L&G Half-year Report 2010 - P

RNS Number : 4826Q

Legal & General Group Plc

04 August 2010

 



International Financial Reporting Standards										Page 25
Supplementary operating profit information
For the six months ended 30 June 2010
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
From continuing operations
Risk							2.01(a)	310	223	735
Savings							2.02(a)	54	17	50
Investment management							2.03	98	74	172
International							2.04	61	65	127
Group capital and financing							2.05	33	25	57
Investment projects1								(14)	-	(32)
Operating profit								542	404	1,109
Variation from longer term investment return							2.06	(4)	(527)	(16)
Property losses attributable to minority interests								(1)	(20)	(19)
Profit/(loss) from continuing operations before tax								537	(143)	1,074
Tax (expense)/credit attributable to equity holders of the Company							2.07	(136)	52	(230)
Profit/(loss) for the period								401	(91)	844
Attributable to:
Minority interests							2.17	(1)	(20)	(19)
Equity holders of the Company								402	(71)	863
								p	p	p
Earnings per share							2.11
Based on operating profit from continuing operations after tax attributable to equity holders
of the Company								6.73	5.22	13.82
Based on profit/(loss) attributable to equity holders of the Company								6.90	(1.22)	14.82
Diluted earnings per share							2.11
Based on operating profit from continuing operations after tax attributable to equity holders
of the Company								6.66	5.21	13.74
Based on profit/(loss) attributable to equity holders of the Company								6.83	(1.22)	14.73
1. Investment projects relate to strategic investments including Solvency II.
This supplementary operating profit information provides further analysis of the results reported under IFRS and we believe gives shareholders a better understanding of the underlying performance of the business.
Supplementary IFRS operating profit is one of the Group's key performance indicators. The definition of operating profit was amended in 2009 and details were included in Note 2 of the 2009 Annual Report and Accounts. The H1 09 figures have been restated accordingly. In addition, the composition of the Savings and Investment management segments has changed. Institutional retail business is now included in the Savings segment. H1 09 and FY 09 have been amended accordingly in line with the new definition. The effect has been to reduce Savings H1 09 operating profit by £4m and FY 09 operating profit by £5m with an offsetting increase in the Investment management segment's operating profit.
Operating profit for the Risk segment represents the profit from the non profit Risk businesses (individual and group protection, and individual and bulk purchase annuities) and the profit of our general insurance business. Operating profit reflects the investment returns that the business expects to make on the financial investments that back this business and on shareholder funds retained within our general insurance business.
Operating profit for the Savings segment represents the profit from the non profit Savings businesses (non profit investment bonds and non profit pensions (including SIPPs)), the with-profits transfer and the profit of our retail investments business. Operating profit reflects the investment returns that the business expects to make on the financial investments that back this business.
Operating profit for the Investment management and International segments includes a longer term expected investment return on the shareholders' funds within the investment management and Netherlands' operations.
Investment return on Group capital incorporates a longer term expected investment return using longer term investment return assumptions applied to the average balance of Group invested assets (including interest bearing intra-group balances) calculated on a monthly basis.  Profits or losses arising from actuarial movements on annuities held by the Group's defined benefit pension schemes are excluded from operating profit. Profits or losses arising on the elimination of own debt holdings are also excluded from operating profit.
International Financial Reporting Standards										Page 26
Supplementary operating profit information
2.01	Risk
(a)	Risk operating profit									Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
Non profit Risk							2.01(b)	298	210	717
General insurance							2.01(f)	14	6	17
Other1								(2)	7	1
Total Risk operating profit								310	223	735
1. Other comprises estate agencies and housing related business conducted through our regulated mortgage network and business unit costs of £1m (H1 09: £2m; FY 09: £3m) allocated to the Risk business. In July 2009, an insurance business transfer of Nationwide Life business was made to Legal & General Assurance Society Limited (Society). Operating profit associated with the business was included in Other prior to the transfer; post transfer operating profit is recorded in non profit Risk.
(b)	Analysis of non profit Risk operating profit
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
Non profit business operating profit comprises:
	Operational cash generation							202	207	438
	New business strain							(10)	13	50
	Net cash generation							192	220	488
	Experience variances						2.01(c)	(3)	22	113
	Changes to valuation assumptions						2.01(d)	98	(2)	169
	Changes to FSA reporting and capital rules							-	-	15
	Movements in non-cash items						2.01(e)	(78)	(80)	(229)
	Other							5	(10)	(41)
								214	150	515
	Tax gross-up							84	60	202
								298	210	717
Non profit business operational cash generation represents the expected cash flows to be generated in the period from the in-force non profit business which is broadly equivalent to the release of profit from the non profit Risk business using best estimate assumptions. The experience variances are calculated with reference to embedded value assumptions, including the apportionment of investment return and tax in the EEV model.
Both new business strain and operational cash generation exclude required solvency margin from the liability calculation as is required by the ABI SORP.
In 2006, the FSA introduced a more realistic reserving framework for certain non profit business (Policy statement (PS) 06/14). In July 2009, an insurance business transfer of the Nationwide Life Risk business to Society took place and the Group chose to adopt PS06/14 for this business. The impact of this, offset by the amortisation of associated intangible assets, is reflected within changes to FSA reporting and capital rules above.
An analysis of the experience variances, valuation assumption changes and non-cash items, all net of tax, is provided below:
(c)	Experience variances
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Persistency								(5)	(11)	(9)
Mortality/morbidity								2	(2)	(9)
Expenses								1	(18)	1
Bulk purchase annuity data loading								-	35	48
Project and development costs1								(5)	(14)	(21)
Tax2								20	21	79
Other								(16)	11	24
