L&G Half-year Report 2018 Part 2

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Latest directors dealings

Conclusion

Scope of review

Directors' responsibilities

This report is made solely to the Group in accordance with the terms of our engagement to assist the Group in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Group those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group for our review work, for this report, or for the conclusions we have reached.

UK 100

RNS Number : 2643X

Legal & General Group Plc

09 August 2018

Legal & General Half-year Report 2018 Part 2

Page 27

INDEPENDENT REVIEW REPORT TO LEGAL & GENERAL GROUP PLC

We have been engaged by Legal & General Group plc ("the Group") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the Consolidated Balance Sheet, the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity (pages 41 to 46), and the related explanatory notes to the interim financial statements (pages 29 to 40 and 47 to 66).

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

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 UK. 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. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) 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.

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

Rees Aronson

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

8 August 2018

Page 28

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IFRS Disclosures on Performance and Release from Operations Page 29

2.01 Operating profit

For the six month period to 30 June 2018

		6 months	6 months	Full year
		2018	2017	2017
	Notes	£m	£m	£m


From continuing operations
Legal & General Retirement (LGR)	2.03	480	566	1,247
- LGR Institutional (LGRI)		361	402	906
- LGR Retail (LGRR)		119	164	341
Legal & General Investment Management (LGIM)	2.04	203	194	400
Legal & General Capital (LGC)	2.06	172	142	272
Legal & General Insurance (LGI)	2.03	154	147	303
- UK and Other		136	90	209
- US (LGIA)		18	57	94
General Insurance	2.05	(6)	15	37


Operating profit from divisions:
From continuing operations		1,003	1,064	2,259
From discontinued operations¹		56	56	107


Operating profit from divisions		1,059	1,120	2,366
Group debt costs²		(97)	(92)	(191)
Group investment projects and central expenses	2.07	(53)	(40)	(120)


Operating profit		909	988	2,055
Investment and other variances	2.08	32	169	24
Gains on non-controlling interests		1	6	11


Profit before tax attributable to equity holders		942	1,163	2,090
Tax expense attributable to equity holders	4.06	(170)	(211)	(188)


Profit for the period		772	952	1,902


Profit attributable to equity holders		771	946	1,891


Earnings per share:
Basic (pence per share)³	2.09	13.00p	15.94p	31.87p
Diluted (pence per share)³	2.09	12.94p	15.88p	31.73p


1. Discontinued operating profit from divisions primarily reflects the operating profit of the Savings division following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For these operating profit disclosures, discontinued operations in 2017 also includes the results of Legal & General Netherlands (LGN) which was sold during 2017 and was a component of the LGI (UK and Other) division. During 2017, LGN was not classified as discontinued and hence the Profit before tax attributable to equity holders in the Consolidated Income Statement (H1 2017: £1,118m; FY 2017: £1,991m) excludes the profit before tax associated with discontinued operations of LGN (H1 2017: £45m; FY 2017: £99m).
2. Group debt costs exclude interest on non recourse financing.
3. All earnings per share calculations are based on profit attributable to equity holders of the company.

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

· For LGR, worldwide pension risk transfer business (including longevity insurance) is within LGRI, and individual retirement and lifetime mortgages is within LGRR.

· LGIM represents institutional and retail investment management and workplace savings businesses.

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

· LGI represents business in retail and group protection written in the UK, networks, and protection business written in the US (LGIA).

· General Insurance comprises short-term household and other personal insurance.

· Discontinued operations represent businesses that have either been sold or announced to sell subject to formal transfer, namely Mature Savings (including with-profits). In 2017 the discontinued operations include Mature Savings (sale announced in December 2017) and Legal & General Netherlands (LGN) (sold in April 2017). LGN was not classified as discontinued in previously reported results for the half year ended 30 June 2017.

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

IFRS Disclosures on Performance and Release from Operations Page 30

2.02 Reconciliation of release from operations to operating profit before tax

					Changes					Operating
		New	Net		in			Operating		profit/
	Release	business	release	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	from	surplus/	from	ience	assump-	items and	national	(loss)	expense/	before
For the six month period	operations¹	(strain)	operations	variances	tions	other	and other²	after tax	(credit)	tax
to 30 June 2018	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


LGR	275	23	298	51	57	(6)	-	400	80	480
- LGRI	192	12	204	50	54	(7)	-	301	60	361
- LGRR	83	11	94	1	3	1	-	99	20	119
LGIM	177	(13)	164	(1)	-	(1)	-	162	41	203
- LGIM (excluding
Workplace Savings)	161	-	161	-	-	-	-	161	40	201
- Workplace Savings³	16	(13)	3	(1)	-	(1)	-	1	1	2
LGC	138	-	138	-	-	-	-	138	34	172
LGI	165	(8)	157	31	8	(9)	(76)	111	43	154
- UK and Other	88	(8)	80	31	8	(9)	1	111	25	136
- US (LGIA)	77	-	77	-	-	-	(77)	-	18	18
General Insurance	(5)	-	(5)	-	-	-	-	(5)	(1)	(6)


From continuing operations	750	2	752	81	65	(16)	(76)	806	197	1,003
From discontinued operations⁴	22	-	22	(3)	-	26	-	45	11	56


Total from divisions	772	2	774	78	65	10	(76)	851	208	1,059


Group debt costs	(79)	-	(79)	-	-	-	-	(79)	(18)	(97)
Group investment projects and expenses	(15)	-	(15)	-	-	-	(25)	(40)	(13)	(53)


Total	678	2	680	78	65	10	(101)	732	177	909


1. Release from operations includes dividends from the US of £77m within the US (LGIA) line.
2. International and other includes £9m of restructuring costs (£11m before tax) within the group investment projects and expenses line.
3. Workplace Savings represents administration business only. Profits on fund management services are included within LGIM (excluding Workplace Savings).
4. Discontinued operations primarily reflects the result of the Savings division following the announcement in December 2017 to sell the Mature Savings business to Swiss Re.

Release from operations for LGR, LGIM and LGI represents the expected IFRS surplus generated in the year from the in-force non profit annuities, workplace savings and protection businesses using best estimate assumptions. The LGIM release from operations also includes operating profit after tax from the institutional and retail investment management businesses. The LGI release from operations also includes dividends remitted from LGIA and operating profit after tax from the remaining LGI businesses. The release from operations within discontinued operations primarily reflects the unwind of expected profits after tax under the risk transfer agreement with ReAssure from the Mature Savings business.

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

Net release from operations for LGR, LGIM, LGI and discontinued operations is defined as release from operations plus/(less) new business surplus/(strain).

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

See Note 2.03 for more detail on experience variances, changes to valuation assumptions and non-cash items.

IFRS Disclosures on Performance and Release from Operations Page 31

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

					Changes					Operating
		New	Net		in			Operating		profit/
	Release	business	release	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	from	surplus/	from	ience	assump-	items and	national	(loss)	expense/	before
For the six month period	operations¹	(strain)	operations	variances	tions	other	and other²	after tax	(credit)	tax
to 30 June 2017	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


LGR	256	51	307	59	104	(3)	-	467	99	566
- LGRI	174	40	214	62	57	(4)	-	329	73	402
- LGRR	82	11	93	(3)	47	1	-	138	26	164
LGIM	165	(11)	154	-	(2)	1	-	153	41	194
- LGIM (excluding Workplace
Savings)	153	-	153	-	-	-	-	153	41	194
- Workplace Savings³	12	(11)	1	-	(2)	1	-	-	-	-
LGC	119	-	119	-	-	-	-	119	23	142
LGI	166	3	169	(28)	23	(13)	(46)	105	42	147
- UK and Other	86	3	89	(28)	23	(13)	1	72	18	90
- US (LGIA)	80	-	80	-	-	-	(47)	33	24	57
General Insurance	12	-	12	-	-	-	-	12	3	15

From continuing operations	718	43	761	31	125	(15)	(46)	856	208	1,064
From discontinued operations⁴	53	(2)	51	-	2	(11)	3	45	11	56


Total from divisions	771	41	812	31	127	(26)	(43)	901	219	1,120


Group debt costs	(74)	-	(74)	-	-	-	-	(74)	(18)	(92)
Group investment projects
and expenses	(14)	-	(14)	-	-	-	(18)	(32)	(8)	(40)

Total	683	41	724	31	127	(26)	(61)	795	193	988

1. Release from operations includes US dividends of £80m within the US (LGIA) line.
2. International and other includes £10m of restructuring costs (£12m before tax) within the Group investment projects and expenses line.
3. Workplace Savings represents administration business only. Profits on fund management services are included within LGIM (excluding Workplace Savings).
4. Discontinued operations primarily reflects the result of the Savings division following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For this reconciliation, discontinued operations also include the results of Legal & General Netherlands. This business was sold during 2017 and was previously reflected in the LGI (UK and Other) divisional results.

IFRS Disclosures on Performance and Release from Operations Page 32

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

					Changes					Operating
		New	Net		in			Operating		profit/
	Release	business	release	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	from	surplus/	from	ience	assump-	items and	national	(loss)	expense/	before
For the year ended	operations¹	(strain)	operations	variances	tions	other	and other²	after tax	(credit)	tax
31 December 2017	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


LGR	508	180	688	72	274	3	-	1,037	210	1,247
- LGRI	347	152	499	66	190	1	-	756	150	906
- LGRR	161	28	189	6	84	2	-	281	60	341
LGIM	342	(21)	321	(4)	(1)	2	-	318	82	400
- LGIM (excluding Workplace
Savings)	318	-	318	-	-	-	-	318	82	400
- Workplace Savings ³	24	(21)	3	(4)	(1)	2	-	-	-	-
LGC	224	-	224	-	-	-	-	224	48	272
LGI	273	2	275	(50)	48	(25)	(26)	222	81	303
- UK and Other	193	2	195	(50)	48	(25)	1	169	40	209
- US (LGIA)	80	-	80	-	-	-	(27)	53	41	94
General Insurance	30	-	30	-	-	-	-	30	7	37


From continuing operations	1,377	161	1,538	18	321	(20)	(26)	1,831	428	2,259
From discontinued operations⁴	107	(5)	102	(1)	3	(21)	3	86	21	107


Total from divisions	1,484	156	1,640	17	324	(41)	(23)	1,917	449	2,366


Group debt costs	(154)	-	(154)	-	-	-	-	(154)	(37)	(191)
Group investment projects
and expenses	(32)	-	(32)	-	-	-	(64)	(96)	(24)	(120)


Total	1,298	156	1,454	17	324	(41)	(87)	1,667	388	2,055


1. Release from operations includes dividends from the US of £80m within the US (LGIA) line.
2. International and other includes £48m of restructuring costs (£59m before tax) within the group investment projects and expenses line.
3. Workplace Savings represents administration business only. Profits on fund management services are included within LGIM (excluding Workplace Savings).
4. Discontinued operations primarily reflects the result of the Savings division following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For this reconciliation, discontinued operations also include the results of Legal & General Netherlands. This business was sold during 2017 and was previously reflected in the LGI (UK and Other) divisional results.

