L&G Half Year Results 2021 Part 2

RNS Number : 4747H

Legal & General Group Plc

04 August 2021

 

Legal & General Group Plc

Half Year Results 2021 Part 2

1 INDEPENDENT REVIEW REPORT TO LEGAL & GENERAL GROUP PLC   Page 33

Conclusion 

We have been engaged by Legal & General Group plc ("the Group") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Condensed Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows (pages 46 to 51) and the related explanatory notes to the interim financial statements (pages 35 to 45 and 52 to 72). 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

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

Directors' responsibilities 

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

As disclosed in Note 4.01, the latest annual financial statements of the Group were prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and the next annual financial statements will be prepared in accordance with UK-adopted international accounting standards. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK. 

Our responsibility 

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

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

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

Rees Aronson  

for and on behalf of KPMG LLP 

Chartered Accountants  

15 Canada Square

London

E14 5GL 

3 August 2021 

Legal & General Group Plc

Half Year Results 2021 Part 2

   Page 34

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Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 35

2.01 Operating profit^#

For the six month period to 30 June 2021

			6 months	6 months	Full year
			2021	2020	2020
		Notes	£m	£m	£m
From continuing operations
Legal & General Retirement (LGR)		2.03	683	720	1,728
- LGR Institutional (LGRI)			525	585	1,331
- LGR Retail (LGRR) 1			158	135	397
Legal & General Investment Management (LGIM) 1		2.04	204	197	407
Legal & General Capital (LGC)		2.05	250	123	275
Legal & General Insurance (LGI)		2.03	134	88	189
- UK and Other			96	57	205
- US (LGIA)			38	31	(16)
Operating profit from divisions:
From continuing operations			1,271	1,128	2,599
From discontinued operations 2			-	26	34
Operating profit from divisions			1,271	1,154	2,633
Group debt costs 3			(120)	(115)	(233)
Group investment projects and expenses			(72)	(72)	(155)
Covid-19 costs 4			-	(21)	(27)
Operating profit			1,079	946	2,218
Investment and other variances		2.06	244	(644)	(394)
Losses on non-controlling interests			(3)	(17)	(36)
Adjusted profit before tax attributable to equity holders			1,320	285	1,788
Tax attributable to equity holders		4.05	(258)	(12)	(217)
Profit for the period		3.01	1,062	273	1,571
Less: Profit after tax from discontinued operations 2		3.01	-	(19)	(290)
Profit after tax from continuing operations		3.01	1,062	254	1,281
Total tax expense		3.01	339	88	218
Profit before tax		3.01	1,401	342	1,499
Profit attributable to equity holders			1,065	290	1,607
Earnings per share:
Basic (pence per share) 5		2.07	17.78p	4.89p	27.00p
Diluted (pence per share) 5		2.07	16.96p	4.63p	25.60p
1. LGRR includes the Workplace Savings business which was previously reported in LGIM. Prior period comparatives have been restated to reflect the change in segmentation. Further details are provided in Note 2.08.
2. In 2020 discontinued operations included the results of the Mature Savings division, the sale of which completed on 7 September 2020.
3. Group debt costs exclude interest on non-recourse financing.
4. Covid-19 costs reflected incremental operational expenses incurred as a result of Covid-19.
5. All earnings per share calculations are based on profit attributable to equity holders of the company.

This supplementary operating profit information (one of the group's key performance indicators) provides additional analysis of the results reported under IFRS, and the group believes it provides stakeholders with useful information to enhance their understanding of the performance of the business in the period.

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 the operating profit for LGC's trading businesses (which reflects the IFRS profit before tax). Variances between actual and long-term expected investment return assumptions are reported below operating profit, which include any differences between investment return on actual assets and the target long-term asset mix. Exceptional income and expenses which arise outside the normal course of business in the period, such as gains/losses from merger and acquisition, and start-up costs, are also excluded from operating profit.

The group reports its results across the following business segments:

· LGR represents worldwide pension risk transfer business including longevity insurance (within LGRI), and retail retirement, workplace savings and lifetime mortgage loans (within LGRR).

· LGIM represents institutional and retail investment management.

· LGC represents shareholder assets invested in direct investments primarily in the areas of housing, urban regeneration, clean energy and SME finance, as well as traded and treasury assets.

· LGI primarily represents UK and US retail protection business, UK group protection and Fintech business.

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 36

2.02 Reconciliation of release from operations to operating profit^# before tax

					Changes in valuation assump- tions			Operating profit/ (loss) after tax		Operating profit/ (loss) before tax
		New business surplus/ (strain)	Net release from operations
	Release from operations1			Exper- ience variances		Non-cash items	Other		Tax expense/ (credit)
For the six month period
to 30 June 2021	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGR	363	83	446	117	8	12	-	583	100	683
- LGRI	252	68	320	105	8	15	-	448	77	525
- LGRR 2	111	15	126	12	-	(3)	-	135	23	158
LGIM 2	163	-	163	-	-	-	-	163	41	204
LGC	213	-	213	-	-	-	-	213	37	250
LGI	151	8	159	4	1	4	(64)	104	30	134
- UK and Other	61	8	69	4	1	4	-	78	18	96
- US (LGIA) 3	90	-	90	-	-	-	(64)	26	12	38
Total from divisions	890	91	981	121	9	16	(64)	1,063	208	1,271
Group debt costs	(97)	-	(97)	-	-	-	-	(97)	(23)	(120)
Group investment projects and expenses	(30)	-	(30)	-	-	-	(31)	(61)	(11)	(72)
Total	763	91	854	121	9	16	(95)	905	174	1,079
1. Release from operations within US (LGIA) includes £80m of dividends from the US.
2. LGRR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in segmentation. Further details are provided in Note 2.08.
3. Other includes experience variances, changes in valuation assumptions and non-cash items for LGIA.
Release from operations for LGR and LGI UK and Other represents the expected IFRS surplus generated in the period from the difference between the prudent assumptions underlying the IFRS liabilities and our best estimate of future experience for in-force non-profit annuities, workplace savings and UK protection businesses. The LGI release from operations also includes dividends remitted from LGIA.
New business surplus/(strain) for LGR and LGI UK and Other represents the initial profit or loss from writing new business. This includes the costs associated with acquiring new business and setting up prudent reserves in respect of new business for UK non-profit annuities, workplace savings and protection, net of tax. The new business surplus and release from operations for LGR and LGI excludes any capital held in excess of the prudent reserves from the liability calculation.
LGR's new business metrics are presented based on a target long-term asset portfolio. At certain period ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may have sourced more or less of the high quality assets targeted to support that business. At period end, the profit impact of the difference between actual assets held (including alternative surplus assets where suitable) and the long-term asset mix is reflected in investment variance.
Net release from operations for LGR and LGI is defined as release from operations plus new business surplus/(strain).
Release from operations and net release from operations for LGC and LGIM represents the operating profit (net of tax).
See Note 2.03 for more detail on experience variances, changes to valuation assumptions and non-cash items.
# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 37