								(3)	22	113
1. Project and development costs in 2009 related principally to continued investment in internal and other customer facing systems.
2. The current tax charge was lower due to the utilisation of brought forward tax losses.
International Financial Reporting Standards										Page 27
Supplementary operating profit information
2.01	Risk (continued)
(d)	Changes to valuation assumptions
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Persistency								-	-	(5)
Mortality/morbidity1								35	-	101
Expenses								(14)	1	54
Other2								77	(3)	19
								98	(2)	169
1. Mortality/morbidity includes the release of £32m relating to reserving benefits within individual protection.
2. Other includes a £72m benefit from Inflation modelling enhancement on deferred annuity business.
(e)	Movements in non-cash items
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Deferred tax1								(80)	(82)	(221)
Other								2	2	(8)
								(78)	(80)	(229)
1. The movement in deferred tax reflects the profitability of the non profit Risk business and the consequent utilisation of brought forward losses.
(f)	General insurance operating profit
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Household								11	6	12
Other business								3	-	5
								14	6	17
(g)	General insurance underwriting result
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Household								7	-	1
Other business								2	(1)	4
								9	(1)	5
(h)	General insurance combined operating ratio
										Full year
								30.06.10	30.06.09	31.12.09
								%	%	%
Household								91	98	98
Other business								79	103	79
								90	99	96
	The combined operating ratio is:
	Net incurred claims + Expenses + Net commission x 100 Net earned premiums Net written premiums
International Financial Reporting Standards										Page 28
Supplementary operating profit information
2.02	Savings
(a)	Savings operating profit
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
Non profit Savings1							2.02(b)	11	6	(4)
With-profits business2								32	29	64
								43	35	60
Retail investments3								17	(5)	4
Other4								(6)	(13)	(14)
Total Savings operating profit								54	17	50
1. Non profit Savings business includes non profit investment bonds and non profit pensions (including SIPPs).
2. With-profits business operating profit is the shareholders' share of total with-profits bonuses.
3. Retail investments operating profit includes institutional unit trusts which were previously reported in the Investment management segment. Prior period comparatives have been amended. The impact has been to reduce Retail investments H1 09 operating profit by £4m and FY 09 operating profit by £5m.
4. Other includes Suffolk Life, International (Ireland), Nationwide Life Savings business and business unit costs of £1m (H1 09: £2m; FY 09: £3m), allocated to the Savings business.
(b)	Analysis of non profit Savings operating profit
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
Non profit business operating profit/(loss) comprises:
	Operational cash generation							37	31	58
	New business strain							(34)	(44)	(77)
	Net cash generation							3	(13)	(19)
	Experience variances						2.02(c)	9	(8)	(1)
	Changes to valuation assumptions						2.02(d)	(6)	15	9
	Changes to FSA reporting and capital rules							-	38	50
	Movements in non-cash items						2.02(e)	3	1	(64)
	Other							(1)	(29)	22
								8	4	(3)
	Tax gross-up							3	2	(1)
								11	6	(4)
Non profit business operational cash generation represents the expected cash flows to be generated in the period from the in-force non profit business which is broadly equivalent to the release of profit from non profit Savings business using best estimate assumptions. The experience variances are calculated with reference to embedded value assumptions, including the apportionment of investment return and tax in the EEV model.
Both new business strain and operational cash generation exclude required solvency margin from the liability calculation as is required by the ABI SORP.
In 2006, the FSA introduced a more realistic reserving framework for certain non profit business (PS 06/14). In 2009, the Group chose to implement PS 06/14 rule changes relating to the calculation of the regulatory sterling reserves on non profit unit linked contracts. The impact of this is reflected within changes to FSA reporting and capital rules above. However, sterling reserves on investment contracts are eliminated from IFRS reporting and the corresponding reduction is reported through non-cash items.
International Financial Reporting Standards										Page 29
Supplementary operating profit information
2.02	Savings (continued)
An analysis of the experience variances, valuation assumption changes and non-cash items, all net of tax, is provided below:
(c)	Experience variances
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Persistency								-	-	(1)
Expenses								(1)	(6)	-
Project and development costs1								(1)	(13)	(23)
Tax2								8	11	22
Other								3	-	1
								9	(8)	(1)
1. Project and development costs in 2009 related principally to continued investment in internal and other customer facing systems.
2. The current tax charge was lower due to the utilisation of brought forward tax losses.
(d)	Changes to valuation assumptions
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Persistency								-	-	1
Mortality/morbidity								-	-	(2)
Expenses								(1)	(2)	(1)
Other								(5)	17	11
								(6)	15	9
(e)	Movements in non-cash items
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
							Notes	£m	£m	£m
Deferred tax1								(17)	(13)	(33)
Deferred acquisition costs							2.02(f)	(5)	(4)	(5)
Deferred income liabilities								18	27	35
Other2								7	(9)	(61)
								3	1	(64)
1. The movement in deferred tax reflects the profitability of the non profit Savings business and the consequent utilisation of brought forward losses.
2. In 2009, Other includes the elimination of £55m of sterling reserves following the adoption of PS06/14.
(f)	Deferred acquisition cost movement, net of associated deferred tax
										Full year
								30.06.10	30.06.09	31.12.09
							Notes	£m	£m	£m
As at 1 January								628	633	633
Amortisation through income							2.02(e)	(32)	(28)	(67)
Acquisition costs deferred							2.02(e)	27	24	62
As at 30 June / 31 December								623	629	628
Balance sheet deferred acquisition costs also includes amounts relating to the Group's overseas, general insurance, retail investments and with-profits businesses and is presented gross of associated deferred tax.
Expected amortisation profile:
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Expected to be amortised within one year								72	66	61
Expected to be amortised between one year and five years								288	265	244
Expected to be amortised in over five years								263	298	323
								623	629	628
International Financial Reporting Standards										Page 30
Supplementary operating profit information
2.03	Investment management