IFRS Disclosures on Performance and Release from Operations Page 33

2.03 Analysis of LGR and LGI operating profit

For the six month period to 30 June 2018

	LGR	LGI	LGR	LGI	LGR	LGI
	6 months	6 months	6 months	6 months	Full year	Full year
	2018	2018	2017	2017	2017	2017
	£m	£m	£m	£m	£m	£m


Net release from operations	298	157	307	169	688	275


Experience variances
Persistency	3	(9)	-	(13)	9	(18)
Mortality/morbidity	9	(12)	3	(16)	30	(26)
Expenses	(6)	3	(6)	2	(21)	3
Project and development costs	(3)	-	(2)	(1)	(15)	(3)
Other^1,2	48	49	64	-	69	(6)


Total experience variances	51	31	59	(28)	72	(50)


Changes to valuation assumptions
Persistency	-	-	-	-	-	(11)
Mortality/morbidity³	57	10	104	25	303	51
Expenses	-	-	-	-	(20)	9
Other	-	(2)	-	(2)	(9)	(1)


Total changes in valuation assumptions	57	8	104	23	274	48


Movement in non-cash items
Acquisition expense tax relief	-	(5)	-	(9)	-	(18)
Other	(6)	(4)	(3)	(4)	3	(7)


Total movement in non-cash items	(6)	(9)	(3)	(13)	3	(25)


International and other	-	(76)	-	(46)	-	(26)


Operating profit after tax	400	111	467	105	1,037	222


Tax gross up	80	43	99	42	210	81


Operating profit before tax	480	154	566	147	1,247	303


1. Other experience variances for LGR in the period to 30 June 2018 include the impact of an improvement in the quality of scheme data relating to bulk annuities.
2. Other experience variances for LGI in the period to 30 June 2018 reflect a number of modelling refinements for lapsing policies and interest rate application across product groups.
3. Mortality assumption changes for LGR in the period to 30 June 2018 include the one off release of certain scheme specific mortality reserves below a de minimis limit, as well as the benefit arising from an update to the Irish and Dutch long term assumptions for base mortality and future improvements.

IFRS Disclosures on Performance and Release from Operations Page 34

2.04 LGIM operating profit


	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


Asset management revenue (excluding 3rd party market data)¹	396	382	780
Asset management transactional revenue²	16	12	25
Asset management expenses (excluding 3rd party market data)¹	(210)	(200)	(405)
ETF operating loss³	(1)	-	-
Workplace Savings operating profit⁴	2	-	-

Total LGIM operating profit	203	194	400

1. Asset management revenue and expenses excludes income and costs of £8m in relation to provision of third party market data (H1 17: £8m each; FY 17: £17m each).
2. Transactional revenue includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees for property funds.
3. ETF represents the results of the Canvas ETF business, the acquisition of which completed in March 2018.
4. Workplace Savings represents administration business only.

2.05 General Insurance operating profit and combined operating ratio


	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


General Insurance operating (loss)/profit¹	(6)	15	37


General Insurance combined operating ratio ²	107%	95%	93%


1. Includes the General Insurance underwriting result and smoothed investment return.
2. The calculation of the General Insurance combined operating ratio incorporates claims, commission and expenses as a percentage of net earned premiums.

2.06 LGC operating profit


	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


Direct Investments¹	104	69	124
Traded investment portfolio including treasury assets²	68	73	148


Total LGC operating profit	172	142	272


1. Direct Investments represents LGC's portfolio of assets across infrastructure, housing (including CALA Homes) and SME finance.
2. The traded book holds a diversified set of exposures across equities, fixed income, multi-asset funds and cash.

2.07 Group investment projects and central expenses


	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


Group investment projects and central expenses	42	28	61
Restructuring and other costs	11	12	59


Total group investment projects and expenses	53	40	120

IFRS Disclosures on Performance and Release from Operations Page 35

2.08 Investment and other variances


	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


Investment variance¹	54	198	129
M&A related and other variances²	(22)	(29)	(105)


Total investment and other variances	32	169	24


1. Includes a positive variance in respect of the defined benefit pension scheme of £94m (H1 17: £111m; FY 17: £94m) reflecting a one-off payment by the with profits fund, (which forms part of the Mature Savings business sold to Swiss Re) as well as the impact of the acquisition of annuity assets from LGR and the beneficial rate difference between the IAS19 and annuity discount rates, as well as , to the shareholder fund in exchange for the removal of all future obligations in respect of the group's pension schemes.
2. Includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. H1 18 includes the recognition of a one-off profit of £20m arising on the stepped acquisition of CALA Homes (see note 4.02).

IFRS Disclosures on Performance and Release from Operations Page 36

2.09 Earnings per share

(a) Basic earnings per share

For the six month period to 30 June 2018


	After tax	Per share¹	After tax	Per share¹	After tax	Per share¹
	6 months 2018	6 months 2018	6 months 2017	6 months 2017	Full year 2017	Full year 2017
	£m	p	£m	p	£m	p


Operating profit	732	12.34	795	13.40	1,667	28.10
Investment and other variances	39	0.66	151	2.54	224	3.77


Total earnings based on profit attributable to equity holders	771	13.00	946	15.94	1,891	31.87
Less: earnings derived from discontinued operations	(44)	(0.75)	(36)	(0.61)	(80)	(1.35)
Earnings derived from continuing operations	727	12.25	910	15.33	1,811	30.52

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

(b) Diluted earnings per share

For the six month period to 30 June 2018

	After tax	Weighted average number of shares	Per share¹
	£m	m	p


Profit attributable to equity holders	771	5,933	13.00
Net shares under options allocable for no further consideration	-	25	(0.06)


Total diluted earnings	771	5,958	12.94
Less: diluted earnings derived from discontinued operations	(44)	-	(0.74)
Diluted earnings derived from continuing operations	727	5,958	12.20


	After tax	Weighted average number of shares	Per share¹
For the six month period to 30 June 2017	£m	m	p


Profit attributable to equity holders	946	5,933	15.94
Net shares under options allocable for no further consideration	-	25	(0.06)


Total diluted earnings	946	5,958	15.88
Less: diluted earnings derived from discontinued operations	(36)	-	(0.61)
Diluted earnings derived from continuing operations	910	5,958	15.27

	After tax	Weighted average number of shares	Per share¹
For the year ended 31 December 2017	£m	m	p


Profit attributable to equity holders	1,891	5,933	31.87
Net shares under options allocable for no further consideration	-	27	(0.14)


Total diluted earnings	1,891	5,960	31.73
Less: diluted earnings derived from discontinued operations	(80)	-	(1.35)
Diluted earnings derived from continuing operations	1,811	5,960	30.38
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 Disclosures on Performance and Release from Operations Page 37

2.10 Segmental analysis

Reportable segments

The group has five reportable segments that are continuing operations, comprising LGR, LGIM, LGC, LGI and General Insurance, as set out in the Operating profit section.

Central group expenses and debt costs are reported separately.

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

Reporting of assets and liabilities by reportable segment has not been included as this is not information that is provided to key decision makers on a regular basis. The group's assets and liabilities are managed on a legal entity rather than reportable segment basis, in line with regulatory requirements.

Analysis of segmental information for continuing operations

(a) Total income

				General	LGC and	Total continuing
	LGR	LGIM^1,2	LGI	Insurance	other³	operations⁴
For the six month period to 30 June 2018	£m	£m	£m	£m	£m	£m


Internal income	-	81	-	-	(81)	-
External income	(101)	1,324	1,073	183	11	2,490


Total income	(101)	1,405	1,073	183	(70)	2,490



				General	LGC and	Total continuing
	LGR	LGIM^1,2	LGI⁵	Insurance	other^3,5	operations⁴
For the six month period to 30 June 2017	£m	£m	£m	£m	£m	£m


Internal income	-	78	-	-	(78)	-
External income	2,810	12,988	1,075	167	442	17,482


Total income	2,810	13,066	1,075	167	364	17,482




				General	LGC and	Total continuing
	LGR	LGIM^1,2	LGI⁵	Insurance	other^3,5	operations⁴
For the year ended 31 December 2017	£m	£m	£m	£m	£m	£m


Internal income	-	158	-	-	(158)	-
External income	6,862	28,779	2,027	342	2,382	40,392


Total income	6,862	28,937	2,027	342	2,224	40,392


1. LGIM internal income relates to investment management services provided to other segments.
2. LGIM external income includes fees from fund management and investment return.
3. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.
4. Continuing operations exclude the results of the Mature Savings division which has been classified as discontinued following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For the six month period to 30 June 2017 and the year ended 31 December 2017, continuing operations also excludes income relating to Legal & General Netherlands, which was sold during 2017 and was previously reflected in the LGI divisional results.
5. Following a review of the segmentation of income between certain business divisions we have reallocated £179m for the period ended 30 June 2017, and £518m for the year ended 31 December 2017, from LGI to LGC and other, as this better reflects the nature of that income.

IFRS Disclosures on Performance and Release from Operations Page 38

2.10 Segmental analysis (continued)

(b) Fees from fund management and investment contracts


			LGC and other¹	Total continuing
	LGIM	LGI	LGC and other¹	operations²
For the six month period to 30 June 2018	£m	£m	£m	£m


Investment contracts	38	1	-	39
Investment management fees	393	-	(53)	340
Transaction fees	16	-	(1)	15


Total fees from fund management and investment contracts³	447	1	(54)	394



			LGC and other¹	Total continuing
	LGIM	LGI²	LGC and other¹	operations²
For the six month period to 30 June 2017	£m	£m	£m	£m


Investment contracts	38	1	-	39
Investment management fees	375	-	(51)	324
Transaction fees	12	-	1	13


Total fees from fund management and investment contracts³	425	1	(50)	376



			LGC and other¹	Total continuing
	LGIM	LGI²	LGC and other¹	operations²
For the year ended 31 December 2017	£m	£m	£m	£m


Investment contracts	77	1	-	78
Investment management fees	768	1	(101)	668
Transaction fees	25	-	-	25


Total fees from fund management and investment contracts³	870	2	(101)	771


1. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.
2. Continuing operations exclude the results of the Mature Savings division which has been classified as discontinued following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For the six month period to 30 June 2017 and the year ended 31 December 2017, continuing operations also excludes income relating to Legal & General Netherlands, which was sold during 2017 and was previously reflected in the LGI divisional results.
3. Fees from fund management and investment contracts are a component of Total income disclosed in Note 2.10 (a).