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

					Changes in valuation assump- tions			Operating profit/ (loss) after tax		Operating profit/ (loss) before tax
		New business surplus/ (strain)	Net release from operations
	Release from operations1			Exper- ience variances		Non-cash items	Other		Tax expense/ (credit)
For the six month period
to 30 June 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGR	344	87	431	22	143	21	-	617	103	720
- LGRI	246	71	317	20	143	21	-	501	84	585
- LGRR 2	98	16	114	2	-	-	-	116	19	135
LGIM 2	158	-	158	-	-	-	-	158	39	197
LGC	97	-	97	-	-	-	-	97	26	123
LGI	163	(1)	162	(25)	8	(5)	(81)	59	29	88
- UK and Other	69	(1)	68	(25)	8	(5)	-	46	11	57
- US (LGIA) 3	94	-	94	-	-	-	(81)	13	18	31
From continuing operations	762	86	848	(3)	151	16	(81)	931	197	1,128
From discontinued operations 4	21	-	21	-	-	-	-	21	5	26
Total from divisions	783	86	869	(3)	151	16	(81)	952	202	1,154
Group debt costs	(93)	-	(93)	-	-	-	-	(93)	(22)	(115)
Group investment projects and expenses	(25)	-	(25)	-	-	-	(30)	(55)	(17)	(72)
Covid-19 costs 5	-	-	-	-	-	-	(17)	(17)	(4)	(21)
Total	665	86	751	(3)	151	16	(128)	787	159	946
1. Release from operations within US (LGIA) includes £84m of dividends from the US.
2. LGRR includes the Workplace Savings business which was previously reported in LGIM. Further details are provided in Note 2.08.
3. Other includes experience variances, changes in valuation assumptions and non-cash items for LGIA.
4. Discontinued operations include the results of the Mature Savings division, the sale of which completed on 7 September 2020.
5. Covid-19 costs reflect incremental operational expenses incurred as a result of Covid-19.

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 38

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

										Operating
		New	Net		Changes in			Operating		profit/
	Release	business	release	Exper-	valuation			profit/	Tax	(loss)
	from	surplus/	from	ience	assump-	Non-cash		(loss) after	expense/	before
For the year ended	operations1	(strain)	operations	variances	tions	items	Other	tax	(credit)	tax
31 December 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGR	685	262	947	99	400	32	-	1,478	250	1,728
- LGRI	492	220	712	81	314	30	-	1,137	194	1,331
- LGRR 2	193	42	235	18	86	2	-	341	56	397
LGIM 2	327	-	327	-	-	-	-	327	80	407
LGC	224	-	224	-	-	-	-	224	51	275
LGI	250	8	258	(41)	58	(5)	(115)	155	34	189
- UK and Other	146	8	154	(41)	58	(5)	-	166	39	205
- US (LGIA) 3	104	-	104	-	-	-	(115)	(11)	(5)	(16)
From continuing operations	1,486	270	1,756	58	458	27	(115)	2,184	415	2,599
From discontinued operations 4	28	-	28	-	-	-	-	28	6	34
Total from divisions	1,514	270	1,784	58	458	27	(115)	2,212	421	2,633
Group debt costs	(189)	-	(189)	-	-	-	-	(189)	(44)	(233)
Group investment projects and expenses	(56)	-	(56)	-	-	-	(61)	(117)	(38)	(155)
Covid-19 costs 5	-	-	-	-	-	-	(20)	(20)	(7)	(27)
Total	1,269	270	1,539	58	458	27	(196)	1,886	332	2,218
1. Release from operations within US (LGIA) includes £84m of dividends from the US.
2. LGRR includes the Workplace Savings business which was previously reported in LGIM. Further details are provided in Note 2.08.
3. Other includes experience variances, changes in valuation assumptions and non-cash items for LGIA.
4. Discontinued operations include the results of the Mature Savings division, the sale of which completed on 7 September 2020.
5. Covid-19 costs reflect incremental operational expenses incurred as a result of Covid-19.

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 39

2.03 Analysis of LGR and LGI operating profit

For the six month period to 30 June 2021

	LGR1	LGI	LGR1	LGI	LGR1	LGI
	6 months	6 months	6 months	6 months	Full year	Full year
	2021	2021	2020	2020	2020	2020
	£m	£m	£m	£m	£m	£m
Net release from operations	446	159	431	162	947	258
Experience variances
- Persistency	-	(6)	3	(11)	7	3
- Mortality/morbidity	42	3	33	(17)	104	(46)
- Expenses	(3)	(2)	(3)	(5)	(18)	(5)
- Project and development costs	(3)	-	(4)	-	(9)	(1)
- Other 2	81	9	(7)	8	15	8
Total experience variances	117	4	22	(25)	99	(41)
Changes in valuation assumptions
- Persistency	-	-	-	-	-	(1)
- Mortality/morbidity	-	-	19	4	255	54
- Expenses	-	-	-	-	-	2
- Other 3	8	1	124	4	145	3
Total changes in valuation assumptions	8	1	143	8	400	58
Movement in non-cash items
- Acquisition expense tax relief	-	-	-	(2)	-	(3)
- Other 4	12	4	21	(3)	32	(2)
Total movement in non-cash items	12	4	21	(5)	32	(5)
Other	-	(64)	-	(81)	-	(115)
Operating profit after tax	583	104	617	59	1,478	155
Tax expense	100	30	103	29	250	34
Operating profit before tax	683	134	720	88	1,728	189
1. LGR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in segmentation. Further details are provided in Note 2.08.
2. Other experience variances for LGR in the period to 30 June 2021 include the impact from an improvement in the quality of scheme data relating to bulk annuities, as well as the net impact of new reinsurance agreements relating to schemes transacted in different periods.
3. In 2020, the positive Other assumption change in LGR reflects a reduction in the assumed late retirement factors applied to deferred annuities.
4. LGR Other movement in non-cash items is driven by the net effect of the capitalisation and unwind of future asset management profits on activity managed by LGIM, and is a function of new business volumes and movements in the main unit cost assumptions.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 40

2.04 LGIM operating profit

				6 months	6 months	Full year
				2021	2020	2020
				£m	£m	£m
Asset management revenue (excluding 3rd party market data) 1,2				471	458	929
Asset management transactional revenue 3				9	9	27
Asset management expenses (excluding 3rd party market data) 1,2				(276)	(270)	(549)
Total LGIM operating profit 4				204	197	407
1. Asset management revenue and expenses exclude income and costs of £18m in relation to the provision of third party market data (H1 20: £13m; FY 20: £27m).
2. The ETF operating result is included as part of asset management revenue and expenses.
3. Transactional revenue from external clients includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees.
4. The Workplace Savings business, which was previously reported in LGIM, has been transferred to LGRR. Prior year comparatives have been restated to reflect the change in segmentation. Further details are provided in Note 2.08.

