.2	1.6
At 30 September 2014	69.0	35.5	10.1	7.5	4.4	(6.8)	119.7	20.7	39.9
Gross inflows5	2.5	0.3	0.8	0.3	0.1	(0.1)	3.9	1.3	2.6
Gross outflows	(1.1)	(1.0)	(0.1)	(0.1)	(0.1)	0.1	(2.3)	(1.1)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.4	(0.7)	0.7	0.2	-	-	1.6	0.2	2.1
Market and other
movements	1.5	1.2	0.3	-	-	(0.1)	2.9	0.4	2.2
At 31 December 2014	71.9	36.0	11.1	7.7	4.4	(6.9)	124.2	21.3	44.2
1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. 2014 Retail Investments include £1.7bn (Q1 2014: £1.6bn; Q2 2014: £1.5bn; Q3 2014: £1.6bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn
(Q1 2014: £3.2bn; Q2 2014: £3.2bn; Q3 2014: £3.2bn) of LGIM unit trust assets held on our IPS platform.
5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise £38.3bn (Q1 2014: £36.6bn; Q2 2014: £37.3bn; Q3 2014: £37.4bn) of
retail assets and £33.6bn (Q1 2014: £29.0bn; Q2 2014: £30.1bn; Q3 2014: £31.6bn) of assets held on behalf of institutional clients.

Assets and premium flows                                                                                                                          61

3.04 Assets under administration quarterly progression (continued)
						Consol-
		Mature			Overseas	idation		Retail
		Retail	Work-	Suffolk	LGAS	adjust-	Total	Invest-
For the year ended	Platforms1	Savings2	place	Life	Savings	ment3	LGAS	ments4	Annuities
31 December 2013	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2013	8.6	36.2	6.0	5.1	4.5	(1.4)	59.0	18.6	32.2
Gross inflows	0.2	0.4	0.5	0.2	0.1	-	1.4	0.7	0.8
Gross outflows	(0.2)	(1.2)	(0.2)	(0.1)	(0.1)	0.1	(1.7)	(1.1)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.4)
Net flows	-	(0.8)	0.3	0.1	-	0.1	(0.3)	(0.4)	0.4
Market and other
movements	0.5	1.7	0.6	0.3	-	(0.1)	3.0	1.2	0.7
At 31 March 2013	9.1	37.1	6.9	5.5	4.5	(1.4)	61.7	19.4	33.3
Gross inflows5	1.7	0.4	0.5	0.3	-	-	2.9	1.1	0.6
Gross outflows	(0.7)	(1.4)	(0.1)	(0.1)	-	-	(2.3)	(1.0)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.0	(1.0)	0.4	0.2	-	-	0.6	0.1	0.1
Cofunds acquisition	45.7	-	-	-	-	(5.4)	40.3	-	-
Market and other
movements	(2.1)	(0.4)	-	-	-	0.3	(2.2)	(0.4)	(1.2)
At 30 June 2013	53.7	35.7	7.3	5.7	4.5	(6.5)	100.4	19.1	32.2
Gross inflows5	4.5	0.3	0.5	0.4	-	(0.1)	5.6	1.0	2.3
Gross outflows	(1.2)	(1.4)	(0.1)	(0.1)	-	0.2	(2.6)	(0.9)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	3.3	(1.1)	0.4	0.3	-	0.1	3.0	0.1	1.8
Market and other
movements	1.3	1.4	0.2	0.1	-	(0.2)	2.8	0.6	0.5
At 30 September 2013	58.3	36.0	7.9	6.1	4.5	(6.6)	106.2	19.8	34.5
Gross inflows5	4.6	0.3	0.6	0.4	-	(0.2)	5.7	0.8	0.3
Gross outflows	(1.0)	(1.1)	(0.2)	(0.1)	-	0.2	(2.2)	(0.7)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	3.6	(0.8)	0.4	0.3	-	-	3.5	0.1	(0.2)
Market and other
movements	2.2	1.1	0.4	0.2	-	(0.2)	3.7	0.6	0.1
At 31 December 2013	64.1	36.3	8.7	6.6	4.5	(6.8)	113.4	20.5	34.4
1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. 2013 Retail Investments include £1.5bn (Q1 2013: £1.3bn; Q2 2013: £1.3bn; Q3 2013: £1.4bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (Q1 2013: £3.1bn; Q2 2013: £3.0bn; Q3 2013: £3.1bn) of LGIM unit trust assets held on our IPS platform.
5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise  £36.3bn (Q1 2013: £9.1bn; Q2 2013: £34.2bn; Q3 2013: £35.1bn) of retail assets and £27.8bn (Q1 2013: £nil; Q2 2013: £19.5bn; Q3 2013: £23.2bn) of assets held on behalf of institutional clients.