IFRS Disclosures on Performance and Release from Operations Page 39

2.10 Segmental analysis (continued)

				LGC and other¹	Total continuing
	LGR	LGIM	LGI	LGC and other¹	operations²
For the six month period to 30 June 2018	£m	£m	£m	£m	£m


House building	-	-	-	501	501
Professional services fees	-	1	77	(2)	76
Insurance broker	-	-	11	-	11


Total other operational income from contracts with customers	-	1	88	499	588


Other income³	2	-	(1)	27	28


Total other operational income⁴	2	1	87	526	616



				LGC and other¹	Total continuing
	LGR	LGIM	LGI	LGC and other¹	operations^2,4
For the six month period to 30 June 2017	£m	£m	£m	£m	£m


House building	-	-	-	-	-
Professional services fees	1	1	91	(19)	74
Insurance broker	-	-	9	-	9


Total other operational income from contracts with customers	1	1	100	(19)	83


Other income³	1	-	2	41	44


Total other operational income⁴	2	1	102	22	127



				LGC and other¹	Total continuing
	LGR	LGIM	LGI	LGC and other¹	operations^2,4
For the year ended 31 December 2017	£m	£m	£m	£m	£m


House building	-	-	-	5	5
Professional services fees	1	2	168	(19)	152
Insurance broker	-	-	24	-	24


Total other operational income from contracts with customers	1	2	192	(14)	181


Other income³	3	-	2	12	17


Total other operational income⁴	4	2	194	(2)	198


1. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. H1 18 reflects the consolidation of the results of CALA Homes.
2. Continuing operations exclude the results of the Mature Savings division which has been classified as discontinued following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For the six month period to 30 June 2017 and the year ended 31 December 2017, continuing operations also excludes income relating to Legal & General Netherlands, which was sold during 2017 and was previously reflected in the LGI divisional results.
3. Other income includes the net impact of £3m of share of profit from associates (H1 17: £25m; FY 17:£39m) and intra-segmental eliminations and group consolidation adjustments. Other income in H1 18 also includes a one-off profit of £20m on the stepped acquisition of CALA Homes (details are provided in Note 4.02).
4. Total other operational income is a component of Total income disclosed in Note 2.10 (a).

IFRS Disclosures on Performance and Release from Operations Page 40

2.10 Segmental analysis (continued)

(d) Profit/(loss) for the period

						Group
						expenses	Total
					General	and debt	Continuing
For the six month period to	LGR	LGIM	LGC	LGI	Insurance	costs	operations¹
30 June 2018	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	480	203	172	154	(6)	(150)	853
Investment and other variances	85	(4)	(90)	(37)	(8)	86	32
Gains attributable to non-controlling interests	-	-	-	-	-	1	1

Profit/(loss) before tax attributable to equity holders	565	199	82	117	(14)	(63)	886
Tax (expense)/credit attributable to equity holders	(102)	(39)	(14)	(35)	3	29	(158)


Profit/(loss) for the period	463	160	68	82	(11)	(34)	728



						Group
						expenses	Total
					General	and debt	Continuing
For the six month period to	LGR	LGIM	LGC	LGI	Insurance	costs	operations¹
30 June 2017	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	566	194	142	147	15	(132)	932
Investment and other variances	38	(4)	52	(3)	6	77	166
Gains attributable to non-controlling interests	-	-	-	-	-	6	6


Profit/(loss) before tax attributable to equity holders	604	190	194	144	21	(49)	1,104
Tax (expense)/credit attributable to equity holders	(108)	(40)	(25)	(41)	(4)	16	(202)


Profit/(loss) for the period	496	150	169	103	17	(33)	902



						Group
						expenses	Total
					General	and debt	Continuing
For the year ended	LGR	LGIM	LGC	LGI²	Insurance	costs	operations¹
31 December 2017	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	1,247	400	272	303	37	(311)	1,948
Investment and other variances	4	(9)	91	(60)	6	(14)	18
Gains attributable to non-controlling interests	-	-	-	-	-	11	11


Profit/(loss) before tax attributable to equity holders	1,251	391	363	243	43	(314)	1,977
Tax (expense)/credit attributable to equity holders	(225)	(84)	(77)	182	(8)	43	(169)


Profit/(loss) for the year	1,026	307	286	425	35	(271)	1,808


1. Continuing operations exclude the results of the Mature Savings division which has been classified as discontinued following the announcement in December 2017 to sell the Mature Savings business to Swiss Re. For the six month period to 30 June 2017 and the year ended 31 December 2017, continuing operations also exclude profits relating to Legal & General Netherlands, which was sold during 2017 and was previously reflected in the LGI divisional results.
2. The LGI tax credit of £182m in 2017 primarily reflects the impact of a one-off US tax benefit of £246m arising from the revaluation of net deferred tax liabilities as a result of the reduction in the US corporate income tax rate in 2017.

IFRS Primary Financial Statements Page 41

3.01 Consolidated Income Statement

For the six month period to 30 June 2018

		6 months	6 months	Full year
		2018	2017	2017
	Notes	£m	£m	£m


Income
Gross written premiums		2,756	3,684	7,932
Less: Outward reinsurance premiums		(862)	(864)	(1,858)
Less: Net change in provision for unearned premiums		(9)	(11)	(23)


Net premiums earned		1,885	2,809	6,051
Fees from fund management and investment contracts		394	376	771
Investment return		(405)	14,028	33,457
Other operational income		616	141	212


Total income	2.10	2,490	17,354	40,491


Expenses
Claims and change in insurance liabilities		966	3,327	8,326
Less: Reinsurance recoveries		(1,128)	(492)	(1,776)


Net claims and change in insurance liabilities		(162)	2,835	6,550
Change in provisions for investment contract liabilities		292	12,489	29,848
Acquisition costs		428	353	734
Finance costs		113	103	212
Other expenses		873	380	1,086


Total expenses		1,544	16,160	38,430


Profit before tax		946	1,194	2,061
Tax expense attributable to policyholders' returns		(60)	(76)	(70)


Profit before tax attributable to equity holders		886	1,118	1,991


Total tax expense		(218)	(278)	(239)
Tax expense attributable to policyholders' returns		60	76	70


Tax expense attributable to equity holders	4.06	(158)	(202)	(169)


Profit after tax from continuing operations	2.10	728	916	1,822
Profit after tax from discontinued operations¹		44	36	80


Profit for the period		772	952	1,902


Attributable to:
Non-controlling interests		1	6	11
Equity holders		771	946	1,891



Dividend distributions to equity holders during the period	4.04	658	616	872
Dividend distributions to equity holders proposed after the period end	4.04	274	256	658




Earnings per share:
Basic (pence per share)²	2.09	13.00p	15.94p	31.87p
Diluted (pence per share)²	2.09	12.94p	15.88p	31.73p

Basic earnings per share derived from continuing operations²	2.09	12.25p	15.33p	30.52p
Diluted earnings per share derived from continuing operations²	2.09	12.20p	15.27p	30.38p


1. Discontinued operations primarily reflects the results of the Savings division following the group's announcement in December 2017 to sell the Mature Savings business to Swiss Re.
2. All earnings per share calculations are based on profit attributable to equity holders of the company.

IFRS Primary Financial Statements Page 42

3.02 Consolidated Statement of Comprehensive Income

For the six month period to 30 June 2018

	6 months	6 months	Full year
	2018	2017	2017
	£m	£m	£m


Profit for the period	772	952	1,902

Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes	143	(56)	(55)
Tax on actuarial gains/(losses) on defined benefit pension schemes	(26)	10	10


Total items that will not be reclassified subsequently to profit or loss	117	(46)	(45)


Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations	13	(44)	(99)
Movement in cross-currency hedge	9	20	(12)
Tax on movement in cross-currency hedge	(2)	-	2
Net change in financial investments designated as available-for-sale	(41)	28	27
Tax on net change in financial investments designated as available-for-sale	9	(10)	(4)


Total items that may be reclassified subsequently to profit or loss	(12)	(6)	(86)


Other comprehensive income/(expense) after tax	105	(52)	(131)


Total comprehensive income for the period	877	900	1,771


Total comprehensive income for the period attributable to:
Continuing operations	833	864	1,691
Discontinued operations	44	36	80
	877	900	1,771
Total comprehensive income attributable to:
Non-controlling interests	1	6	11
Equity holders	876	894	1,760

IFRS Primary Financial Statements Page 43

3.03 Consolidated Balance Sheet

As at 30 June 2018

		As at	As at	As at
		30 Jun 2018	30 Jun 2017^1,2	31 Dec 2017¹
	Notes	£m	£m	£m


Assets
Goodwill		65	11	11
Purchased interest in long term businesses and other intangible assets		194	133	138
Deferred acquisition costs		128	752	331
Investment in associates and joint ventures		51	305	252
Property, plant and equipment		63	69	59
Investment property	4.05	7,231	8,714	7,110
Financial investments	4.05	428,117	442,063	443,162
Reinsurers' share of contract liabilities		5,734	5,300	5,703
Deferred tax assets	4.06	7	5	7
Current tax assets		388	358	342
Other assets		9,383	5,060	6,083
Assets of operations classified as held for sale	4.03	21,932	-	22,584
Cash and cash equivalents		20,178	15,805	18,919


Total assets		493,471	478,575	504,701



Equity
Share capital	4.07	149	149	149
Share premium	4.07	990	985	988
Employee scheme treasury shares		(52)	(40)	(40)
Capital redemption and other reserves		158	211	168
Retained earnings		6,456	5,615	6,224


Attributable to owners of the parent		7,701	6,920	7,489
Non-controlling interests	4.08	77	350	76


