L&G Half-year results 2015 Part 2

RNS Number : 1056V

Legal & General Group Plc

05 August 2015

IFRS and Cash 27

Operating profit

For the six months ended 30 June 2015


				Full year
		30.06.15	30.06.14	31.12.14
	Notes	£m	£m	£m


From continuing operations
Insurance	2.02	192	179	370
Savings	2.02	50	54	105
Legal & General Retirement (LGR)	2.02	280	188	428
Legal & General Investment Management (LGIM)	2.04	176	149	321
Legal & General Capital (LGC)	2.05	115	102	203
Legal & General America (LGA)		40	43	56


Operating profit from divisions		853	715	1,483
Group debt costs¹		(75)	(63)	(142)
Group investment projects and expenses²	2.06	(28)	(16)	(66)


Operating profit		750	636	1,275
Investment and other variances	2.07	(86)	(6)	(44)
Gains on non-controlling interests		8	6	7


Profit before tax attributable to equity holders		672	636	1,238
Tax expense attributable to equity holders of the Company	2.16	(125)	(129)	(246)


Profit for the period		547	507	992



Profit attributable to equity holders of the Company		539	501	985



		p	p	p


Earnings per share
Based on profit attributable to equity holders of the Company	2.10	9.11	8.51	16.70

Adjusted earnings per share³
Based on profit attributable to equity holders of the Company	2.10	9.79	8.51	16.70

Diluted earnings per share
Based on profit attributable to equity holders of the Company	2.10	9.05	8.42	16.54


1. Group debt costs exclude interest on non recourse financing.
2. Group investment projects and expenses in H1 15 include restructuring costs of £9m (H1 14: £nil; FY 14; £31m).
3. Adjusted earnings per share has been calculated excluding the impairment loss, £40m, resulting from the classification of disposal groups as held for sale.

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

Following changes to the organisational structure announced in November 2014, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the Workplace Savings business is now included in the LGIM segment. Workplace Savings had previously been recognised in the Savings (LGAS) segment. Comparatives have been amended accordingly in line with this reclassification. The impact of the Workplace Savings reclassification has been to reduce LGIM H1 14 and FY 14 operating profit by £10m and £15m respectively, with an offsetting increase in the Savings segment's operating profit.

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

Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF) and Legal & General Netherlands (LGN). Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.

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

The LGIM segment represents institutional and retail investment management and Workplace Savings businesses.

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

The LGA segment comprises protection business written in the USA.

IFRS and Cash 28

2.01 Reconciliation of operational cash to operating profit before tax

The table below provides an analysis of the operational cash generation by each of the Group's business segments, together with a reconciliation to operating profit before tax.

	Opera-				Changes					Operating
	tional	New	Net		in			Operating		profit/
	cash	business	cash	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	gene-	(strain)/	gene-	ience	assump-	items and	national	(loss)	expense/	before
For the six months ended	ration¹	surplus	ration	variances	tions	other	and other²	after tax	(credit)	tax
30 June 2015	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


Insurance	165	-	165	7	2	(15)	(7)	152	40	192
Savings³	64	(5)	59	(1)	-	(18)	-	40	10	50
LGR	170	22	192	15	37	(13)	-	231	49	280
LGIM³	150	(12)	138	(2)	-	1	-	137	39	176
- LGIM excluding Workplace
Savings	139	-	139	-	-	-	-	139	40	179
- Workplace Savings	11	(12)	(1)	(2)	-	1	-	(2)	(1)	(3)
LGC	92	-	92	-	-	-	-	92	23	115
LGA	52	-	52	-	-	-	(34)	18	22	40


Total from divisions	693	5	698	19	39	(45)	(41)	670	183	853


Group debt costs	(60)	-	(60)	-	-	-	-	(60)	(15)	(75)
Group investment projects
and expenses	(9)	-	(9)	-	-	-	(13)	(22)	(6)	(28)


Total	624	5	629	19	39	(45)	(54)	588	162	750


1. Operational cash generation includes dividends remitted from LGF of £1m (H1 14: £1m; FY 14: £2m) and LGN of £18m (H1 14: £14m; FY 14: £29m) within the Insurance line and LGA of £52m (H1 14: £44m; FY 14: £46m).
2. International and other includes £9m of restructuring costs (£7m before tax) (H1 14: £nil; FY 14: £25m) within the Group investment projects and expenses line.
3. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior year comparatives have been amended.

Operational cash generation for Insurance, Savings, LGR and LGIM represents the expected surplus generated in the year from the in-force non profit Protection, Savings, Annuities and workplace businesses using best estimate assumptions. The Insurance operational cash generation also includes dividends remitted from LGF and LGN and operating profit after tax from General Insurance and the remaining Insurance businesses. The Savings operational cash generation also includes the shareholders' share of bonuses on with-profits business and operating profit after tax from the remaining Savings businesses. The LGIM operational cash generation also includes operating profit after tax from the institutional and retail investment management businesses.

New business strain for Insurance, Savings, LGR and LGIM represents the cost of acquiring new business and setting up regulatory reserves in respect of the new business for UK non profit Protection, Savings, Annuities and Workplace Savings, net of tax. The new business strain and operational cash generation for Insurance, Savings, LGR and LGIM exclude the required solvency margin from the liability calculation.

Net cash generation for Insurance, Savings, LGR and LGIM is defined as operational cash generation less new business strain.

Operational cash generation and net cash for LGC represents the operating profit (net of tax).

The operational cash generation for LGA represents the dividends received.

See Note 2.02 for more detail on experience variances, assumption changes and non-cash items.

IFRS and Cash 29

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



	Opera-							Changes										Operating
	tional	New		Net				in						Operating				profit/
	cash	business		cash		Exper-		valuation		Non-cash		Inter-		profit/		Tax		(loss)
	gene-	(strain)/		gene-		ience		assump-		items and		national		(loss)		expense/		before
For the six months ended	ration¹	surplus		ration		variances		tions		other		and other		after tax		(credit)		tax
30 June 2014	£m	£m		£m		£m		£m		£m		£m		£m		£m		£m


Insurance	166	(8)		158		(9)		15		(24)		(2)		138		41		179
Savings²	64	(8)		56		(3)		-		(10)		-		43		11		54
LGR	146	20		166		(2)		-		(16)		-		148		40		188
LGIM²	132	(15)		117		(3)		(1)		4		-		117		32		149
- LGIM excluding Workplace
Savings	125	-		125		-		-		-		-		125		34		159
- Workplace Savings	7	(15)		(8)		(3)		(1)		4		-		(8)		(2)		(10)
LGC	82	-		82		-		-		-		-		82		20		102
LGA	44	-		44		-		-		-		(17)		27		16		43


Total from divisions	634	(11)		623		(17)		14		(46)		(19)		555		160		715


Group debt costs	(49)	-		(49)		-		-		-		-		(49)		(14)		(63)
Group investment projects
and expenses	(7)	-		(7)		-		-		-		(6)		(13)		(3)		(16)


Total	578	(11)		567		(17)		14		(46)		(25)		493		143		636


1. Operational cash generation includes dividends remitted from LGF of £1m and LGN of £14m within the Insurance line and LGA of £44m.
2. LGIM includes the Workplace Savings business which was previously reported in Savings.


	Opera-						Changes										Operating
	tional	New	Net				in						Operating				profit/
	cash	business	cash		Exper-		valuation		Non-cash		Inter-		profit/		Tax		(loss)
	gene-	(strain)/	gene-		ience		assump-		items and		national		(loss)		expense/		before
For the year ended	ration¹	surplus	ration		variances		tions		other		and other²		after tax		(credit)		tax
31 December 2014	£m	£m	£m		£m		£m		£m		£m		£m		£m		£m


Insurance	332	(5)	327		(8)		24		(50)		(6)		287		83		370
Savings³	127	(14)	113		(7)		3		(22)		(1)		86		19		105
LGR	292	51	343		(13)		48		(32)		-		346		82		428
LGIM³	275	(29)	246		(3)		5		2		-		250		71		321
- LGIM excluding Workplace
Savings	262	-	262		-		-		-		-		262		74		336
- Workplace Savings	13	(29)	(16)		(3)		5		2		-		(12)		(3)		(15)
LGC	162	-	162		-		-		-		-		162		41		203
LGA	46	-	46		-		-		-		(14)		32		24		56


Total from divisions	1,234	3	1,237		(31)		80		(102)		(21)		1,163		320		1,483


Group debt costs	(112)	-	(112)		-		-		-		-		(112)		(30)		(142)
Group investment projects
and expenses	(21)	-	(21)		-		-		-		(32)		(53)		(13)		(66)


Total	1,101	3	1,104		(31)		80		(102)		(53)		998		277		1,275


1. Operational cash generation includes dividends remitted from LGF of £2m and LGN of £29m within the Insurance line and LGA of £46m.
2. International and other includes £25m of restructuring costs (£31m before tax) within the Group investment projects and expenses line.
3. LGIM includes the Workplace Savings business which was previously reported in Savings.

IFRS and Cash 30

2.02 Analysis of Insurance, Savings and LGR operating profit


	Insurance	Savings¹	LGR	Insurance	Savings¹	LGR
	30.06.15	30.06.15	30.06.15	30.06.14	30.06.14	30.06.14
	£m	£m	£m	£m	£m	£m


Net cash generation	165	59	192	158	56	166


Experience variances
Persistency	1	(4)	-	3	(3)	-
Mortality/Morbidity	4	-	4	(2)	-	5
Expenses	4	-	-	2	-	-
BPA Loading	-	-	(4)	-	-	-
Project and development costs	(1)	-	(6)	(3)	(2)	(8)
Other²	(1)	3	21	(9)	2	1


Total experience variances	7	(1)	15	(9)	(3)	(2)


Changes to valuation assumptions
Persistency	-	-	-	-	-	-
Mortality/Morbidity³	3	-	37	22	-	-
Expenses	1	-	-	-	-	-
Other	(2)	-	-	(7)	-	-


Total valuation assumption changes	2	-	37	15	-	-


Movement in non-cash items
Deferred tax	2	-	-	(1)	(2)	-
Utilisation of brought forward trading losses	(2)	(2)	(13)	(2)	-	(36)
Acquisition expense tax relief	(17)	-	-	(18)	(1)	-
Deferred Acquisition Costs (DAC)⁴	-	(27)	-	-	(31)	-
Deferred Income Liabilities (DIL)⁴	-	17	-	-	24	-
Other	2	(6)	-	(3)	-	20


Total non-cash movement items	(15)	(18)	(13)	(24)	(10)	(16)


Other	(7)	-	-	(2)	-	-


Operating profit after tax	152	40	231	138	43	148


Tax gross up	40	10	49	41	11	40


Operating profit before tax	192	50	280	179	54	188


1. Savings excludes the Workplace Savings business which is now reported in LGIM. Prior period comparatives have been amended. The impact includes the increase of net cash generation by £8m and the increase of operating profit by £10m. Offsetting movements have been reflected in the LGIM segment.
2. The other LGR experience variance reflects the benefit to profit of selective longevity and asset reinsurance related to bulk annuity transactions.
3. The mortality/morbidity valuation assumption change in LGR primarily reflects a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants.
4. The DAC in Savings represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.