2.05 LGC operating profit

				6 months	6 months	Full year
				2021	2020	2020
				£m	£m	£m
Direct investments1				195	36	112
Traded investment portfolio including treasury assets2				55	87	163
Total LGC operating profit				250	123	275
1. Direct investments represents LGC's portfolio of assets across urban regeneration (including specialist commercial real estate and clean energy), housing and SME finance.
2. The traded investment portfolio holds a diversified set of exposures across equities, fixed income, multi-asset funds and cash.

2.06 Investment and other variances

				6 months	6 months	Full year
				2021	2020	2020
				£m	£m	£m
Investment variance 1				255	(599)	(691)
M&A related and other variances 2				(11)	(45)	297
Total investment and other variances				244	(644)	(394)
1. The investment variance for the six months ended 30 June 2021 is driven by the formulaic impact of rising interest rates on LGI reserves of £230m (H1 20: £(483)m), along with strong portfolio performance in LGR and LGC, partially offset by the similarly formulaic but negative impact of rising interest rates on the value of the annuity obligations insured by LGAS in the group's defined benefit pension schemes, which drives the Group central expenses investment variance of £(132)m (H1 20: £71m).
2. M&A related and other variances includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. Full year 2020 includes a £335m profit on the disposal of the Mature Savings business.
Investment variance includes differences between actual and long term expected investment return on traded and real assets, economic assumption changes (e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business, and excludes the yield associated with assets held for future new pension risk transfer business from the valuation discount rate.
The long term expected investment return is based on opening economic assumptions applied to the assets under management at the start of the reporting period. The assumptions underlying the calculation of the expected returns for traded equity and commercial property assets are based on market consensus forecasts and long term historic average returns expected to apply through the cycle. The principal assumptions are:
				6 months	6 months	Full year
				2021	2020	2020
Equities				7%	7%	7%
Commercial property				5%	5%	5%
Residential property				RPI + 50bps	RPI + 50bps	RPI + 50bps

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 41

2.07 Earnings per share

(a) Basic earnings per share

				After tax	Per share1	After tax	Per share1	After tax	Per share1
				6 months	6 months	6 months	6 months	Full year	Full year
				2021	2021	2020	2020	2020	2020
				£m	p	£m	p	£m	p
Profit for the period attributable to equity holders				1,065	17.96	290	4.89	1,607	27.10
Less: coupon payable in respect of restricted Tier 1 convertible notes net of tax relief				(11)	(0.18)	-	-	(6)	(0.10)
Total basic earnings				1,054	17.78	290	4.89	1,601	27.00
Less: earnings derived from discontinued operations				-	-	(19)	(0.32)	(290)	(4.89)
Basic earnings derived from continuing operations				1,054	17.78	271	4.57	1,311	22.11
1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the period, excluding employee scheme treasury shares.

(b) Diluted earnings per share

					After tax	Weighted average number of shares	Per share1
For the six month period to 30 June 2021					£m	m	p
Profit for the period attributable to equity holders					1,065	5,929	17.96
Net shares under options allocable for no further consideration					-	45	(0.14)
Conversion of restricted Tier 1 notes					-	307	(0.86)
Total diluted earnings					1,065	6,281	16.96
Diluted earnings derived from continuing operations					1,065	6,281	16.96
					After tax	Weighted average number of shares	Per share1
For the six month period to 30 June 2020					£m	m	p
Profit for the period attributable to equity holders					290	5,930	4.89
Net shares under options allocable for no further consideration					-	33	(0.03)
Conversion of restricted Tier 1 notes					-	307	(0.23)
Total diluted earnings					290	6,270	4.63
Less: diluted earnings derived from discontinued operations					(19)	-	(0.30)
Diluted earnings derived from continuing operations					271	6,270	4.33
					After tax	Weighted average number of shares	Per share1
For the year ended 31 December 2020					£m	m	p
Profit for the year attributable to equity holders					1,607	5,930	27.10
Net shares under options allocable for no further consideration					-	40	(0.18)
Conversion of restricted Tier 1 notes					-	307	(1.32)
Total diluted earnings					1,607	6,277	25.60
Less: diluted earnings derived from discontinued operations					(290)	-	(4.62)
Diluted earnings derived from continuing operations					1,317	6,277	20.98
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 and conversion of restricted Tier 1 notes.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 42

2.08 Segmental analysis

The group has four reportable segments that are continuing operations, comprising LGR, LGIM, LGC and LGI, as set out in Note 2.01. Group central expenses and debt costs are reported separately. Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.

From 1 January 2021, management of the Workplace Savings business has transferred from LGIM to LGRR, where it complements their retirement solutions offering and retail customer focus. The change in segment reporting has no impact on the profit or loss, or net assets, of the group. To enable comparison, segmental information for prior periods has been restated accordingly.

For 2020, continuing operations exclude the results of the Mature Savings division, the sale of which completed on 7 September 2020.

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

Financial information on the reportable segments is further broken down where relevant in order to better explain the drivers of the group's results.