Total equity		7,778	7,270	7,565



Liabilities
Participating insurance contracts		-	5,579	-
Participating investment contracts		-	5,180	-
Unallocated divisible surplus		-	719	-
Value of in-force non-participating contracts		-	(145)	-


Participating contract liabilities		-	11,333	-



Non-participating insurance contracts		59,713	60,271	61,589
Non-participating investment contracts		302,280	325,059	315,651


Non-participating contract liabilities		361,993	385,330	377,240


Core borrowings	4.09	3,489	3,499	3,459
Operational borrowings	4.10	957	553	538
Provisions		1,153	1,358	1,335
UK deferred tax liabilities	4.06	73	316	13
Overseas deferred tax liabilities	4.06	235	365	244
Current tax liabilities		255	171	223
Payables and other financial liabilities	4.11	59,152	43,709	52,246
Other liabilities		438	509	563
Net asset value attributable to unit holders		25,434	24,162	27,317
Liabilities of operations classified as held for sale	4.03	32,514	-	33,958


Total liabilities		485,693	471,305	497,136


Total equity and liabilities		493,471	478,575	504,701


1. Following a change in accounting policy for LGIA term life reserves, a number of balance sheet items have been restated, notably deferred acquisition costs, non-participating insurance contracts and deferred tax liabilities. The overall net impact on the group's retained earnings as at 30 June 2017 and 31 December 2017 is a reduction of £245m and £354m respectively. Further detail on the change in accounting policy is provided in Note 4.01.
2. As at 30 June 2017, £6,202m of reverse repurchase agreements were classified in Other assets. On review, we have determined that these instruments meet the definition of a financial asset and therefore should have been included within Financial Investments. Accordingly, balances as at 30 June 2017 have been restated resulting in a decrease in Other assets of £6,202m and an increase in Financial investments of £6,202m. The instruments have been classified as Loans at fair value and assessed as fair value Level 2. The restatement has nil impact on the valuation of the instruments, and a net nil impact on Total assets in the Consolidated Balance Sheet.

IFRS Primary Financial Statements Page 44

3.04 Condensed Consolidated Statement of Changes in Equity


			Employee	Capital		Equity
			scheme	redemption		attributable	Non-
	Share	Share	treasury	and other	Retained	to owners	controlling	Total
For the six month period to 30 June 2018	capital	premium	shares	reserves¹	earnings	of the parent	interests	equity
For the six month period to 30 June 2018	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2018	149	988	(40)	168	6,224	7,489	76	7,565
Total comprehensive (expense)/income for the period	-	-	-	(12)	888	876	1	877
Options exercised under share option schemes	-	2	(12)	(22)	-	(32)	-	(32)
Net movement in employee scheme treasury shares	-	-	-	23	3	26	-	26
Dividends	-	-	-	-	(658)	(658)	-	(658)
Movement in third party interests	-	-	-	-	-	-	-	-
Currency translation differences	-	-	-	1	(1)	-	-	-


As at 30 June 2018	149	990	(52)	158	6,456	7,701	77	7,778



1. Capital redemption and other reserves include share-based payments £70m, foreign exchange £83m, capital redemption £17m, available-for-sale reserves £(10)m and hedging reserves £(2)m.


			Employee	Capital		Equity
			scheme	redemption		attributable	Non-
	Share	Share	treasury	and other	Retained	to owners	controlling	Total
For the six month period to 30 June 2017	capital	premium	shares	reserves¹	earnings	of the parent	interests	equity
For the six month period to 30 June 2017	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2017	149	981	(30)	212	5,633	6,945	338	7,283
Total comprehensive (expsenses)/income for the period	-	-	-	(6)	900	894	6	900
Options exercised under share option schemes	-	4	-	-	-	4	-	4
Net movement in employee scheme treasury shares	-	-	(10)	(3)	1	(12)	-	(12)
Dividends	-	-	-	-	(616)	(616)	-	(616)
Movement in third party interests	-	-	-	-	-	-	6	6
Currency translation differences	-	-	-	8	(8)	-	-	-
Changes in accounting policy²	-	-	-	-	(295)	(295)	-	(295)


Restated as at 30 June 2017	149	985	(40)	211	5,615	6,920	350	7,270



1. Capital redemption and other reserves include share-based payments £57m, foreign exchange £99m, capital redemption £17m, available-for-sale reserves £17m and hedging reserves £21m.
2. Changes in accounting policy represents the cumulative impact on retained earnings of the change in accounting policy related to the recognition of US term assurance liabilities, described in Note 4.01. The change has been applied retrospectively, and this adjustment represents the effect of that change across half year 2017 and all prior periods. The impact of this change on retained earnings as at 1 January 2017 was a reduction of £277m.

IFRS Primary Financial Statements Page 45

3.04 Condensed Consolidated Statement of Changes in Equity (continued)


			Employee	Capital		Equity
			scheme	redemption		attributable	Non-
	Share	Share	treasury	and other	Retained	to owners	controlling	Total
For the year ended 31 December 2017	capital	premium	shares	reserves¹	earnings	of the parent	interests	equity
For the year ended 31 December 2017	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2017	149	981	(30)	212	5,633	6,945	338	7,283
Total comprehensive (expenses)/income for the year	-	-	-	(86)	1,846	1,760	11	1,771
Options exercised under share option schemes	-	7	(10)	(19)	-	(22)	-	(22)
Net movement in employee scheme treasury shares	-	-	-	28	4	32	-	32
Dividends	-	-	-	-	(872)	(872)	-	(872)
Movement in third party interests	-	-	-	-	-	-	(273)	(273)
Currency translation differences	-	-	-	33	(33)	-	-	-
Changes in accounting policy²	-	-	-	-	(354)	(354)	-	(354)


Restated as at 31 December 2017	149	988	(40)	168	6,224	7,489	76	7,565



1. Capital redemption and other reserves include share-based payments £69m, foreign exchange £69m, capital redemption £17m, available-for-sale reserves £22m and hedging reserves £(9)m.
2. Changes in accounting policy represents the cumulative impact on retained earnings of the change in accounting policy related to the recognition of US term assurance liabilities, described in Note 4.01. The change has been applied retrospectively, and this adjustment represents the effect of that change across 2017 and all prior years. The impact of this change on retained earnings as at 1 January 2017 was a reduction of £277m.

IFRS Primary Financial Statements Page 46

3.05 Consolidated Statement of Cash Flows

For the six month period to 30 June 2018

		6 months	6 months	Full year
		2018	2017	2017
	Notes	£m	£m	£m


Cash flows from operating activities
Profit for the period		772	952	1,902
Adjustments for non cash movements in net profit for the period
Realised and unrealised losses/(gains) on financial investments and investment properties		6,025	(9,588)	(25,024)
Investment income		(5,386)	(5,396)	(9,953)
Interest expense		140	106	220
Tax expense		210	358	377
Other adjustments		105	33	154
Net (increase)/decrease in operational assets
Investments held for trading or designated as fair value through profit or loss		7,306	418	11,794
Investments designated as available-for-sale		387	(4)	277
Other assets		(2,012)	(6,116)	(2,344)
Net increase/(decrease) in operational liabilities
Insurance contracts		(2,001)	259	(3,989)
Investment contracts		(13,370)	3,790	(10,798)
Value of in-force non-participating contracts		-	62	206
Other liabilities		5,923	10,574	20,444
Net (decrease)/increase in held for sale assets/liabilities		(538)	-	12,139


Cash used in operations		(2,439)	(4,552)	(4,595)
Interest paid		(142)	(104)	(221)
Interest received		1,816	2,353	4,528
Tax paid¹		(286)	(298)	(497)
Dividends received		2,802	2,851	5,196


Net cash flows from operating activities		1,751	250	4,411


Cash flows from investing activities
Net acquisition of plant, equipment, intangibles and other assets		(97)	(30)	(230)
Net disposal/(acquisition) of operations		326	286	223
Investment in joint ventures and associates		-	-	(7)


Net cash flows used in investing activities		229	256	(14)


Cash flows from financing activities
Dividend distributions to ordinary equity holders during the period	4.04	(658)	(616)	(872)
Issue of ordinary share capital		2	3	7
Purchase of employee scheme shares (net)		12	9	10
Proceeds from borrowings		148	1,211	1,232
Repayment of borrowings		(11)	(619)	(600)
Movement in non-controlling interests		1	-	(262)


Net cash flows used in financing activities		(506)	(12)	(485)


Net increase in cash and cash equivalents		1,474	494	3,912
Exchange gains/(losses) on cash and cash equivalents		6	(37)	(19)
Cash and cash equivalents at 1 January (before reallocation of held for sale cash)		18,919	15,348	15,348


Total cash and cash equivalents		20,399	15,805	19,241
Cash and cash equivalents classified as held for sale		(221)	-	(322)


Cash and cash equivalents at 30 June/ 31 December		20,178	15,805	18,919


1. Tax comprises UK corporation tax paid of £170m (H1 17: £151m; FY 17: £290m), overseas corporate taxes of £23m (H1 17: £8m; FY 17: £12m), and withholding tax of £93m (H1 17: £139m; FY 17: £195m).

IFRS Disclosure Notes Page 47

4.01 Basis of preparation

The group financial information for the six months ended 30 June 2018 has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting'. The group's financial information has also been prepared in line with the accounting policies which the group expects to adopt for the 2018 year end. These policies are consistent with the principal accounting policies which were set out in the group's 2017 consolidated financial statements, except where changes have been outlined in "New standards, interpretations and amendments to published standards that have been adopted by the group" and "Change in accounting policy" outlined below. These are 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 interim management 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 2017 financial statements except for the changes outlined in the "Change in accounting policy" below.

The results for the half year ended 30 June 2018 are unaudited but have been reviewed by KPMG LLP. The interim results do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The results from the full year 2017 have been taken from the group's 2017 Annual Report and Accounts, restated as described in the changes in accounting policy section below. Therefore, these interim accounts should be read in conjunction with the 2017 Annual Report and Accounts that have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and adopted by the European Commission for use in the European Union. PricewaterhouseCoopers LLP reported on the 2017 financial statements, and their report was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The group's 2017 Annual Report and Accounts has been filed with the Registrar of Companies.

Key technical terms and definitions

The interim management report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive list of these definitions is contained within the glossary section of these interim financial statements.