IFRS and Cash 31

2.02 Analysis of Insurance, Savings and LGR operating profit (continued)


	Insurance	Savings¹	LGR
	Full year	Full year	Full year
	31.12.14	31.12.14	31.12.14
	£m	£m	£m


Net cash generation	327	113	343


Experience variances
Persistency	(3)	1	(3)
Mortality/Morbidity²	(7)	2	13
Expenses	1	(2)	(3)
BPA Loading	-	-	6
Project and development costs	(6)	(3)	(19)
Other	7	(5)	(7)


Total experience variances	(8)	(7)	(13)


Changes to valuation assumptions
Persistency³	43	(1)	-
Mortality/Morbidity⁴	37	-	61
Expenses	11	3	(5)
Other⁵	(67)	1	(8)


Total valuation assumption changes	24	3	48


Movement in non-cash items
Deferred tax	(3)	6	(11)
Utilisation of brought forward trading losses	(11)	2	(62)
Acquisition expense tax relief	(36)	(6)	-
Deferred Acquisition Costs (DAC)⁶	-	(76)	-
Deferred Income Liabilities (DIL)⁶	-	50	-
Other⁷	-	2	41


Total non-cash movement items	(50)	(22)	(32)


Other	(6)	(1)	-


Operating profit after tax	287	86	346


Tax gross up	83	19	82


Operating profit before tax	370	105	428


1. Savings excludes the Workplace Savings business which is now reported in LGIM. The impact includes the increase of net cash generation by £16m and the increase of operating profit by £15m. Offsetting movements have been reflected in the LGIM segment.
2. The mortality/morbidity experience variances in Insurance in 2014 primarily relates to adverse morbidity on one of our group protection products.
3. The persistency valuation assumption change in Insurance primarily relates to an improvement in the experience and modelling for persistency on some of our long term products.
4. The mortality/morbidity valuation assumption change in Insurance primarily relates to an improvement in the modelling for certain morbidity features on our retail protection products. The LGR mortality valuation assumption change primarily relates to the adoption of the recent CMI projection table (CMI2013) with an allowance for anticipated modelling changes that have been incorporated into the CMI2014 model.
5. The other valuation assumption change in Insurance primarily relates to a refinement in the modelling for reinsurance on certain long term policies.
6. The DAC in Savings represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.
7. The other non-cash items in LGR primarily relates to the elimination of intra-group future profits arising from the provision of investment management services at market referenced rates.

IFRS and Cash 32

2.03 General insurance operating profit and combined operating ratio

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


General insurance operating profit¹	38	28	59


General insurance combined operating ratio (%)²	82	88	87


1. The general insurance operating profit includes the underwriting result and investment return.
2. The calculation of the general insurance combined operating ratio incorporates commission and expenses as a percentage of net earned premiums.

2.04 LGIM¹

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Investment management revenue	347	309	645
Investment management expenses	(168)	(150)	(309)
Workplace Savings operating loss	(3)	(10)	(15)


Total LGIM operating profit	176	149	321


1. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior period comparatives have been amended. Offsetting movements have been reflected in the Savings segment.

2.05 LGC

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Investment return	125	109	219
Expenses	(10)	(7)	(16)


Total LGC operating profit	115	102	203

2.06 Group investment projects and expenses

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Group investment projects and central expenses	(19)	(16)	(35)
Restructuring costs	(9)	-	(31)


Total Group investment projects and expenses	(28)	(16)	(66)

2.07 Investment and other variances

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Investment variance¹	(29)	26	(8)
M&A related²	(55)	(15)	(21)
Other³	(2)	(17)	(15)


Total Investment and other variances	(86)	(6)	(44)


1. H1 15 investment variance is negative, primarily arising from the defined pension benefit scheme variance of £(26)m (H1 14: £8m; FY 14: £40m), that reflects the actuarial losses and gains and valuation differences arising on annuity assets held by defined benefit pension schemes that have been purchased from Legal & General Assurance Society Limited (Society).
2. M&A related includes gains, expenses and intangible amortisation relating to acquisitions and disposals (including the recognition of £40m impairment losses arising on classification of disposal groups as held for sale).
3. Other includes new business start-up costs and other non-investment related variance items.

IFRS and Cash 33

Consolidated Income Statement

For the six months ended 30 June 2015

				Full year
		30.06.15	30.06.14	31.12.14
	Notes	£m	£m	£m


Revenue
Gross written premiums		3,170	5,291	10,168
Outward reinsurance premiums		(865)	(514)	(1,122)
Net change in provision for unearned premiums		14	6	1


Net premiums earned		2,319	4,783	9,047
Fees from fund management and investment contracts		564	548	1,085
Investment return		5,062	13,481	40,639
Operational income		444	372	746


Total revenue	2.09	8,389	19,184	51,517


Expenses
Claims and change in insurance liabilities		2,090	6,717	15,071
Reinsurance recoveries		(999)	(582)	(975)


Net claims and change in insurance liabilities		1,091	6,135	14,096
Change in provisions for investment contract liabilities		4,958	10,864	33,385
Acquisition costs		429	436	873
Finance costs		91	90	183
Other expenses		930	869	1,748
Transfers to/(from) unallocated divisible surplus		61	50	(181)


Total expenses		7,560	18,444	50,104


Profit before tax		829	740	1,413
Tax expense attributable to policyholder returns		(157)	(104)	(175)


Profit before tax attributable to equity holders		672	636	1,238


Total tax expense		(282)	(233)	(421)
Tax expense attributable to policyholder returns		157	104	175


Tax expense attributable to equity holders	2.16	(125)	(129)	(246)


Profit for the period		547	507	992



Attributable to:
Non-controlling interests		8	6	7
Equity holders of the Company		539	501	985



Dividend distributions to equity holders of the Company during the period	2.18	496	408	580
Dividend distributions to equity holders of the Company proposed after the period end	2.18	205	172	496





		p	p	p


Earnings per share
Based on profit attributable to equity holders of the Company	2.10	9.11	8.51	16.70


Adjusted earnings per share ¹
Based on profit attributable to equity holders of the Company	2.10	9.79	8.51	16.70


Diluted earnings per share
Based on profit attributable to equity holders of the Company	2.10	9.05	8.42	16.54


1. Adjusted earnings per share has been calculated excluding the impairment loss, £40m, resulting from the classification of disposal groups as held for sale.

IFRS and Cash 34

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2015

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Profit for the period	547	507	992

Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes	22	(10)	(94)
Actuarial (losses)/gains on defined benefit pension schemes transferred to unallocated
divisible surplus	(8)	4	38


Total items that will not be reclassified to profit or loss subsequently	14	(6)	(56)


Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations	(25)	(28)	12
Net change in financial investments designated as available-for-sale	(18)	20	26


Total items that may be reclassified to profit or loss subsequently	(43)	(8)	38


Other comprehensive expense after tax	(29)	(14)	(18)


Total comprehensive income for the period	518	493	974


Total comprehensive income attributable to:
Non-controlling interests	8	6	7
Equity holders of the Company	510	487	967

IFRS and Cash 35

Consolidated Balance Sheet

As at 30 June 2015

		30.06.15	30.06.14	31.12.14
	Notes	£m	£m	£m


Assets
Goodwill		82	73	79
Purchased interest in long term businesses and other intangible assets		328	341	342
Deferred acquisition costs		1,822	1,848	1,936
Investment in associates and joint ventures		207	138	149
Property, plant and equipment		86	136	146
Investment property	2.15	8,779	7,352	8,152
Financial investments	2.15	351,159	340,170	360,614
Reinsurers' share of contract liabilities		3,360	3,025	2,906
UK deferred tax asset	2.16	33	68	54
Current tax recoverable		185	303	217
Other assets		3,539	3,018	2,249
Assets of operations classified as held for sale	2.13	6,149	-	-
Cash and cash equivalents		19,583	21,087	22,709


Total assets		395,312	377,559	399,553



Equity
Share capital		149	148	149
Share premium		973	966	969
Employee scheme treasury shares		(31)	(36)	(37)
Capital redemption and other reserves		98	54	117
Retained earnings		4,843	4,579	4,830


Shareholders' equity		6,032	5,711	6,028
Non-controlling interests	2.22	281	271	275


Total equity		6,313	5,982	6,303



Liabilities
Participating insurance contracts		5,901	6,596	6,579
Participating investment contracts		5,093	7,452	7,667
Unallocated divisible surplus		798	1,253	983
Value of in-force non-participating contracts		(223)	(234)	(208)


Participating contract liabilities		11,569	15,067	15,021



Non-participating insurance contracts		49,274	44,439	49,876
Non-participating investment contracts		280,472	279,084	288,558


Non-participating contract liabilities		329,746	323,523	338,434



Core borrowings	2.20	2,490	2,991	2,977
Operational borrowings	2.21	645	692	715
Provisions		1,189	1,143	1,247
UK deferred tax liabilities	2.16	277	96	180
Overseas deferred tax liabilities	2.16	414	402	434
Current tax liabilities		40	12	9
Payables and other financial liabilities	2.17	18,449	11,281	16,131
Other liabilities		671	923	963
Net asset value attributable to unit holders		17,513	15,447	17,139
Liabilities of operations classified as held for sale	2.13	5,996	-	-


Total liabilities		388,999	371,577	393,250


Total equity and liabilities		395,312	377,559	399,553

IFRS and Cash 36

Condensed Consolidated Statement of Changes in Equity

			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the six months ended 30 June 2015	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2015	149	969	(37)	117	4,830	6,028	275	6,303
Total comprehensive income/(expense)
for the period	-	-	-	(43)	553	510	8	518
Options exercised under
share option schemes	-	4	-	-	-	4	-	4
Net movement in employee scheme
treasury shares	-	-	6	(4)	(16)	(14)	-	(14)
Dividends	-	-	-	-	(496)	(496)	-	(496)
Movement in third party interests	-	-	-	-	-	-	(2)	(2)
Currency translation differences	-	-	-	28	(28)	-	-	-


As at 30 June 2015	149	973	(31)	98	4,843	6,032	281	6,313



			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the six months ended 30 June 2014	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2014	148	959	(39)	57	4,517	5,642	265	5,907
Total comprehensive income/(expense)
for the period	-	-	-	(8)	495	487	6	493
Options exercised under
share option schemes	-	7	-	-	-	7	-	7
Net movement in employee scheme
treasury shares	-	-	3	(10)	(10)	(17)	-	(17)
Dividends	-	-	-	-	(408)	(408)	-	(408)
Movement in third party interests	-	-	-	-	-	-	-	-
Currency translation differences	-	-	-	15	(15)	-	-	-


As at 30 June 2014	148	966	(36)	54	4,579	5,711	271	5,982



			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2014	148	959	(39)	57	4,517	5,642	265	5,907
Total comprehensive income
for the year	-	-	-	38	929	967	7	974
Options exercised under
share option schemes	1	10	-	-	-	11	-	11
Net movement in employee scheme
treasury shares	-	-	2	3	(17)	(12)	-	(12)
Dividends	-	-	-	-	(580)	(580)	-	(580)
Movement in third party interests	-	-	-	-	-	-	3	3
Currency translation differences	-	-	-	19	(19)	-	-	-