(i) Profit/(loss) for the period
					Group
					expenses	Total
					and debt	continuing
	LGR1	LGIM1	LGC	LGI	costs2	operations
For the six month period to 30 June 2021	£m	£m	£m	£m	£m	£m
Operating profit/(loss)#	683	204	250	134	(192)	1,079
Investment and other variances	105	(7)	48	230	(132)	244
Losses attributable to non-controlling interests	-	-	-	-	(3)	(3)
Profit/(loss) before tax attributable to equity holders	788	197	298	364	(327)	1,320
Tax (expense)/credit attributable to equity holders	(145)	(44)	(54)	(91)	76	(258)
Profit/(loss) for the period	643	153	244	273	(251)	1,062
					Group
					expenses	Total
					and debt	continuing
	LGR1	LGIM1	LGC	LGI	costs2	operations
For the six month period to 30 June 2020	£m	£m	£m	£m	£m	£m
Operating profit/(loss)#	720	197	123	88	(208)	920
Investment and other variances	73	4	(307)	(483)	71	(642)
Losses attributable to non-controlling interests	-	-	-	-	(17)	(17)
Profit/(loss) before tax attributable to equity holders	793	201	(184)	(395)	(154)	261
Tax (expense)/credit attributable to equity holders	(97)	(23)	33	70	10	(7)
Profit/(loss) for the period	696	178	(151)	(325)	(144)	254
					Group
					expenses	Total
					and debt	continuing
	LGR1	LGIM1	LGC	LGI	costs2	operations
For the year ended 31 December 2020	£m	£m	£m	£m	£m	£m
Operating profit/(loss)#	1,728	407	275	189	(415)	2,184
Investment and other variances	15	1	(299)	(459)	24	(718)
Losses attributable to non-controlling interests	-	-	-	-	(36)	(36)
Profit/(loss) before tax attributable to equity holders	1,743	408	(24)	(270)	(427)	1,430
Tax (expense)/credit attributable to equity holders	(228)	(65)	(8)	58	94	(149)
Profit/(loss) for the year	1,515	343	(32)	(212)	(333)	1,281
1. LGR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in segmentation.
2. Group expenses and debt costs include £nil of incremental costs incurred as a result of Covid-19 (H1 20: £21m; FY 20: £27m).
# Operating profit for total continuing operations represents 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 43

2.08 Segmental analysis (continued)

(ii) Revenue

(a) Total revenue

								6 months		6 months		Full year
								2021		2020		2020
								£m		£m		£m
Total income								14,898		17,419		50,231
Adjusted for:
Share of (profit)/loss from associates and joint ventures, net of tax								(21)		23		28
Total revenue from continuing operations								14,877		17,442		50,259
(b) Total income
									LGC and		Total continuing
			LGR		LGIM1,2		LGI		other3		operations
For the six month period to 30 June 2021			£m		£m		£m		£m		£m
Internal income			-		80		-		(80)		-
External income			(13)		17,891		1,003		(3,983)		14,898
Total income			(13)		17,971		1,003		(4,063)		14,898
									LGC and		Total continuing
			LGR		LGIM1,2		LGI		other3		operations
For the six month period to 30 June 2020			£m		£m		£m		£m		£m
Internal income			-		102		-		(102)		-
External income			6,530		(1,812)		1,016		11,685		17,419
Total income			6,530		(1,710)		1,016		11,583		17,419
									LGC and		Total continuing
			LGR		LGIM1,2		LGI		other3		operations
For the year ended 31 December 2020			£m		£m		£m		£m		£m
Internal income			-		201		-		(201)		-
External income			15,057		20,878		1,799		12,497		50,231
Total income			15,057		21,079		1,799		12,296		50,231
1. LGIM internal income relates to investment management services provided to other segments.
2. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds.
3. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 44

2.08 Segmental analysis (continued)

(ii) Revenue (continued)

(c) Fees from fund management and investment contracts

					LGC and other2	Total continuing
		LGR1	LGIM1	LGI		operations
For the six month period to 30 June 2021		£m	£m	£m	£m	£m
Investment contracts		46	-	-	-	46
Investment management fees		-	488	-	(80)	408
Transaction fees		-	9	-	-	9
Total fees from fund management and investment contracts 3		46	497	-	(80)	463
					LGC and other2	Total continuing
		LGR1	LGIM1	LGI		operations
For the six month period to 30 June 2020		£m	£m	£m	£m	£m
Investment contracts		38	-	-	-	38
Investment management fees		-	467	-	(96)	371
Transaction fees		-	9	-	-	9
Total fees from fund management and investment contracts 3		38	476	-	(96)	418
					LGC and other2	Total continuing
		LGR1	LGIM1	LGI		operations
For the year ended 31 December 2020		£m	£m	£m	£m	£m
Investment contracts		79	-	1	-	80
Investment management fees		-	954	-	(188)	766
Transaction fees		-	27	-	-	27
Total fees from fund management and investment contracts 3		79	981	1	(188)	873
1. LGR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in segmentation.
2. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.
3. Fees from fund management and investment contracts are a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a).

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosures on performance and Release from operations    Page 45

2.08 Segmental analysis (continued)

(ii) Revenue (continued)

(d) Other operational income from contracts with customers

							LGC and other	Total continuing
				LGR	LGIM	LGI		operations
For the six month period to 30 June 2021				£m	£m	£m	£m	£m
House building				-	-	-	651	651
Professional services fees				1	-	49	-	50
Insurance broker				-	-	2	-	2
Total other operational income from contracts with customers1				1	-	51	651	703
							LGC and other	Total continuing
				LGR	LGIM	LGI		operations
For the six month period to 30 June 2020				£m	£m	£m	£m	£m
House building				-	-	-	220	220
Professional services fees				1	1	33	-	35
Insurance broker				-	-	13	-	13
Total other operational income from contracts with customers1				1	1	46	220	268
							LGC and other	Total continuing
				LGR	LGIM	LGI		operations
For the year ended 31 December 2020				£m	£m	£m	£m	£m
House building				-	-	-	748	748
Professional services fees				1	-	83	-	84
Insurance broker				-	-	16	-	16
Total other operational income from contracts with customers1				1	-	99	748	848
1. Total other operational income from contracts with customers is a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a) and excludes the share of profit/loss from associates and joint ventures, and the gain on acquisition and disposal of subsidiaries, associates and joint ventures.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 46