Alternative performance measures

The group uses a number of alternative performance measures (APMs), including net release from operations and operating profit, in the discussion of its business performance and financial position as the group believes that they provide a better indication of performance. Definitions of key APMs can be found in the glossary.

Tax attributable to policyholders and equity holders

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

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

(a) New standards, interpretations and amendments to published standards that have been adopted by the group

The group has applied the following standards and amendments for the first time in its annual reporting period commencing 1 January 2018.

IFRS15 Revenue from Contracts with Customers

IFRS 15, 'Revenue from Contracts with Customers', is the new revenue recognition reporting standard, which became effective from 1 January 2018. IFRS 15 has replaced all of the previous revenue standards and interpretations in IFRS, in particular IAS 18 'Revenue' and IAS 11 'Construction Contracts'.

The standard introduces a five-step model to account for revenue arising from contracts with customers, the core principle of which is that an entity will recognise revenue at an amount that reflects the consideration to which it expects to be entitled in exchange for transferring goods or services to a customer in the reporting period.

The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

The group has adopted IFRS 15 using the full retrospective method. Revenue arising from insurance contracts, financial instruments and leases is out of scope of the standard. There are two categories of revenue in the group's income statement that remain in scope:

(i) 'Fees from fund management and investment contracts'; and

(ii) Components of the account 'Other operational income'.

IFRS Disclosure Notes Page 48

Fees from fund management and investment contracts

The group generates revenue from acting as the investment manager for clients. Fees charged on investment management services are based on the contractual fee arrangements applied to assets under management and recognised as earned when the service has been provided or as they are provided.

Other operational income

Other operational income predominantly includes revenue from house building, and professional and intermediary services. Revenue is recognised at a point in time when the service has been completed.

There has been no material impact on the group's consolidated financial statements from the implementation of IFRS 15 and therefore the group's financial statements have not been restated.

Amendments to IAS 40 Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property under construction or development, into or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management's intentions for the use of a property does not provide evidence of a change in use. These amendments do not have any impact on the group's consolidated financial statements.

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions

The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The group already accounts for net settlement features as equity settled and therefore there is no impact on the group's consolidated financial statements.

Amendments to IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice

The amendments clarify that an entity that is a venture capital organisation, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. If an entity, that is not itself an investment entity, has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture's interests in subsidiaries. This election is made separately for each investment in an associate or joint venture, at the later of the date on which: (a) the investment in an associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment in an associate or joint venture first becomes a parent. These amendments do not have any impact on the group's consolidated financial statements.

Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters

Short-term exemptions in paragraphs E3-E7 of IFRS 1 were deleted because they have now served their intended purpose. These amendments do not have any impact on the group's consolidated financial statements.

IFRIC Interpretation 22 Foreign Currency Transactions and Advanced Consideration

The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of a related asset, over the then expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. This Interpretation does not have any impact on the group's consolidated financial statements.

(b) Change in accounting policy

LGIA (Legal & General Insurance America) Term Assurance

During the period, the group has changed its accounting policy for term assurance liabilities on business transacted by its US subsidiaries, which was previously based on recognised actuarial methods reflecting US GAAP. From 1 January 2018, the group has calculated such liabilities on the basis of current information using the gross premium valuation method, which is in line with how similar products are accounted for in other parts of the business.

The group believes the new policy is preferable as it more closely aligns the accounting for this business with that of business written in the UK, and therefore results in the financial statements providing reliable and more relevant information about the impact of term assurance business on the group's financial position, financial performance or cash flows, in line with IFRS requirements.

This represents a voluntary change in accounting policy and has been applied retrospectively, with prior periods retained earnings adjusted accordingly.

The principal impact of the change on the prior period consolidated financial statements is an increase in long term insurance contract liabilities and the derecognition of deferred acquisition costs where the associated cash flows are now recognised within the insurance contract liability calculation.

IFRS Disclosure Notes Page 49


The impact on each line item of the consolidated balance sheets presented is shown in the table below:

	As reported		Adjustments		Restated
	30 Jun 2017	31 Dec 2017	30 Jun 2017	31 Dec 2017	30 Jun 2017	31 Dec 2017
	£m	£m	£m	£m	£m	£m


Deferred acquisition costs	2,032	1,507	(1,280)	(1,176)	752	331
Non-participating insurance contracts	61,097	62,318	(826)	(729)	60,271	61,589
Overseas deferred tax liability	524	337	(159)	(93)	365	244
Retained earnings	5,910	6,578	(295)	(354)	5,615	6,224

As a consequence of the change highlighted above, the group has reclassified £164m (as of 1 January 2017) of financial investments backing term assurance business from designated as available for sale to designated as fair value through profit or loss. This represents a further change in accounting policy permitted by IFRS 4 'Insurance Contracts'.

Whole of Life Mortality Assumptions

During the period, the group changed its accounting policy for whole of life mortality improvers. This change has arisen following the change in regulatory regime to Solvency II. The old regime only allowed improvers to be added where reserves would be increased, in line with INSPRU requirements. Under the new policy mortality improvement assumptions can now be applied consistently across all types of mortality business. The change covers all term assurance and whole of life products, and results in the group no longer needing to comply with INSPRU 1.2.60 section 5a. The group believes that the new policy better reflects the risks that the business is exposed to, providing more reliable and relevant information to users of the financial statements.

This represents a voluntary change in accounting policy. However, because the impact of this change on prior periods is considered insignificant, the group has applied the change prospectively.

Future accounting developments

Insurance Contracts

IFRS 17, 'Insurance Contracts' was issued in May 2017 and is effective for annual periods beginning on or after 1 January 2021 (subject to EU endorsement). The standard provides a comprehensive approach for accounting for insurance contracts including their valuation, income statement presentation and disclosure. The group has mobilised a project to assess the financial and operational implications of the standard.

Financial Instruments

In July 2014, the IASB issued IFRS 9, 'Financial Instruments' which is effective for annual periods beginning on or after 1 January 2018. The IASB subsequently issued 'Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts' which allows entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17 or 1 January 2021, whichever is the earlier. As disclosed in the 31 December 2017 financial statements, the group has qualified for the deferral and has chosen to apply it.

The impact of IFRS 9 on the group's ﬁnancial statements will depend on the interaction of the asset classiﬁcation and measurement with the insurance contract measurement at the date of transition, particularly for liabilities which are measured using locked in discount rates.

Leases

In January 2016, the IASB issued IFRS 16, 'Leases', effective for annual periods beginning on or after 1 January 2019. IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a 'right-of-use asset' for virtually all lease contracts, bringing commitments in relation to operating leases (as currently defined in IAS 17, 'Leases') onto the balance sheet. The impact of the standard on lessor accounting is significantly smaller with the provisions remaining closely aligned to those in IAS 17 although the IASB have issued updated guidance on the definition of a lease. The impact on the group is not expected to be material. The group has not early adopted this standard.

IFRS Disclosure Notes Page 50

4.02 Acquisitions

CALA Group (Holdings) Limited

On 12 March 2018 the group increased its shareholding in CALA Group (Holdings) Limited ('CALA Homes') to 100% by acquiring the remaining 52.12% shareholding of the company it did not previously own. Under the agreement, the counterparty for £152m of loan notes payable by CALA Homes was novated to the group and the loan notes subsequently cancelled which reduced the fair value of purchase considerations from £605m to £453m.

The transaction has been accounted for as a stepped acquisition in accordance with IFRS 3 'Business Combinations', resulting in the recognition of a one-off profit of £20m.

The assets and liabilities acquired at the point of the transaction have been recorded at their fair values for the purposes of the acquisition balance sheet and included in the consolidated accounts of the group using the group's accounting policies in accordance with IFRS.

The following table summarises the consideration for the acquisition, the fair value of the assets acquired, liabilities assumed, and resulting allocation of goodwill.

			Fair Value
			£m
Assets
Intangible assets (Brand)			25
Other non-current assets			4
Land and inventories			1,006
Receivables			34
Cash			18

Total assets			1,087


Liabilities
Loans and borrowings			362
Trade and other payables			271
Other liabilities			33

Total Liabilities			666



Fair value of net assets acquired			421

Fair value of purchase consideration			453

Goodwill arising on acquisition			32


Fair value adjustments arising on acquisition were in relation to identifiable intangible assets, land and inventories, and related deferred tax liabilities. The residual goodwill recognised on acquisition, none of which is expected to be deductible for tax purposes, is attributable to the network of customers and contractors and the pipeline of future land and homes that could not be directly attributed to homes currently under construction or the brand acquired. There were no contingent consideration arrangements or indemnification assets recognised on acquisition.

Other acquisitions

During the period ended 30 June 2018 the group completed the acquisitions of Canvas European exchange-traded fund ('Canvas') and Buddies Enterprises Limited.

The assets and liabilities of the acquired business have been recorded at their fair values for the purposes of the acquisition balance sheet and included in the consolidated accounts of the group using the group's accounting policies in accordance with IFRS.

A total residual goodwill of £22m has been recognised in respect of these acquisitions.

IFRS Disclosure Notes Page 51

4.03 Assets and liabilities of operations classified as held for sale

4.04 Dividends and appropriations


	Dividend	Per share¹	Dividend	Per share¹	Dividend	Per share¹
	6 months 2018	6 months 2018	6 months 2017	6 months 2017	Full year 2017	Full year 2017
	£m	p	£m	p	£m	p


Ordinary dividends paid and charged to equity in the period:
- Final 2017 dividend paid in June 2018	658	11.05	-	-	-	-
- Final 2016 dividend paid in June 2017	-	-	616	10.35	616	10.35
- Interim 2017 dividend paid in September 2017	-	-	-	-	256	4.30


	658	11.05	616	10.35	872	14.65


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

Subsequent to 30 June 2018, the directors declared an interim dividend for 2018 of 4.6 pence per ordinary share. This dividend will be paid on 27 September 2018. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2018 and is not included as a liability in the Consolidated Balance Sheet.