As at 31 December 2014	149	969	(37)	117	4,830	6,028	275	6,303

IFRS and Cash 37

Consolidated Cash Flow Statement

For the six months ended 30 June 2015

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Cash flows from operating activities
Profit for the period	547	507	992
Adjustments for non cash movements in net profit for the period
Realised and unrealised losses/(gains) on financial investments and investment properties	4,236	(8,705)	(30,851)
Investment income	(4,928)	(4,853)	(9,205)
Interest expense	91	90	183
Tax expense	282	233	421
Other adjustments	(35)	46	87
Net (increase)/decrease in operational assets
Investments held for trading or designated as fair value through profit or loss	(2,450)	2,036	5,931
Investments designated as available-for-sale	210	164	225
Other assets	(1,518)	(857)	(151)
Net increase/(decrease) in operational liabilities
Insurance contracts	(784)	3,923	9,228
Transfer to/(from) unallocated divisible surplus	68	39	(222)
Investment contracts	(5,254)	387	10,156
Value of in-force non-participating contracts	(15)	14	40
Other liabilities	3,249	6,182	9,811


Cash generated used in operations	(6,301)	(794)	(3,355)
Interest paid	(129)	(103)	(203)
Interest received	2,413	2,430	4,857
Tax paid¹	(84)	(97)	(76)
Dividends received	2,282	2,169	4,264


Net cash flows (used in)/generated from operating activities	(1,819)	3,605	5,487


Cash flows from investing activities
Net acquisition of plant, equipment and intangibles	(11)	(12)	(80)
Acquisitions (net of cash acquired)²	(5)	(18)	(38)
Disposal of subsidiaries	34	50	56
Investment in joint ventures	(65)	(77)	(77)


Net cash flows from investing activities	(47)	(57)	(139)


Cash flows from financing activities
Dividend distributions to ordinary equity holders of the Company during the period	(496)	(408)	(580)
Proceeds from issue of ordinary share capital	4	7	11
Purchase of employee scheme shares	(7)	(3)	(2)
Proceeds from borrowings	194	592	674
Repayment of borrowings	(649)	(88)	(181)


Net cash flows (used in)/generated from financing activities	(954)	100	(78)


Net increase in cash and cash equivalents	(2,820)	3,648	5,270
Exchange losses on cash and cash equivalents	(65)	(15)	(15)
Cash and cash equivalents at 1 January	22,709	17,454	17,454


Cash and cash equivalents (before reallocation of held for sale cash)	19,824	21,087	22,709
Cash and cash equivalents classified as held for sale	(241)	-	-


Cash and cash equivalents at 30 June/31 December	19,583	21,087	22,709


1. Tax comprises UK corporation tax paid of £8m (H1 14: £1m; FY 14: £29m), overseas corporate taxes of £18m (H1 14: £7m; FY 14: £24m) and withholding tax of £58m (H1 14: £89m; FY 14: £23m).
2. Net cash flows from acquisitions includes cash paid of £5m (H1 14: £18m; FY 14: £38m) less cash and cash equivalents acquired of £nil (H1 14: £nil; FY 14: £nil).

The Group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including those relating to the UK long-term fund policyholders.

IFRS and Cash 38

2.08 Basis of preparation

The Group's financial information for the six months ended 30 June 2015 has been prepared in accordance with the Listing Rules of the 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 and methods of computation which the Group expects to adopt for the 2015 year end. These policies are consistent with the principal accounting policies which were set out in the Group's 2014 consolidated financial statements which were consistent with IFRSs issued by the International Accounting Standards Board as adopted by the European Commission for use in the European Union.

The preparation of the 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 2014 financial statements except for the changes outlined in Note 2.02.

The results for the six months ended 30 June 2015 are unaudited but have been reviewed by PricewaterhouseCoopers 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 2014 have been taken from the Group's 2014 Annual Report and Accounts. Therefore, these interim accounts should be read in conjunction with the 2014 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 2014 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 2014 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 of the Group's 2014 Annual Report and Accounts.

2.09 Segmental analysis

Reportable segments

The Group has six reportable segments comprising Insurance, Savings, LGR, LGIM, LGA and LGC.

Following changes to the organisational structure, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the Workplace Savings business is now included in the LGIM segment. Workplace Savings had previously been recognised in the Savings (LGAS) segment. Comparatives have been amended accordingly in line with this reclassification. The impact of the Workplace Savings reclassification has been to reduce LGIM H1 14 and FY 14 operating profit by £10m and £15m respectively, with an offsetting increase in the Savings segment's operating profit.

Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF) and Legal & General Netherlands (LGN).

Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.

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

The LGIM segment represents institutional and retail investment management, and Workplace Savings businesses.

The LGC segment includes shareholders' equity supporting the non profit LGR, Insurance and Savings businesses held within Society and Legal & General Pensions Limited (LGPL) and capital held by the Group's treasury function. LGC and group expenses also incorporates inter-segmental eliminations and consolidated unit trusts and property partnerships managed on behalf of clients which do not constitute a separately reportable segment.

The LGA segment represents protection business written in the USA.

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

IFRS and Cash 39

2.09 Segmental analysis (continued)
(a) Profit/(loss) for the period

							Group
							expenses
							and debt
	Insurance	Savings	LGR	LGIM	LGC	LGA	costs	Total
For the six months ended 30 June 2015	£m	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	192	50	280	176	115	40	(103)	750
Investment and other variances¹	(48)	(20)	11	(5)	(4)	1	(21)	(86)
Gains attributable to non-controlling
interests	-	-	-	-	-	-	8	8


Profit/(loss) before tax attributable to
equity holders	144	30	291	171	111	41	(116)	672
Tax (expense)/credit attributable to equity
holders of the Company	(38)	(6)	(50)	(38)	(2)	(22)	31	(125)


Profit/(loss) for the period	106	24	241	133	109	19	(85)	547




							Group
							expenses
							and debt
	Insurance	Savings²	LGR	LGIM²	LGC	LGA	costs	Total
For the six months ended 30 June 2014	£m	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	179	54	188	149	102	43	(79)	636
Investment and other variances	14	(18)	76	(5)	(44)	(3)	(26)	(6)
Gains attributable to non-controlling
interests	-	-	-	-	-	-	6	6


Profit/(loss) before tax attributable to
equity holders	193	36	264	144	58	40	(99)	636
Tax (expense)/credit attributable to equity
holders of the Company	(44)	(8)	(56)	(31)	6	(21)	25	(129)


Profit/(loss) for the period	149	28	208	113	64	19	(74)	507




							Group
							expenses
							and debt
	Insurance	Savings²	LGR	LGIM²	LGC	LGA	costs	Total
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m


Operating profit/(loss)	370	105	428	321	203	56	(208)	1,275
Investment and other variances	12	(24)	67	(7)	(37)	(13)	(42)	(44)
Gains attributable to non-controlling
interests	-	-	-	-	-	-	7	7


Profit/(loss) before tax attributable to
equity holders	382	81	495	314	166	43	(243)	1,238
Tax (expense)/credit attributable to equity
holders of the Company	(90)	(14)	(97)	(68)	(9)	(19)	51	(246)


Profit/(loss) for the year	292	67	398	246	157	24	(192)	992


1. At H1 15 Investment and other variances - Insurance and Savings include the recognition of £38m and £2m respectively of impairment losses arising on the classification of disposal groups as held for sale.
2. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior period comparatives have been amended. At H1 14, the impact includes the reduction of operating profit by £10m and profit before tax by £10m (FY 14: £15m and £10m respectively). Offsetting movements have been reflected in the Savings segment.

IFRS and Cash 40

2.09 Segmental analysis (continued)
(b) Revenue

						LGC
						and
	Insurance	Savings¹	LGR	LGIM¹	LGA	other²	Total
For the six months ended 30 June 2015	£m	£m	£m	£m	£m	£m	£m


Internal revenue	197	-	-	43	(86)	(154)	-
External revenue	1,176	1,714	561	4,752	205	(19)	8,389


Total revenue	1,373	1,714	561	4,795	119	(173)	8,389




						LGC
						and
	Insurance	Savings¹	LGR	LGIM¹	LGA	other²	Total
For the six months ended 30 June 2014	£m	£m	£m	£m	£m	£m	£m


Internal revenue	150	-	-	69	(98)	(121)	-
External revenue	1,269	1,741	5,300	10,410	197	267	19,184


Total revenue	1,419	1,741	5,300	10,479	99	146	19,184




						LGC
						and
	Insurance	Savings¹	LGR	LGIM¹	LGA	other²	Total
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m


Internal revenue	300	-	373	220	(218)	(675)	-
External revenue	2,444	2,154	13,767	28,345	377	4,430	51,517


Total revenue	2,744	2,154	14,140	28,565	159	3,755	51,517


1. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior year comparatives have been amended. The impact includes the increase of LGIM external revenue for H1 14 by £146m (FY 14: increase of £373m). Offsetting movements have been reflected in the Savings segment.
2. LGC and other includes LGC, inter-segmental eliminations and group consolidation adjustments.

Total revenue includes investment return of £5,062m (H1 14: £13,481m; FY 14: £40,639m).

IFRS and Cash 41

2.10 Earnings per share

(a) Earnings per share


			Adjusted	Adjusted
	Profit	Earnings	profit	earnings	Profit	Earnings
	after tax	per share	after tax	per share^1,2	after tax	per share¹
	30.06.15	30.06.15	30.06.15	30.06.15	30.06.14	30.06.14
	£m	p	£m	p	£m	£m


Operating profit	588	9.94	588	9.94	493	8.38
Investment and other variances	(49)	(0.83)	(9)	(0.15)	9	0.15
Impact of change in UK tax rates³	-	-	-	-	(1)	(0.02)


Earnings per share based on profit
attributable to equity holders	539	9.11	579	9.79	501	8.51



					Profit	Earnings
					after tax	per share¹
					Full year	Full year
					31.12.14	31.12.14
					£m	£m


Operating profit					998	16.92
Investment and other variances					(13)	(0.22)
Impact of change in UK tax rates					-	-


Earnings per share based on profit
attributable to equity holders					985	16.70


1. Earnings per share is calculated by dividing profit after tax derived from continuing operations by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares.
2. Adjusted earnings per share has been calculated excluding the impairment loss, £40m, resulting from the classification of disposal groups as held for sale.
3. The impact of the further corporation tax reductions announced on 8 July 2015 has not been included in the half year 2015 results as required under IAS 12. The impact will be included in the FY 15 results.

(b) Diluted earnings per share


	Profit	Number	Earnings	Profit	Number	Earnings
	after tax	of shares¹	per share	after tax	of shares¹	per share
	30.06.15	30.06.15	30.06.15	30.06.14	30.06.14	30.06.14
	£m	m	p	£m	m	p


Profit attributable to equity holders of the Company	539	5,915	9.11	501	5,884	8.51
Net shares under options allocable for no further consideration	-	38	(0.06)	-	65	(0.09)


Diluted earnings per share	539	5,953	9.05	501	5,949	8.42




				Profit	Number	Earnings
				after tax	of shares¹	per share
				Full year	Full year	Full year
				31.12.14	31.12.14	31.12.14
				£m	m	p


Profit attributable to equity holders of the Company				985	5,897	16.70
Net shares under options allocable for no further consideration				-	59	(0.16)


Diluted earnings per share				985	5,956	16.54




1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees.

IFRS and Cash 42

2.11 Acquisition

On 1 April 2015, the Group acquired 100% of New Life Home Finance Limited, a UK based lifetime mortgage provider for a consideration of £5m. The acquisition gave rise to an increase in the Group's goodwill of £2m and an increase in purchased interest in long term businesses (PILTB) and other intangibles of £2m. This enables the Group to offer lifetime mortgages as part of its retirement solutions suite of products.