3.01 Consolidated Income Statement

		6 months		6 months		Full year
		2021		2020		2020
For the six month period to 30 June 2021	Notes	£m		£m		£m
Income
Gross written premiums		4,263		5,497		12,545
Outward reinsurance premiums		(1,605)		(1,303)		(3,187)
Net change in provision for unearned premiums		35		10		12
Net premiums earned		2,693		4,204		9,370
Fees from fund management and investment contracts		463		418		873
Investment return		11,018		12,552		39,168
Other operational income		724		245		820
Total income	2.08	14,898		17,419		50,231
Expenses
Claims and change in insurance contract liabilities		540		8,366		17,768
Reinsurance recoveries		(1,313)		(1,957)		(3,601)
Net claims and change in insurance contract liabilities		(773)		6,409		14,167
Change in investment contract liabilities		12,232		9,190		31,410
Acquisition costs		436		438		617
Finance costs		157		155		305
Other expenses		1,445		885		2,233
Total expenses		13,497		17,077		48,732
Profit before tax		1,401		342		1,499
Tax expense attributable to policyholder returns		(81)		(81)		(69)
Profit before tax attributable to equity holders		1,320		261		1,430
Total tax expense		(339)		(88)		(218)
Tax expense attributable to policyholder returns		81		81		69
Tax expense attributable to equity holders	4.05	(258)		(7)		(149)
Profit after tax from continuing operations	2.08	1,062		254		1,281
Profit after tax from discontinued operations1		-		19		290
Profit for the period		1,062		273		1,571
Attributable to:
Non-controlling interests		(3)		(17)		(36)
Equity holders		1,065		290		1,607
Dividend distributions to equity holders during the period	4.03	754		754		1,048
Dividend distributions to equity holders proposed after the period end	4.03	309		294		754
		p		p		p
Total basic earnings per share2	2.07	17.78		4.89		27.00
Total diluted earnings per share2	2.07	16.96		4.63		25.60
Basic earnings per share derived from continuing operations2	2.07	17.78		4.57		22.11
Diluted earnings per share derived from continuing operations2	2.07	16.96		4.33		20.98
1. In 2020, discontinued operations include the results of the Mature Savings division, the sale of which completed on 7 September 2020.
2. All earnings per share calculations are based on profit attributable to equity holders of the company.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 47

3.02 Consolidated Statement of Comprehensive Income

	6 months	6 months	Full year
	2021	2020	2020
For the six month period to 30 June 2021	£m	£m	£m
Profit for the period	1,062	273	1,571
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes	116	(146)	(168)
Tax on actuarial gains/(losses) on defined benefit pension schemes	(20)	45	48
Total items that will not be reclassified subsequently to profit or loss	96	(101)	(120)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations	(11)	56	2
Movement in cross-currency hedge	6	75	7
Tax on movement in cross-currency hedge	(4)	(11)	(4)
Movement in financial investments designated as available-for-sale	(8)	(8)	2
Tax on movement in financial investments designated as available-for-sale	1	1	-
Total items that may be reclassified subsequently to profit or loss	(16)	113	7
Other comprehensive income/(expense) after tax	80	12	(113)
Total comprehensive income for the period	1,142	285	1,458
Total comprehensive income for the period from:
Continuing operations	1,142	266	1,168
Discontinued operations	-	19	290
Total comprehensive income/(expense) for the period attributable to:
Non-controlling interests	(3)	(17)	(36)
Equity holders	1,145	302	1,494

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 48

3.03 Consolidated Balance Sheet

		As at	As at	As at
		30 Jun 2021	30 Jun 20201	31 Dec 2020
	Notes	£m	£m	£m
Assets
Goodwill		68	68	68
Purchased interest in long term businesses and other intangible assets		377	221	329
Deferred acquisition costs		46	49	47
Investment in associates and joint ventures accounted for using the equity method		314	328	288
Property, plant and equipment		322	291	274
Investment property	4.04	9,080	8,041	8,475
Financial investments	4.04	519,762	513,602	526,057
Reinsurers' share of contract liabilities		6,947	6,694	6,939
Deferred tax assets	4.05	12	10	5
Current tax assets		612	508	634
Receivables and other assets		14,331	15,986	9,429
Assets of operations classified as held for sale		-	23,968	-
Cash and cash equivalents		16,397	21,700	18,020
Total assets		568,268	591,466	570,565
Equity
Share capital	4.06	149	149	149
Share premium	4.06	1,011	1,003	1,006
Employee scheme treasury shares		(90)	(76)	(75)
Capital redemption and other reserves		162	302	198
Retained earnings		8,620	7,137	8,224
Attributable to owners of the parent		9,852	8,515	9,502
Restricted Tier 1 convertible notes	4.07	495	495	495
Non-controlling interests	4.08	(34)	34	(31)
Total equity		10,313	9,044	9,966
Liabilities
Non-participating insurance contract liabilities		86,339	83,504	89,029
Non-participating investment contract liabilities		358,613	327,380	343,543
Core borrowings	4.09	4,542	4,651	4,558
Operational borrowings	4.10	1,138	1,195	1,055
Provisions	4.14	1,113	1,336	1,288
Deferred tax liabilities	4.05	277	237	207
Current tax liabilities		57	-	61
Payables and other financial liabilities	4.12	80,785	101,665	91,942
Other liabilities		640	540	756
Net asset value attributable to unit holders		24,451	33,883	28,160
Liabilities of operations classified as held for sale		-	28,031	-
Total liabilities		557,955	582,422	560,599
Total equity and liabilities		568,268	591,466	570,565
1. Following a change in accounting policy during the second half of 2020 for LGIA universal life and annuity reserves, a number of balance sheet items have been restated, notably financial investments, reinsurers' share of contract liabilities, capital redemption and other reserves, non-participating insurance contracts liabilities and deferred tax liabilities. The overall net impact on the group's retained earnings as at 30 June 2020 is a reduction of £316m. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 49

3.04 Condensed Consolidated Statement of Changes in Equity

			Employee	Capital		Equity	Restricted
			scheme	redemption		attributable	Tier 1	Non-
	Share	Share	treasury	and other	Retained	to owners	convertible	controlling	Total
For the six month period to 30 June 2021	capital	premium	shares	reserves1	earnings	of the parent	notes	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2021	149	1,006	(75)	198	8,224	9,502	495	(31)	9,966
Total comprehensive income for the period	-	-	-	(16)	1,161	1,145	-	(3)	1,142
Options exercised under share option schemes	-	5	-	-	-	5	-	-	5
Net movement in employee scheme treasury shares	-	-	(15)	(15)	(5)	(35)	-	-	(35)
Dividends	-	-	-	-	(754)	(754)	-	-	(754)
Coupon payable in respect of restricted Tier 1 convertible notes net of tax relief2	-	-	-	-	(11)	(11)	-	-	(11)
Movement in third party interests	-	-	-	-	-	-	-	-	-
Currency translation differences	-	-	-	(5)	5	-	-	-	-
As at 30 June 2021	149	1,011	(90)	162	8,620	9,852	495	(34)	10,313
1. Capital redemption and other reserves as at 30 June 2021 include share-based payments £86m, foreign exchange £27m, capital redemption £17m, hedging reserves £37m and available-for-sale reserves £(5)m.
2. See Note 4.07 for details.