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Managed pension funds								70	55	128
Private equity								(1)	(1)	(1)
Property								(1)	1	4
Other income1								30	19	41
Total Investment management operating profit2								98	74	172
1. Other income includes £17m of profits arising from the provision of investment management services charged to the Group's Risk and Savings businesses (H1 09: £12m; FY 09: £28m).
2. Investment management operating profit no longer includes institutional unit trusts which are now included within the Savings segment. Prior period comparatives have been amended. The impact has been to increase Investment management H1 09 operating profit by £4m and FY 09 operating profit by £5m.
2.04	International
(a)	International operating profit
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
USA								44	45	86
Netherlands								14	16	42
France								7	4	4
Other1								(4)	-	(5)
Total International operating profit								61	65	127
1. Other includes our joint venture operations in Egypt, the Gulf, India and business unit costs allocated to the International segment.
2.05	Group capital and financing
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Investment return1								96	95	191
Interest expense2								(59)	(65)	(127)
Investment expenses								(1)	(2)	(3)
Unallocated corporate expenses								(3)	(3)	(4)
Total Group capital and financing operating profit								33	25	57
1. The longer term expected investment return of £96m (H1 09: £95m; FY 09: £191m) reflects an average return of 3% (H1 09: 3%; FY 09: 6%) on the average balance of invested assets of £3.2bn (H1 09: £2.7bn; FY 09: £3.0bn) held within Group capital and financing calculated on a monthly basis. The invested assets held within Group capital and financing amounted to £3.1bn at H1 10 (H1 09: £2.7bn; FY 09: £2.8bn).
2. Interest expense excludes interest on non recourse financing (see Note 2.16).
International Financial Reporting Standards										Page 31
Supplementary operating profit information
2.06	Variation from longer term investment return
										Full year
								30.06.10	30.06.09	31.12.09
									Restated
								£m	£m	£m
Risk1								112	(361)	(218)
Savings2								(16)	(26)	127
Investment management								(4)	(1)	(4)
International								25	(10)	26
Group capital and financing
	Asset related3							(82)	(146)	24
	Debt related4							(65)	13	15
	Defined benefit pension scheme5							26	4	14
Total variation from longer term investment return								(4)	(527)	(16)
1. Risk business H1 10 investment variances reflects the positive trading experience of £150m, and favourable default experience leading to a release of £20m.  The positive variances have been partly offset (£50m) by adverse economic conditions and changes to modelling of liability and asset data.
2. Savings business investment variance includes the relationship between IFRS deferred policyholder tax and the amount included within the unit linked life funds.
3. Group capital and financing asset related investment variances reflect the difference between the assumed return and actual return on Society shareholder capital and the Group's treasury assets.
4. The Group manages it's exposure to interest rate movements on debt issued with a series of interest rate swaps to lock into a fixed funding cost. The Group does not hold an active trading position in such derivative contracts. For contracts which have not been designated within hedge accounting relationships there is resulting short term income statement volatility which in H1 10, as a result of a decrease in the relevant long term interest rates, amounted to £(56)m  (H1 09: £26m; FY 09: £23m). In addition the elimination of Legal & General debt owned by the Group is £(4)m (H1 09: £nil; FY 09: £6m) and other small items have an impact of £(5)m (H1 09: £(13)m; FY 09: £(14)m).
5. The defined benefit pension scheme investment variance includes the actuarial gains and losses and valuation difference arising on annuity assets held by the defined benefit pension schemes that have been purchased from Legal & General Assurance Society Limited.
Investment return is allocated to operating profit by reference to a longer term rate of investment return for the respective invested funds. The difference between the amount allocated to operating profit and actual investment return is the variation from longer term investment return analysed above.
2.07	Analysis of tax
					Profit		Profit			Tax
					/(loss)	Tax	/(loss)	Tax	Profit/(loss)	(expense)/
					before tax	(expense)/	before tax	(expense)/	before tax	credit
						credit		credit	Full year	Full year
					30.06.10	30.06.10	30.06.09	30.06.09	31.12.09	31.12.09
							Restated	Restated
					£m	£m	£m	£m	£m	£m
From continuing operations
Risk					310	(86)	223	(61)	735	(204)
Savings					54	(16)	17	(2)	50	(13)
Investment management					98	(28)	74	(20)	172	(47)
International					61	(21)	65	(21)	127	(41)
Group capital and financing					33	(3)	25	4	57	(8)
Investment projects					(14)	4	-	-	(32)	9
Operating profit/(loss)					542	(150)	404	(100)	1,109	(304)
Variation from longer term investment return					(4)	14	(527)	152	(16)	74
Property losses attributable to minority interests					(1)	-	(20)	-	(19)	-
Profit/(loss) for the period/Tax (expense)/credit for the period					537	(136)	(143)	52	1,074	(230)
Only the element of total tax attributable to equity holders' profit/loss is shown explicitly in the analysis above; the tax attributable to policyholder returns is included within reported operating profit.
The rate of UK corporation tax applied in the calculation of the IFRS result is 28% (H1 09: 28%; FY 09: 28%).
At 30 June 2010, a partial provision is held for a dispute with HMRC relating to the basis of recognition of taxable profit within Society's LTF.  The matter is being progressed through the Tax Tribunals Service. The maximum exposure in relation to this issue is £232m, plus interest of £98m.
International Financial Reporting Standards										Page 32
Consolidated income statement
For the six months ended 30 June 2010
										Full year
								30.06.10	30.06.09	31.12.09
							Notes	£m	£m	£m
Revenue
Gross written premiums							2.10	2,772	3,110	5,275
Outward reinsurance premiums								(286)	(283)	(574)
Net change in provision for unearned premiums								(7)	3	11
Net premiums earned								2,479	2,830	4,712
Fees from fund management and investment contracts								452	345	786
Investment return								1,170	(1,778)	38,201
Operational income								42	44	91
Total revenue							2.09	4,143	1,441	43,790
Expenses
Claims and change in insurance liabilities								3,748	3,132	7,614
Reinsurance recoveries								(344)	(345)	(520)
Net claims and change in insurance liabilities								3,404	2,787	7,094
Change in provisions for investment contract liabilities								(587)	(2,209)	33,186
Acquisition costs								377	358	780
Finance costs								78	148	179
Other expenses								381	401	882
Transfers (from)/to unallocated divisible surplus								(87)	30	430
Total expenses								3,566	1,515	42,551