2.12 Disposal

On 29 May 2015, the Group sold its interests in Snow + Rock Group Holding Limited to Cotswold Outdoor Limited for £34m. The carrying value of the investment was £6m, net of amortisation of the brand, hence realising a profit on disposal of £28m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.

2.13 Held for sale


Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. In February 2015 the Group entered into an agreement to sell Legal & General International (Ireland) Limited (LGII), the Group's Dublin based offshore bond provider to Canada Life. The sale completed on 1 July 2015. The assets and liabilities of LGII are a disposal group and have been classified as held for sale at 30 June 2015. On 12 July 2015, the Group entered into an agreement to sell Commercial International Life Insurance Company SAE (CIL), the Group's Egypt based life insurance joint venture, to AXA. In addition on 28 July 2015 the Group entered into an agreement to sell its interest in Legal & General Gulf BSC (LGG), the Group's Bahrain based life insurance joint venture, to a third party. Completion of these transactions are subject to customary closing conditions, including the receipt of regulatory approvals, and are expected to take place by the end of 2015. The assets and liabilities of CIL and LGG are disposal groups and have been classified as held for sale at 30 June 2015. On 30 July 2015 the Group entered into exclusive negotiations to sell Legal & General Holdings (France) S.A (LGF), the Group's French insurance business after receiving a binding offer from APICIL Prévoyance. The transaction is subject to the signing of a definitive agreement, customary closing conditions and regulatory approvals. The assets and liabilities of LGF have accordingly been assessed as a disposal group and have been classified as held for sale as at 30 June 2015. The assets and liabilities of all disposal groups were remeasured to the lower of their carrying amount and their estimated fair value less costs to sell at the date of the classification as held for sale. The impairment loss arising of £40m is recognised in other expenses. Neither LGF, LGII, CIL nor LGG is a discontinued operation as none represent a major line of business or geographical segment of the group.

								Total
								30.06.15
								£m


Assets classified as held for sale
Investment in associates								12
DAC								71
Property, plant and equipment								45
Financial investments								5,601
Reinsurers' share of contract liabilities								10
Other assets								410


Total assets of the disposal group								6,149


Liabilities classified as held for sale
Insurance contract liabilities								(320)
Investment contract liabilities								(5,187)
Unallocated divisible surplus								(229)
Tax liabilities								(22)
Other liabilities								(238)


Total liabilities of the disposal group								(5,996)


Total net assets of the disposal group								153

IFRS and Cash 43

2.14 Post balance sheet events

On 1 July 2015, the Group sold Legal & General International (Ireland) Limited (LGII), the Group's Dublin based offshore bond provider, to Canada Life for £16m.

On 12 July 2015, the Group sold Commercial International Life Insurance Company SAE (CIL), the Group's Egypt based life insurance company, to AXA for an estimated £34m, subject to regulatory approval.

2.15 Financial investments and Investment property

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Equities	161,507	161,552	162,177
Unit trusts	7,303	7,252	7,529
Debt securities¹	170,910	164,104	178,766
Accrued interest	1,393	1,548	1,604
Derivative assets²	9,625	5,251	10,035
Loans and receivables	421	463	503


Financial investments	351,159	340,170	360,614


Investment property	8,779	7,352	8,152


Total financial investments and investment property	359,938	347,522	368,766


1. Detailed analysis of debt securities which shareholders are directly exposed to is disclosed in Note 4.05.
2. Derivatives are used to ensure efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities and include £5,819m (H1 14: £2,888m; FY 14: £6,011m) held on behalf of unit linked policyholders.

(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 iBoxx, IDC and Bloomberg, which use mathematical modelling and multiple source validation in order to determine "consensus" prices, except for bespoke CDO and swaps holdings (see below). 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 classified them as level 2. These CDOs are valued using an external valuation based on observable market inputs, which include CDX and iTraxx index tranches and CDS spreads on underlying reference entities. This is then validated against the internal valuation. Accordingly, these assets have also been classified in level 2.

The table on the following page presents the Group's assets by IFRS 13 hierarchy levels:

IFRS and Cash 44

2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)

					Amortised
	Total	Level 1	Level 2	Level 3	cost
For the six months ended 30 June 2015	£m	£m	£m	£m	£m


Shareholder
Equity securities	1,932	1,681	-	251	-
Debt securities	4,570	1,861	2,445	264	-
Accrued interest	30	11	15	4	-
Derivative assets	87	81	6	-	-
Loans and receivables	419	-	-	-	419
Investment property	183	-	-	183	-


Non profit non-unit linked
Equity securities	307	296	11	-	-
Debt securities	38,851	5,845	32,155	851	-
Accrued interest	445	32	407	6	-
Derivative assets	3,664	264	3,400	-	-
Loans and receivables	-	-	-	-	-
Investment property	2,037	-	-	2,037	-


With-profits
Equity securities	3,596	3,084	2	510	-
Debt securities	6,886	3,265	3,604	17	-
Accrued interest	79	35	44	-	-
Derivative assets	55	37	18	-	-
Loans and receivables	2	-	-	-	2
Investment property	1,057	-	-	1,057	-


Unit linked
Equity securities	162,975	159,401	3,331	243	-
Debt securities	120,603	79,895	40,701	7	-
Accrued interest	839	295	544	-	-
Derivative assets	5,819	960	4,859	-	-
Loans and receivables	-	-	-	-	-
Investment property	5,502	-	-	5,502	-


Total financial investments and investment property	359,938	257,043	91,542	10,932	421

IFRS and Cash 45

2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)

					Amortised
	Total	Level 1	Level 2	Level 3	cost
For the six months ended 30 June 2014	£m	£m	£m	£m	£m


Shareholder
Equity securities	1,445	1,268	24	153	-
Debt securities	5,135	2,124	2,846	165	-
Accrued interest	45	19	24	2	-
Derivative assets	153	52	101	-	-
Loans and receivables	178	-	-	-	178
Investment property	328	-	-	328	-


Non profit non-unit linked
Equity securities	84	72	12	-	-
Debt securities	33,330	5,343	27,115	872	-
Accrued interest	404	38	359	7	-
Derivative assets	2,184	313	1,871	-	-
Loans and receivables	-	-	-	-	-
Investment property	1,692	-	-	1,692	-


With-profits
Equity securities	4,206	3,674	13	519	-
Debt securities	10,619	4,377	6,225	17	-
Accrued interest	146	52	94	-	-
Derivative assets	26	24	2	-	-
Loans and receivables	30	-	-	-	30
Investment property	961	-	-	961	-


Unit linked
Equity securities	163,069	160,615	2,127	327	-
Debt securities	115,020	78,246	36,771	3	-
Accrued interest	953	343	610	-	-
Derivative assets	2,888	908	1,980	-	-
Loans and receivables	255	-	-	-	255
Investment property	4,371	-	-	4,371	-


Total financial investments and investment property	347,522	257,468	80,174	9,417	463

IFRS and Cash 46

2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)

					Amortised
	Total	Level 1	Level 2	Level 3	cost
For the year ended 31 December 2014	£m	£m	£m	£m	£m


Shareholder
Equity securities	1,891	1,664	1	226	-
Debt securities	5,033	1,975	2,818	240	-
Accrued interest	41	20	19	2	-
Derivative assets	113	28	85	-	-
Loans and receivables	286	-	-	-	286
Investment property	151	-	-	151	-


Non profit non-unit linked
Equity securities	279	268	-	11	-
Debt securities	40,238	6,315	32,951	972	-
Accrued interest	476	42	427	7	-
Derivative assets	3,850	41	3,809	-	-
Loans and receivables	-	-	-	-	-
Investment property	1,879	-	-	1,879	-


With-profits
Equity securities	4,065	3,531	14	520	-
Debt securities	8,860	4,174	4,668	18	-
Accrued interest	111	45	66	-	-
Derivative assets	61	31	30	-	-
Loans and receivables	29	-	-	-	29
Investment property	1,034	-	-	1,034	-


Unit linked
Equity securities	163,471	157,191	5,895	385	-
Debt securities	124,635	84,287	40,344	4	-
Accrued interest	976	339	637	-	-
Derivative assets	6,011	444	5,567	-	-
Loans and receivables	188	-	-	-	188
Investment property	5,088	-	-	5,088	-


Total financial investments and investment property	368,766	260,395	97,331	10,537	503

IFRS and Cash 47

2.15 Financial investments and Investment property (continued)

(b) Assets measured at fair value based on level 3

Level 3 assets where internal models are used represent a small proportion of assets to which shareholders are exposed. These comprise both property and unquoted equities, the latter including investments in private equity, property vehicles and suspended securities.

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 Group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The Group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the Group's credit standing, liquidity and risk margins on unobservable inputs.

Where quoted market prices are not available, fair value estimates are made at a point in time, based on relevant market data, as well as the best information about the individual financial instrument. Illiquid market conditions have resulted in inactive markets for certain of the Group's financial instruments. As a result, there is generally no or limited observable market data for these assets and liabilities. Fair value estimates for financial instruments deemed to be in an illiquid market are based on judgments regarding current economic conditions, liquidity discounts, currency, credit and interest rate risks, loss experience and other factors. These fair values are estimates and involve considerable uncertainty and variability as a result of the inputs selected and may differ significantly from the values that would have been used had a ready market existed, and the differences could be material. As a result, such calculated fair value estimates may not be realisable in an immediate sale or settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value measurement technique could significantly affect these fair value estimates.

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.

There have been no significant transfers between level 1 and level 2 for the period ended 30 June 2015 (H1 14: £nil; FY 14: £nil).

IFRS and Cash 48

2.15 Financial investments and Investment property (continued)
(b) Assets measured at fair value based on level 3 (continued)


		Other				Other
		financial				financial
	Equity	invest-	Investment		Equity	invest-	Investment
	securities	ments¹	property	Total	securities	ments¹	property	Total
	30.06.15	30.06.15	30.06.15	30.06.15	30.06.14	30.06.14	30.06.14	30.06.14
	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January	1,142	1,243	8,152	10,537	974	633	6,377	7,984
Total gains or (losses) for the period
recognised in profit:
- in other comprehensive income	-	-	-	-	-	5	-	5
- realised and unrealised
gains or (losses)²	97	(21)	226	302	21	25	237	283
Purchases / Additions	26	164	512	702	37	426	863	1,326
Improvements	-	-	63	63	-	-	7	7
Sales / Disposals	(140)	(105)	(174)	(419)	(50)	(125)	(132)	(307)
Transfers into level 3³	12	5	-	17	30	112	-	142
Transfers out of level 3³	(126)	(144)	-	(270)	(13)	(10)	-	(23)
Other	(7)	7	-	-	-	-	-	-


As at 30 June	1,004	1,149	8,779	10,932	999	1,066	7,352	9,417


1. Other financial investments comprise debt securities 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 discussion with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as result of this process.


						Other
						financial
					Equity	invest-	Investment
					securities	ments¹	property	Total
					Full year	Full year	Full year	Full year
					31.12.14	31.12.14	31.12.14	31.12.14
					£m	£m	£m	£m


As at 1 January					974	633	6,377	7,984
Total gains for the year
recognised in profit:
- in other comprehensive income					-	9	-	9
- realised and unrealised gains²					71	99	668	838
Purchases / Additions					210	1,026	1,559	2,795
Improvements					-	-	20	20
Sales / Disposals					(118)	(531)	(472)	(1,121)
Transfers into level 3³					5	10	-	15
Transfers out of level 3³					-	(3)	-	(3)


As at 31 December					1,142	1,243	8,152	10,537


1. Other financial investments comprise debt securities 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 discussion with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as result of this process.