			Employee	Capital		Equity	Restricted
			scheme	redemption		attributable	Tier 1	Non-
	Share	Share	treasury	and other	Retained	to owners	convertible	controlling	Total
For the six month period to 30 June 2020	capital	premium	shares	reserves1	earnings	of the parent	notes	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2020	149	1,000	(65)	250	8,033	9,367	-	55	9,422
Change in accounting policy2	-	-	-	(45)	(284)	(329)	-	-	(329)
Restated as at 1 January 2020	149	1,000	(65)	205	7,749	9,038	-	55	9,093
Total comprehensive income for the period	-	-	-	113	189	302	-	(17)	285
Options exercised under share option schemes	-	3	-	-	-	3	-	-	3
Net movement in employee scheme treasury shares	-	-	(11)	(6)	11	(6)	-	-	(6)
Dividends	-	-	-	-	(754)	(754)	-	-	(754)
Restricted Tier 1 convertible notes	-	-	-	-	-	-	495	-	495
Movement in third party interests	-	-	-	-	-	-	-	(4)	(4)
Currency translation differences	-	-	-	26	(26)	-	-	-	-
Changes in accounting policy 2	-	-	-	(36)	(32)	(68)	-	-	(68)
Restated as at 30 June 2020	149	1,003	(76)	302	7,137	8,515	495	34	9,044
1. Capital redemption and other reserves as at 30 June 2020 include share-based payments £79m, foreign exchange £150m, capital redemption £17m, hedging reserves £96m and available-for-sale reserves £(40)m.
2. Changes in accounting policy represents the impact on capital redemption and other reserves and retained earnings of the change in accounting policy in 2020 related to LGIA universal life and annuity reserves, described in Note 4.01.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 50

3.04 Condensed Consolidated Statement of Changes in Equity (continued)

			Employee	Capital		Equity	Restricted
			scheme	redemption		attributable	Tier 1	Non-
	Share	Share	treasury	and other	Retained	to owners	convertible	controlling	Total
For the year ended 31 December 2020	capital	premium	shares	reserves1	earnings	of the parent	notes	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2020	149	1,000	(65)	205	7,749	9,038	-	55	9,093
Total comprehensive income for the year	-	-	-	7	1,487	1,494	-	(36)	1,458
Options exercised under share option schemes	-	6	-	-	-	6	-	-	6
Net movement in employee scheme treasury shares	-	-	(10)	16	12	18	-	-	18
Dividends	-	-	-	-	(1,048)	(1,048)	-	-	(1,048)
Coupon payable in respect of restricted Tier 1 convertible notes net of tax relief	-	-	-	-	(6)	(6)	-	-	(6)
Restricted Tier 1 convertible notes	-	-	-	-	-	-	495	-	495
Movement in third party interests	-	-	-	-	-	-	-	(50)	(50)
Currency translation differences	-	-	-	(30)	30	-	-	-	-
As at 31 December 2020	149	1,006	(75)	198	8,224	9,502	495	(31)	9,966
1. Capital redemption and other reserves as at 31 December 2020 include share-based payments £101m, foreign exchange £43m, capital redemption £17m, hedging reserves £35m and available-for-sale reserves £2m.

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Primary Financial Statements   Page 51

3.05 Consolidated Statement of Cash Flows

		6 months	6 months	Full year
		2021	2020	2020
For the six month period to 30 June 2021	Notes	£m	£m	£m
Cash flows from operating activities
Profit for the period		1,062	273	1,571
Adjustments for non cash movements in net profit for the period
Net gains on financial investments and investment property		(5,227)	(6,969)	(28,530)
Investment income		(5,790)	(4,578)	(9,761)
Interest expense		157	179	337
Tax expense		339	(17)	144
Other adjustments		44	18	(12)
Net decrease/(increase) in operational assets
Investments held for trading or designated as fair value through profit or loss		5,804	6,032	6,519
Investments designated as available-for-sale		15	(35)	1,072
Other assets		(4,931)	(8,098)	(2,445)
Net increase/(decrease) in operational liabilities
Insurance contracts		(2,615)	5,187	11,607
Investment contracts		15,069	6,789	20,855
Other liabilities		(10,114)	5,537	(5,900)
Net (decrease)/increase in held for sale net liabilities		-	(1,181)	-
Cash (utilised in)/from operations		(6,187)	3,137	(4,543)
Interest paid		(160)	(127)	(301)
Interest received		3,368	2,296	5,190
Rental income		184	173	384
Tax paid1		(276)	(279)	(554)
Dividends received		2,307	2,284	4,125
Net cash flows (utilised in)/from operations		(764)	7,484	4,301
Cash flows from investing activities
Acquisition of plant, equipment, intangibles and other assets		(137)	(43)	(198)
Disposal of plant, equipment, intangibles and other assets		2	1	34
Acquisition of operations, net of cash acquired		-	1	1
Disposal of operations, net of cash transferred		-	-	(278)
Investment in joint ventures and associates		(2)	-	(16)
Net cash flows utilised from investing activities		(137)	(41)	(457)
Cash flows from financing activities
Dividend distributions to ordinary equity holders during the period	4.03	(754)	(754)	(1,048)
Coupon payment in respect of restricted Tier 1 convertible notes, gross of tax		(14)	-	(7)
Options exercised under share option schemes	4.06	5	3	6
Treasury shares purchased for employee share schemes		(24)	(22)	(23)
Payment of lease liabilities		(17)	(18)	(37)
Proceeds from borrowings		252	869	1,086
Repayment of borrowings		(162)	(237)	(501)
Proceeds from issuance of restricted Tier 1 convertible notes, net of associated expenses		-	495	495
Net cash flows (utilised in)/from financing activities		(714)	336	(29)
Net (decrease)/increase in cash and cash equivalents		(1,615)	7,779	3,815
Exchange (losses)/gains on cash and cash equivalents		(8)	26	(28)
Cash and cash equivalents at 1 January (before reallocation of held for sale cash)		18,020	14,233	14,233
Total cash and cash equivalents		16,397	22,038	18,020
Less: cash and cash equivalents of operations classified as held for sale		-	(338)	-
Cash and cash equivalents at 30 June/31 December		16,397	21,700	18,020
1. Tax comprises UK corporation tax paid of £155m (H1 20: £203m; FY 20: £417m), withholding tax of £118m (H1 20: £95m; FY 20: £137m) and overseas corporate tax of £3m (H1 20: refund of £19m; FY 20: £nil).