Profit/(loss) before income tax								577	(74)	1,239
Income tax expense attributable to policyholder returns								(40)	(69)	(165)
Profit/(loss) from continuing operations before income tax attributable to equity holders of the Company								537	(143)	1,074
Total income tax expense								(176)	(17)	(395)
Income tax expense attributable to policyholder returns								40	69	165
Income tax (expense)/credit attributable to equity holders							2.07	(136)	52	(230)
Profit/(loss) for the period								401	(91)	844
Attributable to:
Minority interests								(1)	(20)	(19)
Equity holders of the Company								402	(71)	863
Dividend distributions to equity holders of the Company during the period							2.14	160	120	185
Dividend distributions to equity holders of the Company proposed after the period							2.14	78	65	160
								p	p	p
Earnings per share
Based on profit/(loss) attributable to equity holders of the Company							2.11	6.90	(1.22)	14.82
Diluted earnings per share
Based on profit/(loss) attributable to equity holders of the Company							2.11	6.83	(1.22)	14.73
This financial information was approved by the Board on 3 August 2010.
The results for the six months to 30 June 2010 and 30 June 2009 are unaudited, but have been subject to a review by the Group's independent auditors and constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  They have been prepared on a basis which is consistent with the consolidated Group financial statements approved on 22 March 2010 which have been filed with the Registrar of Companies. The published full year 2009 consolidated Group financial statements prepared under IFRS included an independent auditors' report which was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under Chapter 3 of Part 16 of the Companies Act 2006.
International Financial Reporting Standards										Page 33
Consolidated statement of comprehensive income
For the six months ended 30 June 2010
										Full year
								30.06.10	30.06.09	31.12.09
							Notes	£m	£m	£m
Profit/(loss) for the period								401	(91)	844
Other comprehensive income after tax							2.12
Exchange differences on translation of overseas operations								25	(75)	(63)
Actuarial (losses) on defined benefit pension schemes								(29)	(89)	(154)
Actuarial losses on defined benefit pension schemes transferred to unallocated divisible surplus								12	36	62
Net change in financial investments designated as available-for-sale								21	20	66
Total comprehensive income/(expense) for the period								430	(199)	755
Total comprehensive income/(expense) attributable to:
Minority interests								(1)	(20)	(19)
Equity holders of the Company								431	(179)	774
International Financial Reporting Standards										Page 34
Consolidated balance sheet
As at 30 June 2010
										Full year
								At	At	At
								30.06.10	30.06.09	31.12.09
							Notes	£m	£m	£m
Assets
Investment in associates								44	21	45
Plant and equipment								56	71	61
Investment property								4,303	3,501	3,839
Financial investments							2.13	272,690	237,771	276,016
Reinsurers' share of contract liabilities								2,241	2,125	2,093
Purchased interest in long term businesses and other intangible assets								132	205	146
Deferred acquisition costs								2,030	1,985	1,957
Deferred tax asset								723	1,081	796
Income tax recoverable								1	11	1
Other assets								1,966	2,398	1,440
Cash and cash equivalents								11,261	11,138	10,650
Total assets								295,447	260,307	297,044
Equity
Share capital								147	147	147
Share premium								938	936	936
Employee scheme shares								(43)	(42)	(38)
Capital redemption and other reserves								57	3	41
Retained earnings								3,368	2,251	3,110
Shareholders' equity								4,467	3,295	4,196
Minority interests							2.17	32	149	2
Total equity								4,499	3,444	4,198
Liabilities
Subordinated borrowings							2.16	1,875	1,552	1,870
Participating insurance contracts								9,279	8,881	9,404
Participating investment contracts								7,120	6,689	7,139
Unallocated divisible surplus								1,179	902	1,284
Value of in-force non-participating contracts								(364)	(268)	(367)
Participating contract liabilities								17,214	16,204	17,460
Non-participating insurance contracts								30,011	26,720	28,583
Non-participating investment contracts								228,855	201,032	234,502
Non-participating contract liabilities								258,866	227,752	263,085
Senior borrowings							2.16	1,455	1,933	1,407
Provisions								810	855	757
Deferred tax liabilities								358	252	303
Income tax liabilities								96	155	140
Payables and other financial liabilities								6,465	6,168	5,003
Other liabilities								899	835	892
Net asset value attributable to unit holders								2,910	1,157	1,929
Total liabilities								290,948	256,863	292,846
Total equity and liabilities								295,447	260,307	297,044
International Financial Reporting Standards										Page 35
Condensed consolidated statement of changes in equity
						Capital
					Employee	redemption
			Share	Share	scheme	and other	Retained		Minority	Total
			capital	premium	shares	reserves	earnings	Total	interests	equity
For the six months ended 30 June 2010			£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January			147	936	(38)	41	3,110	4,196	2	4,198
Total comprehensive income/(expense)
for the period			-	-	-	46	385	431	(1)	430
Options exercised under share option schemes			-	2	-	-	-	2	-	2
Net movement in employee scheme shares			-	-	(5)	(3)	6	(2)	-	(2)
Dividends			-	-	-	-	(160)	(160)	-	(160)
Movement in third party interests			-	-	-	-	-	-	31	31
Currency translation differences			-	-	-	(27)	27	-	-	-
As at 30 June			147	938	(43)	57	3,368	4,467	32	4,499
For the six months ended 30 June 2009
As at 1 January			147	936	(46)	(42)	2,593	3,588	144	3,732
Total comprehensive expense
for the period			-	-	-	(55)	(124)	(179)	(20)	(199)
Net movement in employee scheme shares			-	-	4	7	(5)	6	-	6
Dividends			-	-	-	-	(120)	(120)	-	(120)
Movement in third party interests			-	-	-	-	-	-	25	25
Currency translation differences			-	-	-	93	(93)	-	-	-
As at 30 June			147	936	(42)	3	2,251	3,295	149	3,444
For the year ended 31 December 2009
As at 1 January			147	936	(46)	(42)	2,593	3,588	144	3,732
Total comprehensive income/(expense)
for the year			-	-	-	3	771	774	(19)	755
Net movement in employee scheme shares			-	-	8	3	8	19	-	19
Dividends			-	-	-	-	(185)	(185)	-	(185)
Movement in third party interests			-	-	-	-	-	-	(123)	(123)
Currency translation differences			-	-	-	77	(77)	-	-	-
As at 31 December			147	936	(38)	41	3,110	4,196	2	4,198
International Financial Reporting Standards										Page 36
Consolidated cash flow statement
For the six months ended 30 June 2010
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Cash flows from operating activities
Profit/(loss) for the period								401	(91)	844
Adjustments for non cash movements in net profit/(loss) for the period
Realised and unrealised losses/(gains) on financial investments and investment properties								3,615	6,553	(29,180)