IFRS Disclosure Notes Page 52

4.05 Financial investments and investment property

	30 June 2018	30 June 2017	31 December 2017
	£m	£m	£m


Equities	181,535	194,754	199,858
Unit trusts	10,005	7,584	9,147
Debt securities¹	233,977	219,989	230,941
Accrued interest	1,502	1,449	1,518
Derivative assets²	10,132	11,513	12,595
Loans³	10,271	6,774	9,165


Financial investments	447,422	442,063	463,224


Investment property⁴	8,505	8,714	8,337


Total financial investments and investment property	455,927	450,777	471,561
Less: financial investments and investment property classified as held for sale	(20,579)		(21,289)
Financial investments and investment property	435,348		450,272
1. A detailed analysis of debt securities to which shareholders are directly exposed, is disclosed in Note 7.03.
2. Derivatives are used 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. Derivative assets are shown gross of derivative liabilities of £7,652m (30 June 2017: £7,376m; 31 December 2017: £8,173m).
3. As at 30 June 2017, £6,202m of reverse repurchase agreements were classified in Other assets. On review, we have determined that these instruments meet the definition of a financial asset and therefore should have been included within Financial investments. Accordingly, the balances as at 30 June 2017 have been restated resulting in a decrease in Other assets of £6,202m and an increase in Financial investments of £6,202m. The instruments have been classified as Loans at fair value, and assessed as fair value Level 2. The restatement has nil impact on the valuation of the instruments, and a net nil impact on Total assets in the Consolidated Balance Sheet. This classification is consistent with the treatment of reverse repurchase agreements as at 31 December 2017.
4. Total Financial investments and investment property is presented gross of held for sale assets as at 31 December 2017 and 30 June 2018.

(a) Fair value hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the group's view of market assumptions in the absence of observable market information. The group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.

The levels of fair value measurement bases are defined as follows:

Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs).

All of the group's Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modeling and multiple source validation in order to determine consensus prices, with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit), internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have therefore classified them as Level 2.

The group's policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time.

There have been no significant transfers between Level 1 and Level 2 in the six month period to 30 June 2018 (30 June 2017: £666m of forward currency contracts were reclassified from Level 1 to Level 2). Transfers into and out of Level 3 are disclosed in Note 4.06 (b).

IFRS Disclosure Notes Page 53

4.05 Financial investments and investment property (continued)

(a) Fair value hierarchy (continued)

	Total	Level 1	Level 2	Level 3
For the six month period to 30 June 2018	£m	£m	£m	£m


Shareholder
Equity securities	2,317	1,535	-	782
Debt securities	4,947	1,688	2,886	373
Accrued interest	32	15	14	3
Derivative assets	12	4	8	-
Investment property	109	-	-	109
Loans at fair value	352	-	352	-

Non profit non-unit linked
Equity securities	285	281	4	-
Debt securities	50,406	6,641	33,373	10,392
Accrued interest	441	29	391	21
Derivative assets	4,213	-	4,181	32
Investment property	2,791	-	-	2,791
Loans at fair value	573	-	398	175

With-profits
Equity securities	3,276	3,087	-	189
Debt securities	6,083	1,746	4,333	4
Accrued interest	50	14	36	-
Derivative assets	57	4	53	-
Investment property	551	-	-	551
Loans at fair value	117	-	117	-

Unit linked
Equity securities	185,662	185,009	36	617
Debt securities	172,541	120,048	52,484	9
Accrued interest	979	439	540	-
Derivative assets	5,850	218	5,632	-
Investment property	5,054	-	-	5,054
Loans at fair value	8,786	-	8,786	-

Total financial investments and investment property at fair value¹	455,484	320,758	113,624	21,102

1. This table excludes loans of £443m, which are held at amortised cost.

IFRS Disclosure Notes Page 54

4.05 Financial investments and investment property (continued)

(a) Fair value hierarchy (continued)

	Total	Level 1	Level 2	Level 3
For the six month period to 30 June 2017	£m	£m	£m	£m


Shareholder
Equity securities	2,352	1,718	2	632
Debt securities	4,533	1,030	3,105	398
Accrued interest	24	6	15	3
Derivative assets¹	50	6	44	-
Investment property	200	-	-	200
Loans at fair value²	343	-	343	-


Non profit non-unit linked
Equity securities	268	264	4	-
Debt securities	51,067	8,127	35,781	7,159
Accrued interest	469	40	417	12
Derivative assets¹	3,773	-	3,768	5
Investment property	2,687	-	-	2,687
Loans at fair value²	199	-	199	-


With-profits
Equity securities	3,241	3,014	18	209
Debt securities	6,741	2,888	3,848	5
Accrued interest	56	18	38	-
Derivative assets¹	93	22	71	-
Investment property	740	-	-	740
Loans at fair value²	102	-	102	-


Unit linked
Equity securities	196,477	192,628	3,370	479
Debt securities	157,648	105,951	51,690	7
Accrued interest	900	349	551	-
Derivative assets¹	7,597	52	7,545	-
Investment property	5,087	-	-	5,087
Loans at fair value²	5,558	-	5,558	-


Total financial investments and investment property at fair value³	450,205	316,113	116,469	17,623


1. Within derivative assets, £666m of forward currency contracts have been reclassified from Level 1 to Level 2 following a review of the inputs required in their valuation. The reclassification had nil impact on the valuation of the instruments, and therefore nil impact on the Consolidated Balance Sheet.
2. As at 30 June 2017, £6,202m of reverse repurchase agreements were classified in Other assets. On review, we have determined that these instruments meet the definition of a financial asset and therefore should have been included within Financial investments. Accordingly, the balances as at 30 June 2017 have been restated resulting in a decrease in Other assets of £6,202m and an increase in Financial investments of £6,202m. The instruments have been classified as Loans at fair value, and assessed as fair value Level 2. The restatement has nil impact on the valuation of the instruments, and a net nil impact on Total assets in the Consolidated Balance Sheet. This classification is consistent with the treatment of reverse repurchase agreements as at 31 December 2017.
3. This table excludes loans and receivables of £572m, which are held at amortised cost.

IFRS Disclosure Notes Page 55

4.05 Financial investments and investment property (continued)

(a) Fair value hierarchy (continued)

	Total	Level 1	Level 2	Level 3
For the year ended 31 December 2017	£m	£m	£m	£m


Shareholder
Equity securities	2,418	1,743	1	674
Debt securities	4,575	1,134	3,076	365
Accrued interest	24	7	14	3
Derivative assets	44	33	11	-
Investment property	110	-	-	110
Loans at fair value	316	-	316	-


Non profit non-unit linked
Equity securities	282	278	-	4
Debt securities	52,008	7,436	35,084	9,488
Accrued interest	468	38	410	20
Derivative assets	4,018	-	4,018	-
Investment property	2,722	-	-	2,722
Loans at fair value	363	-	363	-


With-profits
Equity securities	3,260	3,074	4	182
Debt securities	6,162	2,105	4,053	4
Accrued interest	54	17	37	-
Derivative assets	99	16	83	-
Investment property	658	-	-	658
Loans at fair value	116	-	116	-


Unit linked
Equity securities	203,045	199,524	2,930	591
Debt securities	168,196	115,470	52,718	8
Accrued interest	972	416	556	-
Derivative assets	8,434	124	8,310	-
Investment property	4,847	-	-	4,847
Loans at fair value	7,874	-	7,874	-


Total financial investments and investment property at fair value¹	471,065	331,415	119,974	19,676


1. This table excludes loans of £496m, which are held at amortised cost.

IFRS Disclosure Notes Page 56

4.05 Financial investments and investment property (continued)

(b) Level 3 assets measured at fair value

Level 3 assets comprise property, unquoted equities, untraded debt securities and securities where the broker methodology is unknown. Unquoted securities include suspended securities and investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans, income strips and lifetime mortgages.

In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the group has classified within Level 3.

The most significant assets classified as Level 3, and their valuation methodologies, are described below.

Equity securities

Level 3 equity securities amount to £1,588m (30 June 2017: £1,320m; 31 December 2017: £1,451m) and are valued by a number of third party specialists using a range of techniques, including earnings multiples and price/earnings ratios, which are deemed to be unobservable.

Other financial investments

Lifetime mortgage loans amount to £2,674m (30 June 2017: £1,433m; 31 December 2017: £2,023m). They are valued using a discounted cash flow model by projecting best-estimate net asset proceeds and discounting using rates inferred from current LTM pricing, thereby ensuring the value of loans at outset is consistent with the purchase price of the loan, and ensuring consistency between new and in-force loans. Inputs to the model include property growth rates and voluntary early redemptions. The valuation at 30 June 2018 reflects a long-term property growth rate assumption of RPI + 0.5%.

Commercial real estate loans amount to £2,193m (30 June 2017: £2,079m; 31 December 2017: £2,169m). Their valuation has been outsourced to IHS Markit, who use a discounted cash flow model taking into consideration the average weighted Yield to Maturity of a basket of agreed comparator bonds. Comparator bonds are selected based on suitability criteria including sector, duration and credit rating.

Income strip assets amount to £1,190m (30 June 2017: £1,047m; 31 December 2017: £1,153m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break terms, lease expiries and underlying residual value of the property.

Private placements held by the US business amount to £337m (30 June 2017: £361m; 31 December 2017: £346m). They are valued using a pricing matrix comprised of a public spread matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to calculate the discounted cashflows and establish a market value for each investment grade private placement.

Commercial mortgage loans amount to £504m (30 June 2017: £373m; 31 December 2017: £342m) and are determined by incorporating credit risk for performing loans at the portfolio level and for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk free rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable inputs. These are further adjusted for credit improvements due to seasoning and illiquidity premiums.

Other debt securities which are not traded in an active market have been valued using third party or counterparty valuations. These prices are considered to be unobservable due to infrequent market transactions.

Investment property

Level 3 investment property amounting to £8,505m (30 June 2017: £8,714m; 31 December 2017: £8,337m) is valued with the involvement of external valuers. All property valuations are carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value, including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market knowledge and professional judgement and not rely only upon historic market sentiment based on historic transactional comparables.

Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee and validated independently as appropriate.

The group's policy is to re-assess the categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time.

IFRS Disclosure Notes Page 57

4.05 Financial investments and investment property (continued)

(b) Level 3 assets measured at fair value (continued)

		Other				Other
		financial				financial
	Equity	invest-	Investment		Equity	invest-	Investment
	securities	ments¹	property	Total	securities	ments¹	property	Total
	30 June 2018	30 June 2018	30 June 2018	30 June 2018	30 June 2017	30 June 2017	30 June 2017	30 June 2017
	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January	1,451	9,888	8,337	19,676	1,101	4,390	8,150	13,641
Total gains / (losses) for the period recognised in profit:
- in other comprehensive income	7	(113)	-	(106)	-	7	-	7
- realised and unrealised gains / (losses)²	41	20	70	131	(23)	234	217	428
Purchases / Additions	147	1,338	397	1,882	156	1,283	402	1,841
Sales / Disposals	(47)	(214)	(299)	(560)	(34)	(39)	(166)	(239)
Transfers into Level 3	-	90	-	90	118	1,714	101	1,933
Transfers out of Level 3	(11)	-	-	(11)	-	(5)	-	(5)
Other	-	-	-	-	2	5	10	17


As at 30 June	1,588	11,009	8,505	21,102	1,320	7,589	8,714	17,623


1. Other financial investments comprise debt securities, lifetime mortgages and derivative assets.
2. The realised and unrealised gains and losses have been recognised in investment return in the Consolidated Income Statement.