Assets and premium flows                                                                                                                          62

3.05 Annuities single premiums quarterly progression
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.14	30.09.141	30.06.14	31.03.14	31.12.13	30.09.13	30.06.13	31.03.13
	£m	£m	£m	£m	£m	£m	£m	£m
Individual Annuities	83	125	139	244	200	323	348	406
Bulk Purchase Annuities	2,619	233	90	3,045	199	1,943	313	357
Total Annuities	2,702	358	229	3,289	399	2,266	661	763
1. Excludes £1.9bn of annuity assets transferred from the with-profits fund.

3.06 Insurance new business
							Annual	Annual
							premiums	premiums
							2014	2013
							£m	£m
UK Retail Protection							165	148
UK Group Protection							65	70
France Protection							33	21
Netherlands Protection							3	7
US Protection							91	99
Longevity Insurance							-	270
Total Insurance new business							357	615

3.07 Insurance new business annual premiums quarterly progression
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.14	30.09.14	30.06.14	31.03.14	31.12.13	30.09.13	30.06.13	31.03.13
	£m	£m	£m	£m	£m	£m	£m	£m
UK Retail Protection	41	41	41	42	43	40	38	27
UK Group Protection	11	14	20	20	13	17	20	20
France Protection	-	-	-	33	-	-	-	21
Netherlands Protection	-	1	-	2	2	1	2	2
US Protection	21	23	24	23	26	28	23	22
Longevity Insurance	-	-	-	-	95	-	-	175
Total Insurance new business	73	79	85	120	179	86	83	267

Assets and premium flows                                                                                                                          63

3.08 Gross written premiums on Insurance business
							12	12
							months	months
							to	to
							31.12.14	31.12.13
							£m	£m
UK Retail Protection							1,056	990
UK Group Protection							351	336
General Insurance							377	375
France Protection							173	168
Netherlands Protection							51	54
US Protection							678	654
Longevity Insurance							333	212
Total gross written premiums on Insurance business							3,019	2,789

3.09 Gross written premiums on Insurance business quarterly progression
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.14	30.09.14	30.06.14	31.03.14	31.12.13	30.09.13	30.06.13	31.03.13
	£m	£m	£m	£m	£m	£m	£m	£m
UK Retail Protection	273	269	260	254	256	250	244	240
UK Group Protection	57	65	130	99	54	74	123	85
General Insurance	95	104	94	84	95	97	97	86
France Protection	41	41	45	46	41	41	43	43
Netherlands Protection	9	16	12	14	13	14	13	14
US Protection	184	162	170	162	172	156	172	154
Longevity Insurance	82	84	83	84	60	60	60	32
Total gross written premiums on
Insurance business	741	741	794	743	691	692	752	654

3.10 Overseas new business in local currency
			Annual	Single		Annual	Single
			premiums	premiums	APE	premiums	premiums	APE
			31.12.14	31.12.14	31.12.14	31.12.13	31.12.13	31.12.13
US (US$m)			150	-	150	155	-	155
Netherlands (€m)			10	138	24	10	126	23
France (€m)			41	351	76	26	312	57
India (Rs m) - Group's 26% interest			408	4,003	808	491	4,264	917
Egypt (Pounds m) - Group's 55% interest			149	-	149	136	-	136
Gulf (US$m) - Group's 50% interest			3	5	4	3	4	3