Investment income								(4,695)	(4,656)	(8,813)
Interest expense								78	148	179
Income tax expense								176	17	395
Other adjustments								32	36	104
Net increase in operational assets
Investments held for trading or designated as fair value through profit or loss								(500)	(7,763)	(5,822)
Investments designated as available-for-sale								(25)	(54)	(61)
Other assets								(383)	(711)	477
Net (decrease)/increase in operational liabilities
Insurance contracts								1,339	858	3,143
Transfer (from)/to unallocated divisible surplus								(99)	(15)	368
Investment contracts								(5,213)	(728)	29,337
Value of in-force non-participating contracts								3	(97)	(196)
Other liabilities								1,434	2,905	1,121
Cash used in operations								(3,837)	(3,598)	(8,104)
Interest paid								(79)	(148)	(160)
Interest received								2,432	2,529	5,074
Income tax received								106	91	52
Dividends received								2,126	2,096	3,896
Net cash flows from operating activities								748	970	758
Cash flows from investing activities
Net acquisition of plant and equipment								(3)	(5)	(7)
Capital injection into overseas joint ventures								-	(8)	(36)
Net cash flows from investing activities								(3)	(13)	(43)
Cash flows from financing activities
Dividend distributions to ordinary equity holders of the Company during the period								(160)	(120)	(185)
Proceeds from issue of ordinary share capital								2	-	-
Purchase of employee scheme shares								(10)	(2)	(2)
Proceeds from borrowings								292	1,451	2,124
Repayment of borrowings								(274)	(1,768)	(2,629)
Net cash flows from financing activities								(150)	(439)	(692)
Net increase in cash and cash equivalents								595	518	23
Exchange gains/(losses) on cash and cash equivalents								16	(68)	(61)
Cash and cash equivalents at 1 January								10,650	10,688	10,688
Cash and cash equivalents at 30 June/31 December								11,261	11,138	10,650
The Group's consolidated cash flow statement includes all cash and cash equivalent flows, including those relating to the UK long term fund policyholders.
International Financial Reporting Standards										Page 37
Notes to the Financial Statements
2.08	Basis of preparation
The Group's financial information for the period ended 30 June 2010 has been prepared in accordance with the Listing Rules of the Financial Services Authority. The 2010 Half-year report has also been prepared in accordance with IAS 34, 'Interim Financial Reporting'. The Group's financial information has been prepared in accordance with the accounting policies and methods of computation which the Group expects to adopt for the 2010 year end. These policies are consistent with the principal accounting policies which were set out in the Group's 2009 consolidated financial statements which were consistent with IFRSs issued by the International Accounting Standards Board as adopted by the European Commission for use in the European Union.
The preparation of the Half-year report 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. The economic and non-economic actuarial assumptions used to establish the liabilities in relation to insurance and investment contracts are significant.  For half-year financial reporting, economic assumptions have been updated to reflect market conditions. Non-economic assumptions are consistent with those used in the 31 December 2009 financial statements except for some limited modelling and assumption changes. The impacts of these changes are included in section 2.01(d).
Estimates are based on management's best knowledge of current circumstances and future events and actions, however, actual results may differ from those estimates, possibly significantly.
2.09	Segmental analysis
Reportable segments
The Group has five reporting segments comprising Risk, Savings, Investment management, International, and Group capital and financing. The composition of the Savings and Investment management segments has changed. Institutional retail business is now included in retail investments as part of the Savings segment; previously this was reported in the Investment management segment. Comparative information has been amended to reflect the change.
The Risk segment comprises individual and group protection, individual and bulk purchase annuities, and general insurance, together with estate agencies and the housing related business conducted through our regulated mortgage network.
The Savings segment comprises non profit investment bonds, non profit pensions (including SIPPs), ISAs, retail unit trusts, and all with-profits products. 'Other' principally comprises the Group's interest in Cofunds.
The Investment management segment comprises institutional fund management.
The International segment comprises businesses in the United States, France, the Netherlands and emerging markets.
Shareholders' equity supporting the non profit Risk and Savings businesses is held within Legal & General Assurance Society Limited and Legal & General Pensions Limited and is managed on a groupwide basis within Group capital and financing. This also includes capital within the Group's treasury function and unit trust funds and property partnerships, which are managed on behalf of clients but are required to be consolidated under IFRS, which do not constitute a separately reportable segment.
Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.
The Group assesses performance and allocates resources on the basis of IFRS supplementary operating profit before tax. Segmental IFRS supplementary operating profit before tax is reconciled to the consolidated profit from continuing operations before tax attributable to equity holders and consolidated profit from ordinary activities after income tax.
International Financial Reporting Standards										Page 38
Notes to the Financial Statements
2.09	Segmental analysis (continued)
(a)	Profit/(loss) from ordinary activities after tax
									Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing1	Total
For the six months ended 30 June 2010					£m	£m	£m	£m	£m	£m
Operating profit					310	54	98	61	19	542
Variation from longer term investment return2					112	(16)	(4)	25	(121)	(4)
Property losses attributable to minority interests					-	-	-	-	(1)	(1)
Profit/(loss) from continuing operations before tax					422	38	94	86	(103)	537
Tax (expense)/credit attributable to equity holders
of the Company					(115)	(10)	(27)	(28)	44	(136)
Profit/(loss) for the period					307	28	67	58	(59)	401
1. For segmental purposes, Investment projects of £14m (FY 09: £32m) have been included in Group capital and financing.
2. Additional information concerning the Variation from longer term investment return is provided in Note 2.06.
									Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing	Total
					Restated	Restated			Restated
For the six months ended 30 June 2009					£m	£m	£m	£m	£m	£m
Operating profit					223	17	74	65	25	404
Variation from longer term investment return2					(361)	(26)	(1)	(10)	(129)	(527)