IFRS and Cash 49

2.15 Financial investments and Investment property (continued)
(c) Effect on changes in significant unobservable inputs to reasonably possible alternative assumptions on level 3 assets

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. The following table shows the level 3 financial instruments carried at fair value as at the balance sheet date, the valuation basis, main assumptions used in the valuation of these instruments and reasonably possible increases or decreases in fair value based on reasonably possible alternative assumptions.

			Reasonably possible
			alternative assumptions
			Current	Increase	Decrease
			fair	in fair	in fair
For the six months ended 30 June 2015		Main	value	value	value
Financial instruments and investment property		assumptions	£m	£m	£m


Assets
Shareholder
- Private equity investment vehicles¹	Price earnings multiple		15	1	(1)
- Unquoted investments in property vehicles²	Property yield; occupancy		137	7	(7)
- Untraded and other debt securities	Cash flows; expected defaults		268	13	(13)
- Unquoted and other securities	Cash flows; expected defaults		99	3	(3)
- Investment property²	Property yield; occupancy		183	9	(9)

Non profit non-linked
- Asset backed securities	Cash flows; expected defaults		725	36	(36)
- Untraded and other debt securities	Cash flows; expected defaults		3	-	-
- Unquoted and other securities	Cash flows; expected defaults		129	6	(6)
- Investment property²	Property yield; occupancy		2,037	102	(102)

With-profits
- Private equity investment vehicles¹	Price earnings multiple		140	8	(8)
- Asset backed securities	Cash flows; expected defaults		5	-	-
- Unquoted and other securities	Cash flows; expected defaults		379	19	(19)
- Other			3	-	-
- Investment property²	Property yield; occupancy		1,057	53	(53)

Unit linked
- Unquoted investments in property vehicles²	Property yield; occupancy		37	2	(2)
- Suspended securities	Estimated recoverable amount		11	1	(1)
- Asset backed securities	Cash flows; expected defaults		4	-	-
- Untraded and other debt securities	Cash flows; expected defaults		2	-	-
- Unquoted and other securities	Cash flows; expected defaults		196	22	(22)
- Investment property²	Property yield; occupancy		5,502	276	(276)


Total			10,932	558	(558)


1. 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.
2. Unquoted investments in property vehicles and direct holdings in investment property are valued 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 yield and occupancy assumptions.

IFRS and Cash 50

2.15 Financial investments and Investment property (continued)
(c) Effect on changes in significant unobservable inputs to reasonably possible alternative assumptions on level 3 assets (continued)

			Reasonably possible
			alternative assumptions
			Current	Increase	Decrease
			fair	in fair	in fair
For the six months ended 30 June 2014		Main	value	value	value
Financial instruments and investment property		assumptions	£m	£m	£m


Assets
Shareholder
- Unquoted investments in property vehicles²	Property yield; occupancy		153	16	(16)
- Untraded and other debt securities	Cash flows; expected defaults		167	8	(8)
- Investment property²	Property yield; occupancy		328	16	(16)

Non profit non-linked
- Untraded and other debt securities	Cash flows; expected defaults		879	29	(29)
- Investment property²	Property yield; occupancy		1,692	85	(85)

With-profits
- Private equity investment vehicles¹	Price earnings multiple		170	9	(9)
- Unquoted investments in property vehicles²	Property yield; occupancy		366	19	(19)
- Investment property²	Property yield; occupancy		961	48	(48)

Unit linked
- Unquoted investments in property vehicles²	Property yield; occupancy		321	23	(23)
- Suspended securities	Estimated recoverable amount		6	1	(1)
- Asset backed securities	Cash flows; expected defaults		3	-	-
- Investment property²	Property yield; occupancy		4,371	210	(210)


Total			9,417	464	(464)


1. 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.
2. Unquoted investments in property vehicles and direct holdings in investment property are valued 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 yield and occupancy assumptions.

IFRS and Cash 51

2.15 Financial investments and Investment property (continued)
(c) Effect on changes in significant unobservable inputs to reasonably possible alternative assumptions on level 3 assets (continued)

			Reasonably possible
			alternative assumptions
			Current	Increase	Decrease
			fair	in fair	in fair
For the year ended 31 December 2014		Main	value	value	value
Financial instruments and investment property		assumptions	£m	£m	£m


Assets
Shareholder
- Private equity investment vehicles¹	Price earnings multiple		16	1	(1)
- Unquoted investments in property vehicles²	Property yield; occupancy		117	7	(7)
- Untraded and other debt securities	Cash flows; expected defaults		241	12	(12)
- Unquoted and other securities	Cash flows; expected defaults		94	2	(2)
- Investment property²	Property yield; occupancy		151	8	(8)

Non profit non-linked
- Asset backed securities	Cash flows; expected defaults		497	25	(25)
- Untraded and other debt securities	Cash flows; expected defaults		281	14	(14)
- Unquoted and other securities	Cash flows; expected defaults		173	6	(6)
- Other			39	-	-
- Investment property²	Property yield; occupancy		1,879	94	(94)

With-profits
- Private equity investment vehicles¹	Price earnings multiple		160	9	(9)
- Unquoted and other securities²	Cash flows; expected defaults		375	18	(18)
- Other			3	-	-
- Investment property²	Property yield; occupancy		1,034	52	(52)

Unit linked
- Suspended securities	Estimated recoverable amount		7	-	-
- Asset backed securities	Cash flows; expected defaults		7	4	(4)
- Untraded and other debt securities	Cash flows; expected defaults		2	-	-
- Unquoted and other securities	Cash flows; expected defaults		373	15	(15)
- Investment property²	Property yield; occupancy		5,088	255	(255)


Total			10,537	522	(522)


1. 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.
2. Unquoted investments in property vehicles and direct holdings in investment property are valued 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 yield and occupancy assumptions.

IFRS and Cash 52

2.16 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:

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Profit before tax attributable to equity holders	672	636	1,238
Tax calculated at 20.25% (2014: 21.5%)	136	137	266
Effects of:
Adjustments in respect of prior years	-	1	8
Income not subject to tax, such as dividends	(3)	(2)	(9)
Change in valuation of tax losses	-	(17)	(6)
Higher rate of tax on profits taxed overseas	10	15	8
Additional allowances/non-deductible expenses	(4)	(3)	(7)
Impact of reduction in UK corporate tax rate on deferred tax balances¹	-	1	-
Differences between taxable and accounting investment gains	(11)	(1)	(15)
Other	(3)	(2)	1


Tax attributable to equity holders	125	129	246


Equity holders' effective tax rate²	18.6%	20.3%	19.9%


1. The impact of the further corporation tax reductions announced on 8 July 2015 has not been included in the half year 2015 results as required under IAS 12. The impact will be included in the FY 15 results. 2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.

IFRS and Cash 53

2.16 Tax (continued)
(b) Deferred Tax

			Full year
	30.06.15	30.06.14	31.12.14
(i) UK deferred tax (liabilities)/assets	£m	£m	£m


Realised and unrealised gains on investments	(256)	(154)	(168)
Excess of depreciation over capital allowances	17	21	19
Excess expenses¹	89	145	105
Deferred acquisition expenses	(56)	(66)	(61)
Difference between the tax and accounting value of insurance contracts	(126)	(95)	(143)
Accounting provisions	16	3	3
Trading losses²	10	53	45
Pension fund deficit	85	90	98
Purchased interest in long term business	(23)	(25)	(24)


Net UK deferred tax liabilities³	(244)	(28)	(126)



Presented on the Consolidated Balance Sheet as:


UK deferred tax asset	33	68	54
UK deferred tax liability	(277)	(96)	(180)


Net UK deferred liabilities	(244)	(28)	(126)



(ii) Overseas deferred tax (liabilities)/assets


Realised and unrealised gains on investments	(32)	(48)	(53)
Deferred acquisition expenses	(284)	(256)	(295)
Difference between the tax and accounting value of insurance contracts	(234)	(216)	(242)
Accounting provisions	(19)	(20)	(20)
Trading losses	164	149	186
Pension fund deficit	2	2	-
Purchased interest in long term business	(11)	(13)	(10)


Net Overseas deferred tax liabilities	(414)	(402)	(434)


1. The reduction in the deferred tax asset on excess expenses reflects the full utilisation of excess management expenses together with the unwind of the spread acquisition expenses relating to changes in the I-E legislation.
2. LGPL has utilised its remaining losses against profits that arose during the first half of the year. The remaining losses mainly relate to Cofunds.
3. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of £33m and a liability of £277m where the relevant items cannot be offset.

IFRS and Cash 54

2.17 Payables and other financial liabilities

					Full year
			30.06.15	30.06.14	31.12.14
			£m	£m	£m


Derivative liabilities			5,806	3,469	6,877
Other¹			12,643	7,812	9,254


Payables and other financial liabilities			18,449	11,281	16,131


1. Other liabilities include obligations under repurchase agreements of £9.5bn (H1 14: £5.2bn; FY 14: £7.0bn) and net variation margins on derivative contracts which are maintained daily. Included within the variation margins are collateral held and pledged of £384m and £20m respectively (H1 14: £55m and £5m respectively; FY 14: £107m and £235m respectively). The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements.

Other also includes future commission payments which have contingent settlement provisions of £182m (H1 14: £189m; FY 14: £186m). This liability has been determined using the net present value of the future commission which will be payable on fund values. This valuation technique uses assumptions which are consistent with the Group's effective rate of interest, investment return assumptions and persistency assumptions used in other valuations, but it is not determined by reference to published price quotations.

Fair value hierarchy
					Amortised
	Total	Level 1	Level 2	Level 3	cost
As at 30 June 2015	£m	£m	£m	£m	£m


Derivative liabilities	5,806	843	4,963	-	-
Other	12,643	260	14	184	12,185


Payables and other financial liabilities	18,449	1,103	4,977	184	12,185




					Amortised
	Total	Level 1	Level 2	Level 3	cost
As at 30 June 2014	£m	£m	£m	£m	£m


Derivative liabilities	3,469	415	3,054	-	-
Other	7,812	78	59	194	7,481


Payables and other financial liabilities	11,281	493	3,113	194	7,481




					Amortised
	Total	Level 1	Level 2	Level 3	cost
As at 31 December 2014	£m	£m	£m	£m	£m


Derivative liabilities	6,877	593	6,284	-	-
Other	9,254	869	29	186	8,170


Payables and other financial liabilities	16,131	1,462	6,313	186	8,170



Trail commissions 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 by £6m (H1 14: £6m; FY 14: £6m).


Significant transfers between levels There have been no significant transfers between levels 1, 2 and 3 for the period ended 30 June 2015 (H1 14 and FY 14: No significant transfers between levels 1, 2 and 3).

IFRS and Cash 55

2.18 Dividends


		Per		Per		Per
	Dividend	share¹	Dividend¹	share¹	Dividend	share¹
					Full year	Full year
	30.06.15	30.06.15	30.06.14	30.06.14	31.12.14	31.12.14
	£m	p	£m	p	£m	p


Ordinary share dividends paid in the period:
- Prior year final dividend	496	8.35	408	6.90	408	6.90
- Current year interim dividend	-	-	-	-	172	2.90


	496	8.35	408	6.90	580	9.80


Ordinary share dividend proposed²	205	3.45	172	2.90	496	8.35


1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
2. The dividend proposed is not included as a liability on the Consolidated Balance Sheet.