						Other
						financial
					Equity	invest-	Investment
					securities	ments¹	property	Total
					31 December	31 December	31 December	31 December
					2017	2017	2017	2017
					£m	£m	£m	£m


As at 1 January					1,101	4,390	8,150	13,641
Total gains / (losses) for the year recognised in profit:
- in other comprehensive income					-	37	-	37
- realised and unrealised gains / (losses)²					104	266	456	826
Purchases / Additions					316	3,595	1,218	5,129
Sales / Disposals					(267)	(118)	(975)	(1,360)
Transfers into Level 3³					138	1,718	-	1,856
Other⁴					59	-	(512)	(453)

As at 31 December					1,451	9,888	8,337	19,676


1. Other financial investments comprise debt securities, lifetime mortgages and derivative assets.
2. The realised and unrealised gains and losses have been recognised in investment return in the Consolidated Income Statement.
3. The group holds regular discussions with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as a result of this process and further internal investigations. In 2017, transfers into Level 3 included £874m of private placement and £795m of income strips, which were previously classified as Level 2.
4. Other Level 3 movements primarily reflects the deconsolidation of the group's investment in a property fund.

IFRS Disclosure Notes Page 58

4.05 Financial investments and investment property (continued)

Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data.

Where possible, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative assumptions. As outlined above, Level 3 investments are valued using internally-modelled valuations or independent third parties. Where internally-modelled valuations are used, sensitivities are determined by adjusting various inputs of the model and assigning them a weighting. Where independent third parties are used, sensitivities are determined as outlined below:

· Unquoted investments in property vehicles and direct holdings in investment property are valued using valuations provided by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors. Reasonably possible alternative valuations have been determined using alternative yields.

· Private equity investments are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. Reasonably possible alternative valuations have been determined using alternative price earnings multiples.

· No reasonably possible increases or decreases in fair values have been given for securities where the broker valuation methodology is unknown.

The group is therefore able to perform a sensitivity analysis for its Level 3 investments, which amount to £21.1bn (30 June 2017: £17.6bn; 31 December 2017: £19.7bn). The effect of changes in significant unobservable valuation inputs to reasonable alternative assumptions would result in a change in fair value of +/- £1.0bn (30 June 2017: +/-£0.9bn; 31 December 2017: +/-£1.2bn), which represents 5% (30 June 2017: 5%; 31 December 2017: 6%) of the total value of Level 3 investments.

IFRS Disclosure Notes Page 59

4.06 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:

	Continuing		Continuing		Continuing
	operations	Total	operations	Total	operations	Total
	6 months 2018	6 months 2018	6 months 2017	6 months 2017	Full year 2017	Full year 2017
	£m	£m	£m	£m	£m	£m


Profit before tax attributable to equity holders	886	942	1,118	1,163	1,991	2,090
Tax calculated at 19.00% (H1 17: 19.25%; FY 17: 19.25%)	168	179	215	224	383	402

Adjusted for the effects of:
Recurring reconciling items:
Income not subject to tax	(1)	(1)	(6)	(6)	(11)	(11)
Higher rate of tax on overseas profits	12	12	3	3	1	1
Non-deductible expenses	-	-	-	-	1	1
Differences between taxable and accounting investment gains	(1)	(1)	(4)	(4)	(3)	(3)
Property income attributable to minority interests	(1)	(1)	-	-	-	-
Unrecognised tax losses	-	-	-	-	1	1

Non-recurring reconciling items:
Income not subject to tax	(4)	(4)	(4)	(4)	(4)	(4)
Non-deductible expenses	1	1	1	1	10	10
Differences between taxable and accounting investment gains	-	-	-	-	10	10
Adjustments in respect of prior years	(15)	(15)	(3)	(3)	23	23
Impact of reduction in UK and US corporate tax rates on deferred tax balances¹	2	2	-	-	(242)	(242)
Other	(3)	(2)	-	-	-	-


Tax attributable to equity holders	158	170	202	211	169	188


Equity holders' effective tax rate²	17.8%	18.0%	18.1%	18.1%	8.5%	9.0%


1. The US federal corporate income tax rate was reduced from 35% to 21% from 1 January 2018. The enacted rate of 21% has been applied to US temporary differences to calculate US deferred assets and liabilities on the basis of when temporary differences are expected to reverse.
2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders. Refer to Note 4.01 for detail on the methodology of the split of policyholder and equity holders' tax.

IFRS Disclosure Notes Page 60

4.06 Tax (continued)

(b) Deferred tax

	30 June	30 June	31 December
	2018	2017⁴	2017⁴
Deferred tax (liabilities)/assets	£m	£m	£m


Deferred acquisition expenses	14	34	(11)
- UK	(38)	(43)	(40)
- Overseas	52	77	29
Difference between the tax and accounting value of insurance contracts	(377)	(577)	(331)
- UK	(74)	(134)	(69)
- Overseas	(303)	(443)	(262)
Realised and unrealised gains on investments	(243)	(275)	(282)
Excess of depreciation over capital allowances	14	16	15
Excess expenses	22	40	31
Accounting provisions and other	(11)	(51)	(33)
Trading losses¹	29	63	31
Pension fund deficit	39	77	70
Purchased interest in long-term business	(24)	(3)	(2)

Total net deferred tax liabilities²	(537)	(676)	(512)
Less: net deferred tax liabilities classified as held for sale	236	-	262


Net deferred tax liabilities	(301)	(676)	(250)


Analysed by:

- UK deferred tax assets
- UK deferred tax assets	2	2	2
- UK deferred tax liabilities	(73)	(316)	(13)
- Overseas deferred tax assets	5	3	5
- Overseas deferred tax liabilities³	(235)	(365)	(244)


Net deferred tax liabilities	(301)	(676)	(250)


1. Trading losses include UK trade and US operating losses of £2m (H1 17: £8m; FY 17: £4m) and £27m (H1 17: £55m; FY 17: £27m) respectively.
2. Total net deferred tax liabilities are presented gross of held for sale liabilities for HY 2018 and FY 2017 and net of held for sale liabilities for HY 2017.
3. Overseas deferred tax liability is wholly comprised of US balances as at 30 June 2018.
4. US deferred tax liabilities in respect of deferred acquisition costs and non-participating insurance contracts have been restated following the change in accounting policy for LGIA Term Life reserves. See Note 4.01. The net impact to overseas deferred tax liabilities is a reduction of £159m at 30 June 2017 and £93m at 31 December 2017.

IFRS Disclosure Notes Page 61

4.07 Share capital and share premium


			Number of
Authorised share capital			shares	£m


At 30 June 2018, 30 June 2017 and 31 December 2017: ordinary shares of 2.5p each		9,200,000,000		230



			Share	Share
		Number of	capital	premium
Issued share capital, fully paid		shares	£m	£m


As at 1 January 2018	5,958,438,193		149	988
Options exercised under share option schemes:
- Savings related share option scheme	1,435,336		-	2


As at 30 June 2018	5,959,873,529		149	990


			Share	Share
		Number of	capital	premium
Issued share capital, fully paid		shares	£m	£m


As at 1 January 2017	5,954,656,466		149	981
Options exercised under share option schemes:
- Savings related share option scheme	2,061,874		-	4


As at 30 June 2017	5,956,718,340		149	985


Options exercised under share option schemes:
- Savings related share option scheme	1,719,853		-	3


As at 31 December 2017	5,958,438,193		149	988


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.

4.08 Non-controlling interests

Non-controlling interests represent third party interests in direct equity investments as well as investments in private equity and property investment vehicles which are consolidated in the group's results.

No individual non-controlling interest is considered to be material on the basis of the half year carrying value or share of profit or loss.

IFRS Disclosure Notes Page 62

4.09 Core borrowings

	Carrying	Fair	Carrying	Fair	Carrying	Fair
	amount	value	amount	value	amount	value
	30 June 2018	30 June 2018	30 June 2017	30 June 2017	31 December 2017	31 December 2017
	£m	£m	£m	£m	£m	£m


Subordinated borrowings
5.875% Sterling undated subordinated notes (Tier 2)	405	415	410	432	408	428
10% Sterling subordinated notes 2041 (Tier 2)	311	380	311	406	311	397
5.5% Sterling subordinated notes 2064 (Tier 2)	589	629	589	651	589	710
5.375% Sterling subordinated notes 2045 (Tier 2)	603	657	602	670	603	694
5.25% US Dollar subordinated notes 2047 (Tier 2)	640	617	658	700	628	679
5.55% US Dollar subordinated notes 2052 (Tier 2)	376	361	387	399	369	397
Client fund holdings of group debt¹	(27)	(29)	(33)	(33)	(32)	(38)


Total subordinated borrowings	2,897	3,030	2,924	3,225	2,876	3,267


Senior borrowings
Sterling medium term notes 2031-2041	603	812	602	848	609	857
Client fund holdings of group debt¹	(11)	(14)	(27)	(27)	(26)	(37)


Total senior borrowings	592	798	575	821	583	820


Total core borrowings	3,489	3,828	3,499	4,046	3,459	4,087


1. £38m (30 June 2017: £60m; 31 December 2017: £58m) of the group's subordinated and senior borrowings' carrying amount are 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

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.

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.

5.5% Sterling subordinated notes 2064

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

5.375% Sterling subordinated notes 2045

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

5.25% US Dollar subordinated notes 2047

On 21 March 2017, Legal & General Group Plc issued $850m of 5.25% dated subordinated notes. The notes are callable at par on 21 March 2027 and every five years thereafter. If not called, the coupon from 21 March 2027 will be reset to the prevailing US Dollar mid-swap rate plus 3.687% pa. These notes mature on 21 March 2047.