Property losses attributable to minority interests					-	-	-	-	(20)	(20)
(Loss)/profit from continuing operations before tax					(138)	(9)	73	55	(124)	(143)
Tax credit/(expense) attributable to equity holders
of the Company					40	2	(20)	(18)	48	52
(Loss)/profit for the period					(98)	(7)	53	37	(76)	(91)
									Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing1	Total
For the year ended 31 December 2009					£m	£m	£m	£m	£m	£m
Operating profit					735	50	172	127	25	1,109
Variation from longer term investment return2					(218)	127	(4)	26	53	(16)
Property losses attributable to minority interests					-	-	-	-	(19)	(19)
Profit from continuing operations before tax					517	177	168	153	59	1,074
Tax (expense)/credit attributable to equity holders
of the Company					(142)	(48)	(46)	(49)	55	(230)
Profit for the year					375	129	122	104	114	844
International Financial Reporting Standards										Page 39
Notes to the Financial Statements
2.09	Segmental analysis (continued)
(b)	Revenue								Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing	Total
For the six months ended 30 June 2010					£m	£m	£m	£m	£m	£m
Internal revenue					64	66	59	-	(189)	-
External revenue					2,887	1,219	(664)	726	(25)	4,143
Total revenue					2,951	1,285	(605)	726	(214)	4,143
For the six months ended 30 June 2009
Internal revenue					55	58	51	-	(164)	-
External revenue					2,371	618	(2,244)	680	16	1,441
Total revenue					2,426	676	(2,193)	680	(148)	1,441
For the year ended 31 December 2009
Internal revenue					117	135	104	-	(356)	-
External revenue					5,809	7,295	28,897	1,527	262	43,790
Total revenue					5,926	7,430	29,001	1,527	(94)	43,790
Total revenue includes investment gains of £1,170m (H1 09: losses of £1,778m; FY 09: gains of £38,201m).
(c)	Consolidated balance sheet
									Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing	Total
As at 30 June 2010					£m	£m	£m	£m	£m	£m
Assets
Investments					24,679	44,891	205,626	7,000	6,102	288,298
Other assets					2,869	2,624	1,047	2,965	(2,356)	7,149
Total assets					27,548	47,515	206,673	9,965	3,746	295,447
Shareholders' equity					136	122	370	1,473	2,366	4,467
Minority interests					-	-	-	-	32	32
Total equity					136	122	370	1,473	2,398	4,499
Liabilities
Subordinated borrowings					-	-	-	-	1,875	1,875
Participating contract liabilities					-	14,896	-	2,318	-	17,214
Non-participating contract liabilities					23,585	29,854	202,489	3,567	(629)	258,866
Senior borrowings1					13	200	1	579	662	1,455
Other liabilities					3,814	2,443	3,813	2,028	(560)	11,538
Total liabilities					27,412	47,393	206,303	8,492	1,348	290,948
Total equity and liabilities					27,548	47,515	206,673	9,965	3,746	295,447
1. Includes non recourse financing.
International Financial Reporting Standards										Page 40
Notes to the Financial Statements
2.09	Segmental analysis (continued)
(c)	Consolidated balance sheet (continued)								Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing	Total
As at 30 June 2009					£m	£m	£m	£m	£m	£m
Assets
Investments					20,842	40,272	180,904	6,231	4,182	252,431
Other assets					3,290	2,353	1,472	2,540	(1,779)	7,876
Total assets					24,132	42,625	182,376	8,771	2,403	260,307
Shareholders' equity					94	105	334	1,163	1,599	3,295
Minority interests					-	-	-	-	149	149
Total equity					94	105	334	1,163	1,748	3,444
Liabilities
Subordinated borrowings					-	-	-	-	1,552	1,552
Participating contract liabilities					-	14,103	-	2,101	-	16,204
Non-participating contract liabilities					20,492	25,967	178,487	3,348	(542)	227,752
Senior borrowings1					3	203	6	591	1,130	1,933
Other liabilities					3,543	2,247	3,549	1,568	(1,485)	9,422
Total liabilities					24,038	42,520	182,042	7,608	655	256,863
Total equity and liabilities					24,132	42,625	182,376	8,771	2,403	260,307
1. Includes non recourse financing.
									Group
							Investment		capital
							manage-	Inter-	and
					Risk	Savings	ment	national	financing	Total
As at 31 December 2009					£m	£m	£m	£m	£m	£m
Assets
Investments					22,984	45,531	210,488	6,954	4,593	290,550
Other assets					2,983	2,299	836	2,709	(2,333)	6,494
Total assets					25,967	47,830	211,324	9,663	2,260	297,044
Shareholders' equity					120	113	305	1,372	2,286	4,196
Minority interests					-	-	-	-	2	2
Total equity					120	113	305	1,372	2,288	4,198
Liabilities
Subordinated borrowings					-	-	-	-	1,870	1,870
Participating contract liabilities					-	15,084	-	2,376	-	17,460
Non-participating contract liabilities					22,102	30,078	207,963	3,523	(581)	263,085
Senior borrowings1					9	199	2	535	662	1,407
Other liabilities					3,736	2,356	3,054	1,857	(1,979)	9,024
Total liabilities					25,847	47,717	211,019	8,291	(28)	292,846
Total equity and liabilities					25,967	47,830	211,324	9,663	2,260	297,044
1. Includes non recourse financing.
International Financial Reporting Standards										Page 41
Notes to the Financial Statements
2.10	Gross written premiums on insurance contracts
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
From continuing operations
Risk
Non-participating Risk business								1,737	1,953	3,057
General insurance
- Household								123	123	247
- Other business								11	13	26
Total Risk								1,871	2,089	3,330
Savings
Non-participating Savings business								21	21	45
Participating business								298	416	772
Total Savings								319	437	817
International
USA								251	251	487
Netherlands								131	153	270
France								200	180	371
Total International								582	584	1,128
Total gross written premiums								2,772	3,110	5,275
2.11	Earnings per share
(a)	Earnings per share
			Profit				Profit		Profit
			before	Tax	Profit	Earnings	/(loss)	Tax	/(loss)	Earnings
			tax	expense	after tax	per share	before tax	credit	after tax	per share
			30.06.10	30.06.10	30.06.10	30.06.10	30.06.09	30.06.09	30.06.09	30.06.09
							Restated	Restated	Restated	Restated
			£m	£m	£m	p	£m	£m	£m	p
Operating profit from continuing
operations			542	(150)	392	6.73	404	(100)	304	5.22
Variation from longer term investment return			(4)	14	10	0.17	(527)	152	(375)	(6.44)
Earnings per share based on profit/(loss)
attributable to equity holders			538	(136)	402	6.90	(123)	52	(71)	(1.22)
							Profit	Tax	Profit	Earnings
							before tax	expense	after tax	per share
							Full year	Full year	Full year	Full year
							31.12.09	31.12.09	31.12.09	31.12.09
							£m	£m	£m	p
Operating profit from continuing
operations							1,109	(304)	805	13.82
Variation from longer term investment return							(16)	74	58	1.00
Earnings per share based on profit
attributable to equity holders							1,093	(230)	863	14.82
International Financial Reporting Standards										Page 42
Notes to the Financial Statements
2.11	Earnings per share (continued)
(b)	Diluted earnings per share
(i)	Based on operating profit from continuing operations after tax
						Number			Number
					Profit	of	Earnings	Profit	of	Earnings
					after tax	shares1	per share	after tax	shares1	per share
					30.06.10	30.06.10	30.06.10	30.06.09	30.06.09	30.06.09
								Restated		Restated
					£m	m	p	£m	m	p
Operating profit from continuing operations after tax					392	5,827	6.73	304	5,822	5.22