2.19 Share capital and share premium

	Number of	Number of	Number of
	shares	shares	shares
			Full year
	30.06.15	30.06.14	31.12.14


As at 1 January	5,942,070,229	5,917,066,636	5,917,066,636
Options exercised under share option schemes:
- Savings related share option scheme	3,704,493	18,430,871	25,003,593


As at 30 June / 31 December	5,945,774,722	5,935,497,507	5,942,070,229



There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.

The holders of the Company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the Company.

IFRS and Cash 56

2.20 Core Borrowings

	Carrying	Fair	Carrying	Fair	Carrying	Fair
	amount	value	amount	value	amount	value
					Full year	Full year
	30.06.15	30.06.15	30.06.14	30.06.14	31.12.14	31.12.14
	£m	£m	£m	£m	£m	£m


Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)	647	634	669	654	658	642
5.875% Sterling undated subordinated notes (Tier 2)	414	423	416	439	416	431
4.0% Euro subordinated notes 2025 (Tier 2)	-	-	474	491	472	482
10% Sterling subordinated notes 2041 (Tier 2)	310	394	310	417	310	424
5.5% Sterling subordinated notes 2064 (Tier 2)	588	622	588	594	588	666
Client fund holdings of Group debt¹	(28)	(29)	(22)	(23)	(28)	(31)


Total subordinated borrowings	1,931	2,044	2,435	2,572	2,416	2,614


Senior borrowings
Sterling medium term notes 2031-2041	602	762	602	728	609	800
Client fund holdings of Group debt¹	(43)	(55)	(46)	(55)	(48)	(62)


Total senior borrowings	559	707	556	673	561	738


Total core borrowings	2,490	2,751	2,991	3,245	2,977	3,352


1. £71m (H1 14: £68m; FY 14: £76m) of the Group's subordinated and senior borrowings are currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.

All of the Group's core borrowings are measured using amortised cost. The presented fair values of the Group's core borrowings reflect quoted prices in active markets and they are classified as level 1 in the fair value hierarchy.

Subordinated borrowings

6.385% Sterling perpetual capital securities

In 2007, Legal & General Group Plc issued £600m of 6.385% Sterling perpetual capital securities. These securities are callable at par on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset to three month LIBOR plus 1.93% pa. For regulatory purposes these securities are treated as innovative tier 1 capital.

5.875% Sterling undated subordinated notes

In 2004, Legal & General Group Plc issued £400m of 5.875% Sterling undated subordinated notes. These notes are callable at par on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019 will be reset to the prevailing five year benchmark gilt yield plus 2.33% pa. These notes are treated as tier 2 capital for regulatory purposes.

4.0% Euro subordinated notes 2025

In 2005, Legal & General Group Plc issued €600m of 4.0% Euro dated subordinated notes. The proceeds were swapped into sterling. On 8 June 2015, the Group redeemed these notes at par.

10% Sterling subordinated notes 2041

In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. The notes are callable at par on 23 July 2021 and every five years thereafter. If not called, the coupon from 23 July 2021 will be reset to the prevailing five year benchmark gilt yield plus 9.325% pa. These notes mature on 23 July 2041 and are treated as tier 2 capital for regulatory purposes.

5.5% Sterling subordinated notes 2064

On 19 June 2014, Legal & General Group Plc issued £600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June 2044 and every five years thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% pa. These notes mature on 27 June 2064 and are treated as tier 2 capital for regulatory purposes.

IFRS and Cash 57

2.21 Operational Borrowings

	Carrying	Fair	Carrying	Fair	Carrying	Fair
	amount	value	amount	value	amount	value
					Full year	Full year
	30.06.15	30.06.15	30.06.14	30.06.14	31.12.14	31.12.14
	£m	£m	£m	£m	£m	£m


Short term operational borrowings
Euro Commercial paper	41	41	123	123	73	73
Bank loans/other	7	7	13	13	13	13


Total short term operational borrowings	48	48	136	136	86	86


Non recourse borrowings
US Dollar Triple X securitisation 2037	283	239	260	225	286	240
Suffolk Life unit linked borrowings	99	99	106	106	120	120
LGV 6/LGV 7 Private Equity Fund Limited Partnership	123	123	116	116	136	136
Consolidated Property Limited Partnerships	153	153	129	129	148	148


Total non recourse borrowings	658	614	611	576	690	644


Group holding of operational borrowings¹	(61)	(51)	(55)	(48)	(61)	(52)


Total operational borrowings	645	611	692	664	715	678


1. Group investments in operational borrowings have been eliminated from the Consolidated Balance Sheet.

The presented fair values of the Group's operational borrowings reflect observable market information and have been classified as level 2 in the fair value hierarchy.

Short term operational borrowings

Short term assets available at the holding company level exceeded the amount of short term operational borrowings of £48m (H1 14: £136m; FY 14: £86m). Short term operational borrowings comprise Euro Commercial paper, bank loans and overdrafts.

Non recourse borrowings

US Dollar Triple X securitisation 2037

In 2006, a subsidiary of LGA issued US$450m of non recourse debt in the US capital markets to meet the Triple X reserve requirements of part of the US term insurance written after 2005 and 2006. It is secured on the cash flows related to that tranche of business.

Suffolk Life unit linked borrowings

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

LGV 6/LGV 7 Private Equity Fund Limited Partnerships

These borrowings are non recourse bank borrowings.

Consolidated Property Limited Partnerships

These borrowings are non recourse bank borrowings.

Syndicated credit facility

As at 30 June 2015, the Group had in place a £1bn syndicated committed revolving credit facility provided by a number of its key relationship banks, £0.04bn matures in October 2017 and £0.96bn matures in October 2018. No amounts were outstanding at 30 June 2015.

2.22 Non-controlling interests

Non-controlling interests represent third party interests in private equity and property investment vehicles which are consolidated in the Group's results. The majority of the net increase in the non-controlling interests in 2015 arises from the revaluation of the third party interests in the Legal & General UK Property Ungeared Fund Limited Partnership and the Leisure Fund Unit Trust.

IFRS and Cash 58

2.23 Foreign exchange rates

Principal rates of exchange used for translation are:

Period end exchange rates	At 30.06.15	At 30.06.14	At 31.12.14


United States Dollar	1.57	1.71	1.56
Euro	1.41	1.25	1.29



	01.01.15 -	01.01.14 -	01.01.14 -
Average exchange rates	30.06.15	30.06.14	31.12.14


United States Dollar	1.52	1.67	1.65
Euro	1.37	1.22	1.24

2.24 Related party transactions

There were no material transactions between key management and the Legal & General group of companies during the period. 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 £54m (H1 14: £42m; FY 14: £69m) for all employees.

At 30 June 2015, 30 June 2014 and 31 December 2014 there were no loans outstanding to officers of the Company.

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

			Full year
	30.06.15	30.06.14	31.12.14
	£m	£m	£m


Salaries	3	3	8
Social security costs	2	1	2
Post-employment benefits	1	1	2
Share-based incentive awards	2	2	4


Key management personnel compensation	8	7	16


Number of key management personnel	16	17	16



The Group UK defined benefit pension schemes have purchased annuity contracts issued by Society for consideration of £28m (H1 14: £12m; FY 14: £60m) during the period, priced on an arm's length basis.
The Group's investment portfolio includes investments in venture capital, property and financial investments which are held via collective investment vehicles. Net investments into associate investment vehicles totalled £7m during the period (H1 14: £2m; FY 14: £5m). The Group received investment management fees of £1m during the period (H1 14: £1m; FY 14: £1m). Distributions from these investment vehicles to the Group totalled £7m (H1 14: £1m; FY 14: £13m).

The loans outstanding from CALA at 30 June 2015 total £57m (H1 14: £nil; FY 14: £55m). The equity stake in Pemberton of £5.8m (H1 14: £nil; FY 14: £6.2m), acquired in 2014, has further conditional commitments of £8.9m (H1 14: £nil; FY 14: £8.9m).

A commitment of £177m was previously made to Pemberton's first co-mingled funds, none of which was drawn as at 30 June 2015 or 31 December 2014. An additional commitment of £71m (H1 14: £nil; FY 14: £78m) was previously made to an L&G segregated account with Pemberton. As at 30 June 2015, £60m of this was drawn (H1 14: £nil; FY 14: £25m).
During the period, LGC invested £116m into a joint venture, MediaCity, in the form of £61m equity and £55m debt. The loans outstanding from MediaCity total £56m.

2.25 Pension cost

The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme are defined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributions to, such arrangements. At 30 June 2015, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at £351m (H1 14: £366m; FY 14: £394m). These amounts have been recognised in the financial statements with £221m charged against shareholder equity (H1 14: £231m; FY 14: £248m) and £130m against the unallocated divisible surplus (H1 14: £135m; FY 14: £146m).

IFRS and Cash 59

2.26 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 & General Assurance Society Limited (the Society) was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee in respect of policies issued through the ILU's Policy Signing Office on behalf of NRG Victory Reinsurance Company Ltd (Victory), a company which was then a subsidiary of the Society. In 1990, Nederlandse Reassurantie Groep Holding NV (the assets and liabilities of which have since been assumed by Nederlandse Reassurantie Groep NV under a statutory merger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Society may have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would not apply to policies written or renewed after the acquisition. Nederlandse Reassurantie Groep NV is now owned by Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. Whether the Society has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability is uncertain. The Society has made no payment or provision in respect of this matter.

Group companies have given 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.

IFRS and Cash 60

Independent review report to Legal & General Group Plc - IFRS

Report on the consolidated interim financial statements

Our conclusion

We have reviewed the consolidated interim financial statements, defined below, in the interim management report of Legal & General Group Plc ("the Group") for the six months ended 30 June 2015. Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The consolidated interim financial statements, which are prepared by Legal & General Group Plc, comprise:

· the Consolidated Balance Sheet as at 30 June 2015;

· the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the period then ended;

· the Consolidated Cash Flow Statement for the period then ended;

· the Condensed Consolidated Statement of Changes in Equity for the period then ended; and

· the explanatory notes to the consolidated interim financial statements (pages 27 - 59).

As disclosed in Note 2.08, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The consolidated interim financial statements included in the interim management report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What a review of consolidated interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim management report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated interim financial statements.