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 52

4.01 Basis of preparation

The group financial information for the six months ended 30 June 2021 has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting'. The group's financial information has also been prepared in line with the accounting policies which the group expects to adopt for the 2021 year end. These policies are consistent with the principal accounting policies which were set out in the group's 2020 consolidated financial statements, except where changes have been outlined below in "New standards, interpretations and amendments to published standards that have been adopted by the group". These are consistent with IFRSs iss ued by the International Accounting Standards Board as adopted by the UK Endorsement Board for use in the United Kingdom.

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 2020 financial statements, except as disclosed in Note 2.03 and Note 4.14.

The results for the half year ended 30 June 2021 are unaudited but have been reviewed by KPMG LLP. The interim results do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The results from the full year 2020 have been taken from the group's 2020 Annual Report and Accounts. Therefore, these interim accounts should be read in conjunction with the 2020 Annual Report and Accounts that have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU), and with the requirements of the Companies Act 2006 applicable to companies reporting under IFRS. KPMG LLP reported on the 2020 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 2020 Annual Report and Accounts has been filed with the Registrar of Companies. 

Key technical terms and definitions

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

Alternative performance measures

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

Tax attributable to policyholders and equity holders

The total tax expense shown in the group's Consolidated Income Statement includes income tax borne by both policyholders and shareholders. This has been split between tax attributable to policyholders' returns and equity holders' profits. Policyholder tax comprises the tax suffered on policyholder investment returns, while shareholder tax is corporation tax charged on shareholder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes.

(a) Impact of changes in accounting policy in 2020

Legal & General Insurance America (LGIA) universal life and annuity liabilities

In 2020, the group changed its accounting policy for universal life and annuity liabilities on business transacted by its US subsidiaries, which was previously based on recognised actuarial methods reflecting US GAAP. From 1 July 2020, the group has calculated such liabilities on the basis of current information using the gross premium valuation method, which is in line with how similar products are accounted for in other parts of the business.

In addition, as at 1 July 2020 the group reclassified £ 1,621 m of financial investments from designated as available-for-sale and amortised cost to designated as fair value through profit or loss. This represented a further change in accounting policy permitted by IFRS 4, 'Insurance Contracts'.

The above voluntary changes in accounting policy were applied in 2020 retrospectively, with prior year retained earnings adjusted accordingly. As a consequence of these changes, the Consolidated Balance Sheet as at 30 June 2020 has now also been restated, and the impact on each line item is shown in the table below:

	As reported at 30 June 2020	Adjustments		As restated at 30 June 2020
	£m	£m		£m
Financial investments	513,584	18		513,602
Reinsurers' share of contract liabilities	6,530	164		6,694
Non-participating insurance contract liabilities	82,792	712		83,504
Deferred tax liabilities	370	(133)		237
Capital redemption and other reserves	383	(81)		302
Retained earnings	7,453	(316)		7,137

Legal & General Group Plc

Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 53

4.01 Basis of preparation (continued)

(b) Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position in the current economic climate are set out in this Interim Management Report. The financial position of the group, its cash flows, liquidity position and borrowing facilities as at 30 June 2021 are described in the IFRS Primary Financial Statements and IFRS Disclosure Notes. Since the balance sheet date, Legal & General Group Plc (the company) has called at par £300m of 10% dated subordinated notes, which were issued in 2009. Principal risks and uncertainties are detailed on pages 28 to 29.

The directors have made an assessment of the group's going concern, considering both the group's current performance and outlook for a period of at least, but not limited to, 12 months from the date of approval of the interim financial information, which takes account of the current and future impact of the Covid-19 pandemic, using the information available up to the date of issue of this Interim Management Report.

The group manages and monitors its capital and liquidity, and various stresses are applied to those positions to understand potential impacts from market downturns. Our key sensitivities and the impacts on our capital position from a range of stresses is disclosed on page 82. These stresses, including the additional considerations and stresses applied in response to Covid-19, do not give rise to any material uncertainties over the ability of the group to continue as a going concern. Based upon the available information, the directors consider that the group has the plans and resources to manage its business risks successfully and that it remains financially strong and well diversified.

Having reassessed the principal risks and uncertainties (both financial and operational) in light of Covid-19 and the current economic climate, as detailed on pages 28 to 29, the directors are confident that the group and company will have sufficient funds to continue to meet their liabilities as they fall due for a period of, but not limited to, 12 months from the date of approval of this Interim Management Report and therefore have considered it appropriate to adopt the going concern basis of accounting when preparing the interim financial information.

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

The group has applied the following amendments for the first time in its six months reporting period commencing 1 January 2021.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate Benchmark Reform Phase 2

These amendments, issued in August 2020, address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. In particular, they offer practical expedients, under certain conditions, when a financial contract is modified due to a change resulting directly from IBOR reform. They also allow a series of exemptions from the current rules around hedge accounting. The amendments will be considered as new interest rate benchmarks are introduced. New disclosure requirements have also been introduced as part of Phase 2 on the nature and extent of risks to which the group is exposed arising from financial instruments subject to IBOR reform, how such risks are managed and the group's progress in completing its transition to alternative benchmark rates.

(d) Future accounting developments

IFRS 17 - Insurance Contracts

IFRS 17, 'Insurance Contracts' was originally issued in May 2017 and subsequent amendments were issued in June 2020. The standard is expected to be effective for annual periods beginning on or after 1 January 2023. Adoption by the group remains subject to endorsement for use in the UK. The standard provides a comprehensive approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure, and will be applied retrospectively, subject to the transitional options provided for in the standard. The group project to implement the standard is making substantial progress in ensuring technical compliance and in finalising the build of the required systems and operational capabilities.

IFRS 9 - Financial Instruments

In July 2014 the IASB issued IFRS 9, 'Financial Instruments', which is effective for annual periods beginning on or after 1 January 2018. The standard includes new principles around classification and measurement of financial instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new requirements on hedge accounting. The group qualifies for, and is making use of an option provided by the IASB in 'Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts' to allow deferral of implementation of IFRS 9 until adoption of IFRS 17 or 1 January 2023, whichever is the earlier. The group project to implement the standard has progressed in the development of the expected credit loss model   and transitional requirements. Work will continue throughout the remainder of 2021 to develop the policy and operational changes needed for the implementation of the standard.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 54

4.02 Post balance sheet events

LGIM Partnership with State Street

On 14 July 2021, the group announced that Legal & General Investment Management (LGIM) was extending its existing partnership with State Street, to increase the use of Charles River technology across the front office and to deliver middle office services going forward. The agreement is aligned to LGIM's strategy of building a market-leading global operating model, by enabling the division to offer a more automated, consistent and seamless business experience to its clients from all over the world.