Assets and premium flows                                                                                                                          64

3.11 Worldwide new business
		Annual	Single		Annual	Single		APE
		premiums	premiums	APE	premiums	premiums	APE	Increase/
		2014	2014	2014	2013	2013	2013	(decrease)
		£m	£m	£m	£m	£m	£m	%
Individual Annuities		-	591	59	-	1,277	128	(54)
Bulk Purchase Annuities		-	5,987	599	-	2,812	281	113
Total LGR1		-	6,578	658	-	4,089	409	61
UK Retail Protection		165	-	165	148	-	148	11
UK Group Protection		65	-	65	70	-	70	(7)
France		33	283	61	22	264	48	27
Netherlands		8	111	19	8	107	19	-
Workplace Savings		592	1,061	698	660	747	735	(5)
Platforms (Cofunds & IPS)2		56	3,624	418	43	2,452	288	45
Suffolk Life		-	1,239	124	-	1,330	133	(7)
Mature Retail Savings3		10	791	89	11	790	90	(1)
With-profits		53	75	61	53	80	61	-
Total LGAS		982	7,184	1,700	1,015	5,770	1,592	7
Retail Investments4		13	4,018	415	12	3,427	355	17
US Protection		91	-	91	99	-	99	(8)
India (26% share)		4	40	8	5	46	10	(20)
Egypt (55% share)		13	-	13	13	-	13	-
Gulf (50% share)		2	3	2	2	3	2	-
Total Emerging Markets		19	43	23	20	49	25	(8)
Total Worldwide new business		1,105	17,823	2,887	1,146	13,335	2,480	16
1. Total LGR new business excludes £nil (2013: £270m) of APE in relation to longevity insurance transactions. It is not included in the table due to the unpredictable
deal flow from this type of business.
2. Platforms APE includes retail business only.
3. Includes bonds and retail pensions.
4. Includes retail unit trusts and structured products only.

Assets and premium flows                                                                                                                          65

3.12 Worldwide new business APE quarterly progression
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.14	30.09.14	30.06.14	31.03.14	31.12.13	30.09.13	30.06.13	31.03.13
	£m	£m	£m	£m	£m	£m	£m	£m
Individual Annuities	8	13	14	24	20	33	35	40
Bulk Purchase Annuities	262	23	9	305	20	194	31	36
Total LGR1	270	36	23	329	40	227	66	76
UK Retail Protection	41	41	41	42	43	40	38	27
UK Group Protection	11	14	20	20	13	17	20	20
France	7	7	7	40	4	7	6	31
Netherlands	10	2	2	5	4	4	4	7
Workplace Savings	168	169	183	178	240	166	127	202
Platforms (Cofunds & IPS)2	85	116	114	103	99	94	69	26
Suffolk Life	30	29	30	35	44	39	31	19
Mature Retail Savings3	22	24	21	22	25	21	22	22
With-profits	13	13	17	18	17	13	14	17
Total LGAS	387	415	435	463	489	401	331	371
Retail Investments4	113	111	91	100	83	94	104	74
US Protection	21	23	24	23	26	28	23	22
India (26% share)	2	1	2	3	1	2	1	6
Egypt (55% share)	3	3	3	4	3	3	3	4
Gulf (50% share)	1	-	-	1	-	1	-	1
Total Emerging Markets	6	4	5	8	4	6	4	11
Total Worldwide new business	797	589	578	923	642	756	528	554
1. Total LGR new business excludes £nil (2013: £270m) of APE in relation to longevity insurance transactions. It is not included in the table due to the unpredictable deal flow from this type of business.
2. Platforms APE includes retail business only.
3. Includes bonds and retail pensions.
4. Includes retail unit trusts and structured products only.

 

END

 

 

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