Responsibilities for the consolidated interim financial statements and the review

Our responsibilities and those of the directors

The interim management report, including the consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim management report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

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

PricewaterhouseCoopers LLP

Chartered Accountants

4 August 2015

London

Notes:

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

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

Asset and premium flows 61

3.01 Legal & General investment management total assets

		Active
		fixed	Solu-		Active	Total	Advisory	Total
For the six months	Index	income	tions¹	Property	equities	AUM	assets	assets
ended 30 June 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2015	274.8	103.8	293.3	13.6	8.2	693.7	14.8	708.5
External inflows	15.9	4.8	3.9	0.7	-	25.3		25.3
External outflows	(17.1)	(2.5)	(3.4)	(0.3)	-	(23.3)		(23.3)
Overlay/ advisory net flows	-	-	11.8	-	-	11.8	(3.5)	8.3


External net flows²	(1.2)	2.3	12.3	0.4	-	13.8	(3.5)	10.3
Internal net flows	(0.3)	(0.8)	-	0.2	(0.3)	(1.2)	-	(1.2)


Total net flows	(1.5)	1.5	12.3	0.6	(0.3)	12.6	(3.5)	9.1
Cash management movements³	-	1.7	-	-	-	1.7	-	1.7
Market and other movements²	1.4	0.3	2.6	1.6	0.7	6.6	-	6.6


At 30 June 2015	274.7	107.3	308.2	15.8	8.6	714.6	11.3	725.9

Assets attributable to:
External						624.8	11.3	636.1
Internal						89.8	-	89.8


Assets attributable to:
UK						598.8	-	598.8
International						115.8	11.3	127.1

		Active
		fixed	Solu-		Active	Total	Advisory	Total
For the six months	Index	income	tions¹	Property	equities	AUM	assets	assets
ended 30 June 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2014	269.8	89.4	232.5	11.3	8.6	611.6	-	611.6
External inflows	11.0	2.9	5.2	0.6	0.1	19.8		19.8
External outflows	(19.3)	(1.9)	(2.1)	(0.2)	(0.1)	(23.6)		(23.6)
Overlay/ advisory net flows	-	-	12.3	-	-	12.3	0.1	12.4


External net flows²	(8.3)	1.0	15.4	0.4	-	8.5	0.1	8.6
Internal net flows	(0.1)	0.7	0.5	0.7	(0.2)	1.6	-	1.6


Total net flows	(8.4)	1.7	15.9	1.1	(0.2)	10.1	0.1	10.2
Acquisition of GIA assets	-	-	-	-	-	-	13.4	13.4


Cash management movements³	-	0.2	-	-	-	0.2	-	0.2
Market and other movements²	7.3	5.9	4.7	0.4	(0.2)	18.1	0.2	18.3


At 30 June 2014	268.7	97.2	253.1	12.8	8.2	640.0	13.7	653.7


Assets attributable to:
External						556.6	13.7	570.3
Internal						83.4	-	83.4


Assets attributable to:
UK						570.8	-	570.8
International						69.2	13.7	82.9


1. Solutions include liability driven investments, multi-asset funds, and include £208.1bn at 30 June 2015 (H1 14: £174.9bn) of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2015 was £48.2bn (H1 14: £33.3bn) and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows 62

3.01 Legal & General investment management total assets (continued)

		Active
		fixed	Solu-		Active	Total	Advisory	Total
For the year ended	Index	income	tions¹	Property	equities	AUM	assets	assets
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2014	269.8	89.4	232.5	11.3	8.6	611.6	-	611.6
External inflows	23.7	5.5	8.5	1.4	0.1	39.2		39.2
External outflows	(39.5)	(3.8)	(6.6)	(0.5)	(0.1)	(50.5)		(50.5)
Overlay/ advisory net flows	-	-	18.8	-	-	18.8	(0.2)	18.6


External net flows²	(15.8)	1.7	20.7	0.9	-	7.5	(0.2)	7.3
Internal net flows	(0.2)	(0.5)	0.4	0.7	(0.1)	0.3	-	0.3


Total net flows	(16.0)	1.2	21.1	1.6	(0.1)	7.8	(0.2)	7.6
Acquisition of GIA assets	-	-	-	-	-	-	13.4	13.4


Cash management movements³	-	(1.6)	-	-	-	(1.6)	-	(1.6)
Market and other movements²	21.0	14.8	39.7	0.7	(0.3)	75.9	1.6	77.5


As at 31 December 2014	274.8	103.8	293.3	13.6	8.2	693.7	14.8	708.5


Assets attributable to:
External						603.7	14.8	618.5
Internal						90.0	-	90.0


Assets attributable to:
UK						579.7	-	579.7
International						114.0	14.8	128.8


1. Solutions include liability driven investments, multi-asset funds, and included £194.6bn at 31 December 2014 of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2014 was £46.5bn, and the movement in these assets is included in market and other movements for overlay assets.
3.Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows 63

3.02 Legal & General investment management total assets quarterly progression

		Active
		fixed	Solu-		Active	Total	Advisory	Total
For the six months ended	Index	income	tions¹	Property	equities	AUM	assets	assets
30 June 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2015	274.8	103.8	293.3	13.6	8.2	693.7	14.8	708.5
External inflows	6.8	2.3	1.4	0.3	-	10.8		10.8
External outflows	(8.3)	(1.6)	(1.6)	(0.1)	-	(11.6)		(11.6)
Overlay/ advisory net flows	-	-	5.1	-	-	5.1	(1.2)	3.9


External net flows²	(1.5)	0.7	4.9	0.2	-	4.3	(1.2)	3.1
Internal net flows	-	(0.6)	-	0.2	(0.1)	(0.5)	-	(0.5)


Total net flows	(1.5)	0.1	4.9	0.4	(0.1)	3.8	(1.2)	2.6
Cash management movements³	-	1.7	-	-	-	1.7	-	1.7
Market and other movements²	11.3	4.8	5.8	1.3	0.1	23.3	0.7	24.0


At 31 March 2015	284.6	110.4	304.0	15.3	8.2	722.5	14.3	736.8


External inflows	9.1	2.5	2.5	0.4	-	14.5		14.5
External outflows	(8.8)	(0.9)	(1.8)	(0.2)	-	(11.7)		(11.7)
Overlay/ advisory net flows	-	-	6.7	-	-	6.7	(2.3)	4.4


External net flows²	0.3	1.6	7.4	0.2	-	9.5	(2.3)	7.2
Internal net flows	(0.3)	(0.2)	-	-	(0.2)	(0.7)	-	(0.7)


Total net flows	-	1.4	7.4	0.2	(0.2)	8.8	(2.3)	6.5
Cash management movements³	-	-	-	-	-	-	-	-
Market and other movements²	(9.9)	(4.5)	(3.2)	0.3	0.6	(16.7)	(0.7)	(17.4)


At 30 June 2015	274.7	107.3	308.2	15.8	8.6	714.6	11.3	725.9


1. Solutions include liability driven investments, multi-asset funds, and include £208.1bn at 30 June 2015 (Q1 15: £197.1bn) of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 30 June 2015 is £48.2bn (Q1 15: £44.0bn), and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows 64

3.02 Legal & General investment management total assets quarterly progression (continued)

		Active
		fixed	Solu-		Active	Total	Advisory	Total
For the year ended	Index	income	tions¹	Property	equities	AUM	assets	assets
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2014	269.8	89.4	232.5	11.3	8.6	611.6	-	611.6
External inflows	4.9	1.4	2.4	0.3	-	9.0		9.0
External outflows	(5.8)	(0.5)	(1.2)	(0.1)	-	(7.6)		(7.6)
Overlay/ advisory net flows	-	-	5.2	-	-	5.2	-	5.2


External net flows²	(0.9)	0.9	6.4	0.2	-	6.6	-	6.6
Internal net flows	-	2.0	-	0.5	(0.1)	2.4	-	2.4


Total net flows	(0.9)	2.9	6.4	0.7	(0.1)	9.0	-	9.0
Cash management movements³	-	-	-	-	-	-	-	-
Market and other movements²	1.5	2.9	5.9	(0.1)	0.1	10.3	-	10.3


At 31 March 2014	270.4	95.2	244.8	11.9	8.6	630.9	-	630.9


External inflows	6.1	1.5	2.8	0.3	0.1	10.8		10.8
External outflows	(13.5)	(1.4)	(0.9)	(0.1)	(0.1)	(16.0)		(16.0)
Overlay/ advisory net flows	-	-	7.1	-	-	7.1	0.1	7.2


External net flows²	(7.4)	0.1	9.0	0.2	-	1.9	0.1	2.0
Internal net flows	(0.1)	(1.3)	0.5	0.2	(0.1)	(0.8)	-	(0.8)


Total net flows	(7.5)	(1.2)	9.5	0.4	(0.1)	1.1	0.1	1.2
Acquisition of GIA assets	-	-	-	-	-	-	13.4	13.4


Cash management movements³	-	0.2	-	-	-	0.2	-	0.2
Market and other movements²	5.8	3.0	(1.2)	0.5	(0.3)	7.8	0.2	8.0


At 30 June 2014	268.7	97.2	253.1	12.8	8.2	640.0	13.7	653.7


External inflows	5.6	1.0	1.5	0.3	-	8.4		8.4
External outflows	(8.7)	(0.8)	(1.4)	(0.2)	-	(11.1)		(11.1)
Overlay/ advisory net flows	-	-	2.5	-	-	2.5	-	2.5


External net flows²	(3.1)	0.2	2.6	0.1	-	(0.2)	-	(0.2)
Internal net flows	(0.3)	(0.9)	(0.1)	(0.1)	(0.1)	(1.5)	-	(1.5)


Total net flows	(3.4)	(0.7)	2.5	-	(0.1)	(1.7)	-	(1.7)
Cash management movements³	-	(0.7)	-	-	-	(0.7)	-	(0.7)
Market and other movements²	5.2	1.7	17.4	0.4	(0.2)	24.5	0.5	25.0


At 30 September 2014	270.5	97.5	273.0	13.2	7.9	662.1	14.2	676.3


External inflows	7.1	1.6	1.8	0.5	-	11.0		11.0
External outflows	(11.5)	(1.1)	(3.1)	(0.1)	-	(15.8)		(15.8)
Overlay/ advisory net flows	-	-	4.0	-	-	4.0	(0.3)	3.7


External net flows²	(4.4)	0.5	2.7	0.4	-	(0.8)	(0.3)	(1.1)
Internal net flows	0.2	(0.3)	-	0.1	0.2	0.2	-	0.2


Total net flows	(4.2)	0.2	2.7	0.5	0.2	(0.6)	(0.3)	(0.9)
Cash management movements³	-	(1.1)	-	-	-	(1.1)	-	(1.1)
Market and other movements²	8.5	7.2	17.6	(0.1)	0.1	33.3	0.9	34.2


At 31 December 2014	274.8	103.8	293.3	13.6	8.2	693.7	14.8	708.5

1. Solutions include liability driven investments, multi-asset funds, and include £194.6bn at 31 December 2014 (Q1 14: £168.3bn; H1 14: £174.9bn; Q3 14: £185.3bn) of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in overlay assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2014 was £46.5bn (Q1 14: £33.8bn; H1 14: £33.3bn; Q3 14: £41.2bn), and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows 65

3.02 Legal & General investment management total assets quarterly progression (continued)

	As at	As at	As at	As at	As at	As at
	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£bn	£bn	£bn	£bn	£bn	£bn


Total assets attributable to:¹
External	636.1	644.5	618.5	591.5	570.3	547.8
Internal	89.8	92.3	90.0	84.8	83.4	83.1


Total assets attributable to:¹
UK	598.8	610.4	579.7	589.8	570.8	564.9
International²	127.1	126.4	128.8	86.5	82.9	66.0


1. Total assets at 30 June 2015 include £11.3bn of advisory assets (Q1 15: £14.3bn; Q4 14: £14.8bn; Q3 14: £14.2bn; H1 14: £13.7bn; Q1 14: £nil).
2. In Q4 14, International assets included £37.5bn of assets transferred from our London office to our Chicago office.