Net shares under options allocable for no further consideration					-	63	(0.07)	-	8	(0.01)
Diluted earnings per share					392	5,890	6.66	304	5,830	5.21
								Profit	Number	Earnings
								after tax	of shares1	per share
								Full year	Full year	Full year
								31.12.09	31.12.09	31.12.09
								£m	m	p
Operating profit from continuing operations after tax								805	5,824	13.82
Net shares under options allocable for no further consideration								-	33	(0.08)
Diluted earnings per share								805	5,857	13.74
(ii)	Based on profit/(loss) attributable to equity holders
						Number			Number
					Profit	of	Earnings	Loss	of	Earnings
					after tax	shares1	per share	after tax	shares1	per share
					30.06.10	30.06.10	30.06.10	30.06.09	30.06.09	30.06.09
					£m	m	p	£m	m	p
Profit/(loss) attributable to equity holders of the Company					402	5,827	6.90	(71)	5,822	(1.22)
Net shares under options allocable for no further consideration2					-	63	(0.07)	-	8	-
Diluted earnings per share					402	5,890	6.83	(71)	5,830	(1.22)
								Profit	Number	Earnings
								after tax	of shares1	per share
								Full year	Full year	Full year
								31.12.09	31.12.09	31.12.09
								£m	m	p
Profit attributable to equity holders of the Company								863	5,824	14.82
Net shares under options allocable for no further consideration								-	33	(0.09)
Diluted earnings per share								863	5,857	14.73
The number of shares in issue at 30 June 2010 was 5,865,651,980 (30 June 2009: 5,861,679,365; 31 December 2009: 5,862,216,780).
1. Weighted average number of shares.
2. Net shares under options allocable for no further consideration are anti-dilutive and have therefore been excluded from the diluted earnings per share calculation for H1 09.
International Financial Reporting Standards										Page 43
Notes to the Financial Statements
2.12	Disclosure of tax effects relating to each component of other comprehensive income
						Tax			Tax
					Before	credit/	After	Before	(expense)/	After
					tax	(expense)	tax	tax	credit	tax
					30.06.10	30.06.10	30.06.10	30.06.09	30.06.09	30.06.09
					£m	£m	£m	£m	£m	£m
Exchange differences on translation of overseas operations					25	-	25	(75)	-	(75)
Actuarial (losses) on defined benefit pension schemes					(40)	11	(29)	(123)	34	(89)
Actuarial losses on defined benefit pension schemes
transferred to unallocated divisible surplus					16	(4)	12	50	(14)	36
Net change in financial investments designated as available-for-sale					32	(11)	21	31	(11)	20
Other comprehensive income					33	(4)	29	(117)	9	(108)
									Tax
								Before	(expense)/	After
								tax	credit	tax
								Full year	Full year	Full year
								31.12.09	31.12.09	31.12.09
								£m	£m	£m
Exchange differences on translation of overseas operations								(63)	-	(63)
Actuarial (losses) on defined benefit pension schemes								(213)	59	(154)
Actuarial losses on defined benefit pension schemes
transferred to unallocated divisible surplus								86	(24)	62
Net change in financial investments designated as available-for-sale								101	(35)	66
Other comprehensive income								(89)	-	(89)
2.13	Financial investments
								At	At	At
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Equities								125,099	109,015	139,296
Unit trusts								7,443	5,398	6,329
Debt securities								132,429	116,140	123,511
Accrued interest								1,590	1,446	1,688
Derivative assets1								4,791	3,823	3,749
Loans and receivables								1,338	1,949	1,443
								272,690	237,771	276,016
1. Derivative assets include £2,764m (H1 09: £2,068m; FY 09: £2,160m) held on behalf of unit linked policyholders.  Derivative assets are shown gross of derivative liabilities. Exposures arise from:
a. The use of derivatives for 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.
b. Derivatives matching Guaranteed Equity Bonds within the Nationwide Life portfolio.
2.14	Dividends
					Per share	Total	Per share	Total	Per share	Total
									Full year	Full year
					30.06.10	30.06.10	30.06.09	30.06.09	31.12.09	31.12.09
					p	£m	p	£m	p	£m
Ordinary share dividends paid in the period					2.73	160	2.05	120	3.16	185
Ordinary share dividend proposed¹					1.33	78	1.11	65	2.73	160
1. The dividend proposed has not been included as a liability in the balance sheet.
International Financial Reporting Standards										Page 44
Notes to the Financial Statements
2.15	Ordinary shares
					Number		Number		Number
					of		of		of
					shares		shares		shares
									Full year
					30.06.10		30.06.09		31.12.09
As at 1 January					5,862,216,780		5,861,627,994		5,861,627,994
Options exercised under share option schemes
- Executive share option scheme					209,065		-		20,000
- Savings related share option scheme					3,226,135		51,371		568,786
As at 30 June / 31 December					5,865,651,980		5,861,679,365		5,862,216,780
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.
2.16	Analysis of borrowings
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)								698	659	666
5.875% Sterling undated subordinated notes (Tier 2)								424	425	425
4.0% Euro subordinated notes 2025 (Tier 2)								455	468	498
10% Sterling subordinated notes 2041 (Tier 2)								308	-	308
Client fund holdings of Group debt1								(10)	-	(27)
Total subordinated borrowings								1,875	1,552	1,870
Senior borrowings
Sterling medium term notes 2031-2041								602	602	608
Euro Commercial paper 2010								106	428	98
Bank loans 2010								28	17	12
Non recourse financing
- US Dollar Triple X securitisation 2025								283	322	262
- US Dollar Triple X securitisation 2037								296	269	274
- Sterling property partnership loans 2011								-	97	-
- Suffolk Life unit linked borrowings								147	157	158
- LGV 6 Private Equity Fund Limited Partnership								39	41	40
Client fund holdings of Group debt1								(46)	-	(45)
Total senior borrowings								1,455	1,933	1,407
Total borrowings								3,330	3,485	3,277
Total borrowings (excluding non recourse financing)								2,565	2,599	2,543
1. £56m (FY 09: £72m) of the Group's subordinated and senior debt is currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total borrowings in the tables above. The half-year comparative has not been restated.
Subordinated borrowings
6.385% Sterling perpetual capital securities
In 2007, Legal & General Group Plc issued £600m of 6.385% Sterling perpetual capital securities. Simultaneous with the issuance, the fixed coupon was swapped into six month LIBOR plus 0.94% pa. 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.  These securities have been classified as liabilities as the interest payments become mandatory in certain circumstances.
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 upper tier 2 capital for regulatory purposes.  These securities have been classified as liabilities as the interest payments become mandatory in certain circumstances.
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 lower tier 2 capital for regulatory purposes.
International Financial Reporting Standards										Page 45