5.55% US Dollar subordinated notes 2052

On 24 April 2017, Legal & General Group Plc issued $500m of 5.55% dated subordinated notes. The notes are callable at par on 24 April 2032 and every five years thereafter. If not called, the coupon from 24 April 2032 will be reset to the prevailing US Dollar mid-swap rate plus 4.19% pa. These notes mature on 24 April 2052.

All of the above subordinated notes are treated as tier 2 own funds for Solvency II purposes.

Senior borrowings

Between 2000 and 2002 Legal & General Finance Plc issued £600m of senior unsecured Sterling medium term notes 2031-2041 at coupons between 5.75% and 5.875%. These notes have various maturity dates between 2031 and 2041.

IFRS Disclosure Notes Page 63

4.10 Operational borrowings

	Carrying	Fair	Carrying	Fair	Carrying	Fair
	amount	value	amount	value	amount	value
	30 June 2018	30 June 2018	30 June 2017	30 June 2017	31 December 2017	31 December 2017
	£m	£m	£m	£m	£m	£m


Short term operational borrowings
Euro Commercial paper	497	497	322	322	349	349
Bank loans and overdrafts¹	209	209	20	20	87	87


Total short term operational borrowings	706	706	342	342	436	436



Non recourse borrowings	251	251	211	211	102	102


Total operational borrowings	957	957	553	553	538	538


1. Bank loans and overdrafts include £9m (30 June 2017: £17m, 31 December 2017: £87m) of unit-linked borrowings where risk is retained by policyholders.

Total operational borrowings increased during the period to £957m (H1 17: £553m, FY 17: £538m), primarily reflecting both higher commercial paper as the group took advantage of attractive rates and markets following our debt upgrade by Moody's in May, as well as the impact of consolidating CALA Homes following the acquisition of the remaining share capital in March (see note 4.02 for further details).

Short term operational borrowings

Short term assets available at the holding company level exceeded the amount of short term operational borrowings of £706m (30 June 2017: £342m; 31 December 2017: £436m).

Syndicated credit facility

As at 30 June 2018, the group had in place a £1.0bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2022. No amounts were outstanding at 30 June 2018.

IFRS Disclosure Notes Page 64

4.11 Payables and other financial liabilities

			30 June 2018	30 June 2017	31 December 2017
			£m	£m	£m


Derivative liabilities			7,652	7,376	8,173
Repurchase agreements¹			36,919	28,110	32,357
Other			15,016	8,223	12,026

Total payables and other financial liabilities²			59,587	43,709	52,556
Less: liabilities classified as held for sale			(435)		(310)

Payables and other financial liabilities			59,152	43,709	52,246



1. The repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements.
2. Total payables and other financial liabilities are presented gross of held for sale liabilities as at 30 June 2018 and 31 December 2017.


Fair value hierarchy

	Total	Level 1	Level 2	Level 3	Amortised cost
As at 30 June 2018	£m	£m	£m	£m	£m


Derivative liabilities	7,652	1,312	6,340	-	-
Repurchase agreements	36,919	-	36,919	-	-
Other	15,016	5,580	25	126	9,285

Total payables and other financial liabilities	59,587	6,892	43,284	126	9,285

					Amortised
	Total	Level 1	Level 2	Level 3	cost
As at 30 June 2017	£m	£m	£m	£m	£m


Derivative liabilities¹	7,376	102	7,274	-	-
Repurchase agreements²	28,110	-	28,110	-	-
Other²	8,223	2,550	15	179	5,479

Total payables and other financial liabilities	43,709	2,652	35,399	179	5,479


1. Within derivative liabilities, £380m of forward currency contracts were reclassified from Level 1 to Level 2, following a review of the inputs required in their valuation. The reclassification had nil impact on the valuation of the instruments, and therefore nil impact on the Consolidated Balance Sheet.
2. £28,076m of repurchase agreements have been restated from amortised cost to fair value (Level 2) to properly reflect their classification as fair value through profit and loss. At the same time £34m of accrued interest on repurchase agreements has been reclassified from Other to Repurchase agreements.

					Amortised
	Total	Level 1	Level 2	Level 3	cost
As at 31 December 2017	£m	£m	£m	£m	£m


Derivative liabilities	8,173	193	7,969	11	-
Repurchase agreements	32,357	-	32,357	-	-
Other	12,026	4,793	7	140	7,086

Total payables and other financial liabilities	52,556	4,986	40,333	151	7,086


Future commission costs (included within Other) are modelled using expected cash flows, incorporating expected future persistency. They have therefore been classified as Level 3 liabilities. The entire movement in the balance has been reflected in the Consolidated Income Statement during the period. A reasonably possible alternative persistency assumption would have the effect of increasing the liability (including held for sale liabilities) by £4m (30 June 2017: £5m; 31 December 2017: £4m).


Significant transfers between levels There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the six months ended 30 June 2018 (30 June 2017 and 31 December 2017: no significant transfers), other than those noted above.

IFRS Disclosure Notes Page 65

4.12 Foreign exchange rates

Principal rates of exchange used for translation are:

Period end exchange rates	30 June 2018	30 June 2017	31 December 2017


United States Dollar	1.32	1.30	1.35
Euro	1.13	1.14	1.13


	6 months	6 months	Full year
Average exchange rates	2018	2017	2017


United States Dollar	1.38	1.26	1.29
Euro	1.14	1.16	1.14

4.13 Retirement benefit obligations

The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme are defined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributions to, such arrangements. The schemes were closed to future accrual on 31 December 2015. As at 30 June 2018, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Legal & General Assurance Society) has been estimated at £179m (30 June 2017: £347m; 31 December 2017: £317m).

4.14 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 ("LGAS") 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 LGAS. 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 LGAS against any liability LGAS may have as a result of the ILU's requirement, and the ILU agreed that its requirement of LGAS 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 LGAS has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability is uncertain. LGAS has made no payment or provision in respect of this matter.

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

IFRS Disclosure Notes Page 66

4.15 Related party transactions
There were no material transactions between key management and the Legal & General group of companies during the year. 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 £39m (H1 17: £36m; FY 17: £93m) for all employees.

At 30 June 2018, 30 June 2017 and 31 December 2017 there were no loans outstanding to officers of the company.

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

	6 months 2018	6 months 2017¹	Full year 2017
	£m	£m	£m


Salaries	2	2	10
Post-employment benefits	-	-	-
Share-based incentive awards	2	2	4


Key management personnel compensation	4	4	14


Number of key management personnel	15	16	15


1. For the six months ended 30 June 2017, key management personnel compensation included social security costs. These costs should not have been included in the analysis, as they are not an employee benefit. The table has therefore been restated to exclude these costs. The restatement has no impact on either Total expenses or Profit before income tax in the Company's Statement of Comprehensive Income for the six months ended 30 June 2017.

(ii) Related party transactions

The group has the following related party transactions:

- Annuity contracts issued by Legal & General Assurance Society Limited (LGAS) for consideration of £59m (H1 17: £161m; FY 17: £161m) purchased by the group's UK defined benefit pension schemes during the period, priced on an arm's length basis;

- Investments in venture capital, property and financial investments held via collective investment vehicles. All transactions between the group and these collective investment vehicles are on commercial terms which are no more favourable than those available to companies in general. There were no investments into associate investment vehicles during the period (H1 17: £10m; FY: £32m). The group received investment management fees of £1m during the period (H1 17: £1m; FY 17: £3m). Distributions from these investment vehicles to the group amount to £14m (H1 17: £15m; FY 17: £17m);

- The equity investment in Pemberton is now fully drawn at £18m. A commitment of £221m was previously made to Pemberton's inaugural European Mid-Market Debt Fund, of which £184m was drawn as at 30 June 2018. A commitment of £167m was also made to Pemberton's Mid-Market Debt Fund II, of which £79m was drawn as at 30 June 2018. In addition, a £50m commitment was previously made to the Pemberton U.K. Mid-Market Direct Lending Fund, of which £20m has been drawn at 30 June 2018;

- Loans outstanding from MediaCity at 30 June 2018 of £55m (30 June 2017 and 31 December 2017: £55m);

- Preference shares outstanding from Thorpe Park at 30 June 2018 of £87m (30 June 2017: £30m; 31 December 2017: £59m);

- A 50/50 joint venture in Access Development Partnership, developing build to rent properties. LGC has a total commitment of £200m, of which £45m has been drawn at 30 June 2018;

- A 46% investment in Accelerated Digital Ventures, a venture investment company, for a total commitment of £34m, of which £20m has been drawn at 30 June 2018;

- Further contingent capital commitments of £1m for NTR Asset Management Europe DAC, with a total commitment of £5m. A commitment of £103m to the NTR Wind 1 Limited fund, of which £80m has been drawn at 30 June 2018;

- A 49% investment in Inspired Villages Group, an operating company for the Later Living investments, with a total loan commitment of £10m, the current loan balance being £3m; and

- Investment in SalaryFinance, an early-stage financial wellbeing fintech platform, LGI has a commitment of £7m, of which £2m has been drawn down at 30 June 2018.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR UWAWRWRAWRAR

Legal & General Group (LGEN)

Friday, 20th December 2024

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Mature Savings

On 6 December 2017 the group announced the sale of its Mature Savings business to the ReAssure division of Swiss Re Limited ('Swiss Re') for a consideration of £650m. As part of the transaction, on 1 January 2018 the group entered into a risk transfer agreement with Swiss Re, whereby the group will transfer all economic risks and rewards of the Mature Savings business to Swiss Re from that date. The risk transfer agreement operates until the business is transferred under a court approved scheme under Part VII of the Financial Services and Markets Act 2000, which is expected to complete in 2019. The consideration of £650m was received in January 2018.

As a result of the transaction, the Mature Savings business has been classified as held for sale. Profit arising from the Mature Savings business has been classified as "Profit after tax from discontinued operations" in the Consolidated Income Statement.

IndiaFirst Life Insurance Company Limited

On 1 June 2018 the group announced the sale of its stake in IndiaFirst Life Insurance Company Limited ("IndiaFirst Life"). The group has reached an agreement in principle with an affiliate of Warburg Pincus LLC to sell the group's stake for INR 7.1bn (c.£79m at GBP:Rs 1:90). The transaction is subject to the approval of regulatory authorities and is expected to complete by the end of 2018. As a result of the announcement, the group's interest in IndiaFirst Life has been classified as held for sale as at 30 June 2018.

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