3.03 Legal & General investment management total external assets under management net flows

	3	3	3	3	3	3
	months	months	months	months	months	months
	to	to	to	to	to	to
	30.06.15	30.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£bn	£bn	£bn	£bn	£bn	£bn


LGIM total external AUM net flows¹	9.5	4.3	(0.8)	(0.2)	1.9	6.6
Attributable to:
International	4.6	0.8	1.6	1.3	2.4	3.4

UK Institutional
- Defined contribution	0.6	0.4	0.9	0.7	0.5	0.6
- Defined benefit	4.0	3.1	(3.6)	(2.2)	(1.2)	2.3

UK Retail	0.3	-	0.3	-	0.2	0.3


1. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and cash management movements.

Asset and premium flows 66

3.04 Assets under administration

	Digital						LGIM


				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the six months	Platforms	Life	Savings^2,3	ment⁴	Savings	rlands	place	ments⁵	Annuities
ended 30 June 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2015	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
Gross inflows¹	3.8	0.6	0.7	(0.2)	4.9	0.2	1.2	3.0	1.0
Gross outflows	(2.7)	(0.3)	(2.2)	0.4	(4.8)	(0.2)	(0.3)	(3.0)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(1.1)


Net flows	1.1	0.3	(1.5)	0.2	0.1	-	0.9	-	(0.1)
Market and other
movements	1.6	0.3	0.3	(0.2)	2.0	(0.2)	1.1	1.2	(0.7)


At 30 June 2015	74.6	8.3	34.8	(6.9)	110.8	4.2	13.1	22.5	43.4



	Digital						LGIM


				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the six months	Platforms	Life	Savings²	ment⁴	Savings	rlands	place	ments⁵	Annuities
ended 30 June 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2014	64.1	6.6	36.3	(6.8)	100.2	4.5	8.7	20.5	34.4
Gross inflows¹	4.8	0.6	0.7	(0.2)	5.9	0.2	1.3	1.9	3.5
Gross outflows	(2.3)	(0.2)	(2.2)	0.4	(4.3)	(0.2)	(0.3)	(2.4)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(1.0)


Net flows	2.5	0.4	(1.5)	0.2	1.6	-	1.0	(0.5)	2.5
Market and other
movements	0.8	0.2	1.1	(0.1)	2.0	-	(0.2)	0.6	1.6


At 30 June 2014	67.4	7.2	35.9	(6.7)	103.8	4.5	9.5	20.6	38.5



	Digital						LGIM


				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the year ended	Platforms	Life	Savings²	ment⁴	Savings	rlands	place	ments⁵	Annuities
ended 31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2014	64.1	6.6	36.3	(6.8)	100.2	4.5	8.7	20.5	34.4
Gross inflows¹	10.1	1.3	1.4	(0.5)	12.3	0.4	2.8	4.4	6.5
Gross outflows	(4.7)	(0.5)	(4.4)	0.7	(8.9)	(0.4)	(0.6)	(4.8)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(2.1)


Net flows	5.4	0.8	(3.0)	0.2	3.4	-	2.2	(0.4)	4.4
Market and other
movements	2.4	0.3	2.7	(0.3)	5.1	(0.1)	0.2	1.2	5.4


At 31 December 2014	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2


1. Platforms gross inflows include Cofunds institutional net flows. Total H1 15 Platforms comprise £37.9bn (H1 14: £37.3bn; FY 14: £38.3bn) of retail assets and £36.7bn (H1 14: £30.1bn; FY 14: £33.6bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Total AUA at 30 June 2015 includes £2.8bn of assets relating to Legal & General International (Ireland) Limited, which was sold to Canada Life Group on 1 July 2015.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
5. H1 15 Retail Investments include £1.8bn (H1 14: £1.5bn; FY 14: £1.7bn) of LGIM unit trust assets held on our Cofunds platform and £3.3bn (H1 14: £3.2bn; FY 14: £3.2bn) of LGIM unit trust assets held on our IPS platform.

Asset and premium flows 67

3.05 Assets under administration quarterly progression

	Digital						LGIM


				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the six months	Platforms	Life	Savings^2,3	ment⁴	Savings	rlands	place	ments⁵	Annuities
ended 30 June 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2015	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
Gross inflows¹	1.9	0.3	0.3	-	2.5	0.1	0.6	1.5	0.7
Gross outflows	(1.2)	(0.1)	(0.9)	0.2	(2.0)	(0.1)	(0.1)	(1.6)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)


Net flows	0.7	0.2	(0.6)	0.2	0.5	-	0.5	(0.1)	0.2
Market and other
movements	3.4	0.3	0.7	(0.4)	4.0	(0.1)	1.4	1.2	1.2


At 31 March 2015	76.0	8.2	36.1	(7.1)	113.2	4.3	13.0	22.4	45.6


Gross inflows¹	1.9	0.3	0.4	(0.2)	2.4	0.1	0.6	1.5	0.3
Gross outflows	(1.5)	(0.2)	(1.3)	0.2	(2.8)	(0.1)	(0.2)	(1.4)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.6)


Net flows	0.4	0.1	(0.9)	-	(0.4)	-	0.4	0.1	(0.3)
Market and other
movements	(1.8)	-	(0.4)	0.2	(2.0)	(0.1)	(0.3)	-	(1.9)


At 30 June 2015	74.6	8.3	34.8	(6.9)	110.8	4.2	13.1	22.5	43.4


1. Platforms gross inflows include Cofunds institutional net flows. Total H1 15 Platforms comprise £37.9bn (Q1 15: £38.8bn) of retail assets and £36.7bn (Q1 15: £37.2bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Total AUA at 30 June 2015 includes £2.8bn of assets relating to Legal & General International (Ireland) Limited, which was sold to Canada Life Group on 1 July 2015.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
5. At 30 June 2015 Retail Investments include £1.8bn (Q1 15: £1.8bn) of LGIM unit trust assets held on our Cofunds platform and £3.3bn (Q1 15: £3.4bn) of LGIM unit trust assets held on our IPS platform.

Asset and premium flows 68

3.05 Assets under administration quarterly progression (continued)

	Digital						LGIM


				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nether-	Work-	Invest-
For the year ended	Platforms	Life	Savings²	ment³	Savings	lands	place	ments⁴	Annuities
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


At 1 January 2014	64.1	6.6	36.3	(6.8)	100.2	4.5	8.7	20.5	34.4
Gross inflows¹	2.6	0.3	0.4	(0.1)	3.2	0.1	0.7	1.0	3.3
Gross outflows	(1.1)	(0.1)	(1.1)	0.2	(2.1)	(0.1)	(0.2)	(0.9)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)


Net flows	1.5	0.2	(0.7)	0.1	1.1	-	0.5	0.1	2.8
Market and other
movements	-	0.1	0.5	(0.1)	0.5	(0.1)	(0.1)	0.2	1.1


At 31 March 2014	65.6	6.9	36.1	(6.8)	101.8	4.4	9.1	20.8	38.3


Gross inflows¹	2.2	0.3	0.3	(0.1)	2.7	0.1	0.6	0.9	0.2
Gross outflows	(1.2)	(0.1)	(1.1)	0.2	(2.2)	(0.1)	(0.1)	(1.5)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)


Net flows	1.0	0.2	(0.8)	0.1	0.5	-	0.5	(0.6)	(0.3)
Market and other
movements	0.8	0.1	0.6	-	1.5	0.1	(0.1)	0.4	0.5


At 30 June 2014	67.4	7.2	35.9	(6.7)	103.8	4.5	9.5	20.6	38.5


Gross inflows¹	2.8	0.4	0.4	(0.2)	3.4	0.1	0.7	1.2	0.4
Gross outflows	(1.3)	(0.2)	(1.2)	0.2	(2.5)	(0.1)	(0.2)	(1.3)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.6)


Net flows	1.5	0.2	(0.8)	-	0.9	-	0.5	(0.1)	(0.2)
Market and other
movements	0.1	0.1	0.4	(0.1)	0.5	(0.1)	0.1	0.2	1.6


At 30 September 2014	69.0	7.5	35.5	(6.8)	105.2	4.4	10.1	20.7	39.9


Gross inflows¹	2.5	0.3	0.3	(0.1)	3.0	0.1	0.8	1.3	2.6
Gross outflows	(1.1)	(0.1)	(1.0)	0.1	(2.1)	(0.1)	(0.1)	(1.1)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)


Net flows	1.4	0.2	(0.7)	-	0.9	-	0.7	0.2	2.1
Market and other
movements	1.5	-	1.2	(0.1)	2.6	-	0.3	0.4	2.2


At 31 December 2014	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2


1. Platforms gross inflows include Cofunds institutional net flows. At 31 December 2014 Platforms comprise £38.3bn (Q1 14 £36.6bn; H1 14: £37.3bn; Q3 14: £37.4bn) of retail assets and £33.6bn (Q1 14: £29.0bn; H1 14: £30.1bn; Q3 14: £31.6bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Retail Savings assets included in the Platforms column.
4. At 31 December 2014 Retail Investments include £1.7bn (Q1 14: £1.6bn; H1 14: £1.5bn; Q3 14: £1.6bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (Q1 14: £3.2bn; H1 14: £3.2bn; Q3 14: £3.2bn) of LGIM unit trust assets held on our IPS platform.

Asset and premium flows 69

3.06 LGR new business

	3	3	3	3	3	3
	months	months	months	months	months	months
	to	to	to	to	to	to
	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m


Individual Annuities	81	99	83	125	139	244
Bulk Purchase Annuities	491	655	2,619	233	90	3,045
Lifetime Mortgage Advances¹	37	-	-	-	-	-


Total LGR new business	609	754	2,702	358	229	3,289

1. £12m of these advances were funded by L&G prior to our acquisition of New Life Home Finance Ltd.

3.07 Insurance new business annual premiums

	3	3	3	3	3	3
	months	months	months	months	months	months
	to	to	to	to	to	to
	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m


UK Retail Protection	41	38	41	41	41	42
UK Group Protection	22	18	11	14	20	20
France Protection	-	31	-	-	-	33
Netherlands Protection	2	1	-	1	-	2
US Protection	21	20	21	23	24	23


Total Insurance new business	86	108	73	79	85	120

3.08 Gross written premiums on Insurance business

	3	3	3	3	3	3
	months	months	months	months	months	months
	to	to	to	to	to	to
	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m


UK Retail Protection	275	270	273	269	260	254
UK Group Protection	127	102	57	65	130	99
General Insurance	83	81	95	104	94	84
France Protection	42	43	41	41	45	46
Netherlands Protection	11	13	9	16	12	14
US Protection	202	184	184	162	170	162
Longevity Insurance	85	79	82	84	83	84


Total gross written premiums on insurance business	825	772	741	741	794	743

Asset and premium flows 70

3.09 Overseas new business in local currency

	Annual	Single	Annual	Single	Annual	Single
	premiums	premiums	premiums	premiums	premiums	premiums
	30.06.15	30.06.15	30.06.14	30.06.14	31.12.14	31.12.14


US (US$m)	62	-	78	-	150	-

Netherlands (€m)	8	59	4	51	10	138

France (€m)	42	208	40	168	41	351

India (Rs m) - Group's 26% interest	262	1,515	266	2,257	408	4,003

Egypt (Pounds m) - Group's 55% interest	61	-	84	-	149	-

Gulf (US$m) - Group's 50% interest	2	2	1	1	3	5

This information is provided by RNS

The company news service from the London Stock Exchange

END

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