Notes to the Financial Statements
2.16	Analysis of borrowings (continued)
10% Sterling subordinated notes 2041
On 16 July 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 lower tier 2 capital for regulatory purposes.
Non recourse financing
US Dollar Triple X securitisation 2025
In 2004, a subsidiary of Legal & General America Inc issued US$550m of non recourse debt in the US capital markets to meet the Triple X reserve requirements of part of the US term insurance written up to 2005. It is secured on the cash flows related to that tranche of business. In December 2009, $109m of this issue was bought back.
US Dollar Triple X securitisation 2037
In 2006, a subsidiary of Legal & General America Inc 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.
Sterling property partnership loans 2011
The property partnership loans are secured on specific properties.
Suffolk Life unit linked borrowings
These borrowings relate solely to client investments.
LGV6 Private Equity Fund Limited Partnership
These borrowings are non recourse bank borrowings.
Syndicated credit facility
As at 30 June 2010, the Group had in place a £960m syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2012.
Holding company short term assets
Short term assets available at the holding company level exceeded the amount of non-unit linked short term borrowings of £134m (Euro Commercial Paper and Bank Loans).
2.17	Minority interests
Minority interests represent third party interests in property investment vehicles which are consolidated in the Group's results.  The increase in the minority interests in 2010 arises from the increased percentage in the Group's ownership of Performance Retail Unit Trust to above 50%.
2.18	Foreign exchange rates
Principal rates of exchange used for translation are:
								At	At	At
Period end exchange rates								30.06.10	30.06.09	31.12.09
United States Dollar								1.50	1.65	1.62
Euro								1.22	1.17	1.13
								01.01.10-	01.01.09-	01.01.09-
Average exchange rates								30.06.10	30.06.09	31.12.09
United States Dollar								1.53	1.49	1.57
Euro								1.15	1.12	1.12
International Financial Reporting Standards										Page 46
Notes to the Financial Statements
2.19	Related party transactions
There were no material transactions between key management and the Legal & General group of companies.  All transactions between the Group and its key management are on commercial terms which are no more favourable than those available to employees in general.  Contributions to the post-employment defined benefit plans were £14m (H1 09: £15m; FY 09: £62m).
At 30 June 2010, 30 June 2009 and 31 December 2009 there were no loans outstanding to officers of the Company.
Key management personnel compensation
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:
										Full year
								30.06.10	30.06.09	31.12.09
								£m	£m	£m
Salaries								2	3	7
Social security costs								-	-	1
Post-employment benefits								1	-	1
Share-based incentive awards								2	1	3
Key management personnel compensation								5	4	12
Number of key management personnel								17	16	18
The UK defined benefit pension schemes have purchased annuity contracts issued by Society for consideration of £36m (H1 09: £16m; FY 09: £51m) during the period, priced on an arm's length basis.
The Group's investment portfolio includes investments in venture capital, property and financial investments which are held via collective investment vehicles.  Net investments into associate investment vehicles totalled £1,704m during H1 10 (H1 09: £1,301m; FY 09: £1,780m).  The Group has outstanding loans to these associates of £11m (H1 09: £6m; FY 09: £7m) and received investment management fees of £21m during the period (H1 09: £17m; FY 09: £30m).  Distributions from these investment vehicles to the Group totalled £65m (H1 09: £25m; FY 09: £57m).
2.20	Pension cost
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 30 June 2010, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at £209m (30 June 2009: £179m; 31 December 2009: £203m). These amounts have been recognised in the financial statements with £124m charged against shareholder equity (H1 09: £106m; FY 09: £121m) and £85m against the unallocated divisible surplus (H1 09: £73m; FY 09: £82m).
2.21	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 FSA, ombudsman rulings, industry compensation schemes and court judgments.
Various Group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant members of the Group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with certainty, the extent and the timing of the financial impact of these claims, litigation or issues.
In 1975, Legal & General Assurance Society Limited (the Society) was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee in respect of policies issued through the ILU's Policy Signing Office on behalf of NRG Victory Reinsurance Company Ltd (Victory), a company which was then a subsidiary of the Society.  In 1990, Nederlandse Reassurantie Groep Holding NV (the assets and liabilities of which have since been assumed by Nederlandse Reassurantie Groep NV under a statutory merger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Society may have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would not apply to policies written or renewed after the acquisition.  Nederlandse Reassurantie Groep NV is now owned by Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. Whether the Society has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability, is uncertain.  The Society has made no payment or provision in respect of this matter.
Group companies have given 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.

International Financial Reporting Standards

Page 47

Independent review report to Legal & General Group Plc - IFRS

Introduction

We have been engaged by the Company to review the interim financial information in the Half Year Report for the six months ended 30 June 2010, which comprises the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated balance sheet as at 30 June 2010, Condensed consolidated statement of changes in equity, Consolidated cash flow statement and related notes on pages 32 to 46 ("the interim financial information"). We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

Directors' responsibilities

The Half Year Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2.08, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The interim financial information included in this Half Year Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the interim financial information in the Half Year Report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the Half Year Report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
London

3 August 2010

Notes:

(a)   The Half Year Report is published on the website of Legal & General Group Plc, www.legalandgeneralgroup.com.  The maintenance and integrity of the Legal & General Group Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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