As a result of this announcement, in the second half of the year the group will recognise a provision in relation to implementing this restructuring, in 'Investment and other variances'. The associated costs, the estimation of which is subject to ongoing review, are not expected to have a material impact on the group's results for the year ended 31 December 2021.

Subordinated Note Redemption

In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. Following the notification on 26 May 2021 of the group's intention to redeem these notes in full, they were called at par on 23 July 2021.

4.03 Dividends and appropriations

		Dividend	Per share1	Dividend	Per share1	Dividend	Per share1
		6 months	6 months	6 months	6 months	Full year	Full year
		2021	2021	2020	2020	2020	2020
		£m	p	£m	p	£m	p
Ordinary dividends paid and charged to equity in the period:
- Final 2019 dividend paid in June 2020		-	-	754	12.64	754	12.64
- Interim 2020 dividend paid in September 2020		-	-	-	-	294	4.93
- Final 2020 dividend paid in June 2021		754	12.64	-	-	-	-
Total dividends		754	12.64	754	12.64	1,048	17.57
1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
Subsequent to 30 June 2021, the directors declared an interim dividend of 5.18 pence per ordinary share. This dividend will be paid on 20 September 2021. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2021 and is not included as a liability in the Consolidated Balance Sheet as at 30 June 2021.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 55

4.04 Financial investments and investment property

				30 Jun	30 Jun	31 Dec
				2021	2020	2020
				£m	£m	£m
Equities1				207,803	189,798	189,089
Debt securities2,3,6				278,858	301,059	295,660
Derivative assets4				15,449	25,207	24,631
Loans5,6				17,652	19,035	16,677
Financial investments				519,762	535,099	526,057
Investment property				9,080	9,334	8,475
Total financial investments and investment property				528,842	544,433	534,532
Less: financial investments and investment property of operations classified as held for sale				-	(22,790)	-
Financial investments and investment property				528,842	521,643	534,532
1. Equity securities include investments in unit trusts of £15,681m (30 June 2020: £13,615m; 31 December 2020: £13,215m).
2. Debt securities include accrued interest of £1,389m (30 June 2020: £1,552m; 31 December 2020: £1,434m).
3. A detailed analysis of debt securities to which shareholders are directly exposed is disclosed in Note 7.03.
4. Derivatives are used for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities of £18,249m (30 June 2020: £27,550m; 31 December 2020: £23,208m).
5. Loans include £149m (30 June 2020: £122m; 31 December 2020: £131m) of loans valued at amortised cost.
6. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the half year 2020 balances for Debt securities, Accrued interest and Loans have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.

(a) Fair value hierarchy

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

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

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

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

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

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

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

The group's investment properties are valued by appropriately qualified external valuers using unobservable inputs, resulting in all investment property being classified as Level 3.

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

During 2020 the group enhanced the level of market data it uses to support the determination of the observability of valuation inputs, and this has increased the sensitivity of the levelling assessment to trading volumes, which in turn has increased the number of debt securities transferring between Level 1 and Level 2. At 30 June 2021 debt securities totalling £9,311m transferred from Level 2 to Level 1 in the fair value hierarchy, primarily due to suppressed trading volumes at 31 December 2020.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 56

4.04 Financial investments and investment property (continued)

(a ) Fair value hierarchy (continued)

					Total	Level 1	Level 2	Level 3
For the six month period to 30 June 2021					£m	£m	£m	£m
Shareholder and Non-profit non-unit linked
Equity securities					3,088	1,821	4	1,263
Debt securities					82,699	34,034	26,375	22,290
Derivative assets					14,019	2	14,017	-
Loans at fair value1					4,152	-	4,152	-
Investment property					5,103	-	-	5,103
Total Shareholder and Non-profit non-unit linked					109,061	35,857	44,548	28,656
With-profits
Equity securities					-	-	-	-
Debt securities					-	-	-	-
Derivative assets					-	-	-	-
Loans at fair value					-	-	-	-
Investment property					-	-	-	-
Total With-profits					-	-	-	-
Unit linked
Equity securities					204,715	204,055	23	637
Debt securities					196,159	146,780	49,029	350
Derivative assets					1,430	89	1,341	-
Loans at fair value					13,351	-	13,351	-
Investment property					3,977	-	-	3,977
Total Unit linked					419,632	350,924	63,744	4,964
Total financial investments and investment property at fair value1					528,693	386,781	108,292	33,620
1. This table excludes loans (including accrued interest) of £149m, which are held at amortised cost.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 57

4.04 Financial investments and investment property (continued)

(a ) Fair value hierarchy (continued)

					Total	Level 1	Level 2	Level 3
For the six month period to 30 June 2020					£m	£m	£m	£m
Shareholder and Non-profit non-unit linked
Equity securities					2,812	1,662	-	1,150
Debt securities					81,337	11,155	49,347	20,835
Derivative assets					22,388	6	22,382	-
Loans at fair value 1					1,878	-	1,878	-
Investment property					4,250	-	-	4,250
Total Shareholder and Non-profit non-unit linked					112,665	12,823	73,607	26,235
With-profits
Equity securities					2,846	2,664	-	182
Debt securities					4,960	1,542	3,418	-
Derivative assets					295	3	292	-
Loans at fair value					450	-	450	-
Investment property					455	-	-	455
Total With-profits					9,006	4,209	4,160	637
Unit linked
Equity securities					184,140	183,466	21	653
Debt securities					214,762	153,360	61,116	286
Derivative assets					2,524	174	2,350	-
Loans at fair value					16,585	-	16,585	-
Investment property					4,629	-	-	4,629
Total Unit linked					422,640	337,000	80,072	5,568
Total financial investments and investment property at fair value1,2,3					544,311	354,032	157,839	32,440
1. This table excludes loans (including accrued interest) of £122m, which are held at amortised cost.
2. This table includes financial investments of £21,497m and investment property of £1,293m relating to assets of operations classified as held for sale.
3. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the half year 2020 balances for Debt securities and Accrued interest have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 58

4.04 Financial investments and investment property (continued)

(a ) Fair value hierarchy (continued)

					Total	Level 1	Level 2	Level 3
For the year ended 31 December 2020					£m	£m	£m	£m
Shareholder and Non-profit non-unit linked
Equity securities					3,086	1,905	16	1,165
Debt securities					85,502	29,898	33,935	21,669
Derivative assets					20,936	4	20,932	-
Loans at fair value 1					4,117	-	4,117	-
Investment property					4,672	-	-	4,672
Total Shareholder and Non-profit non-unit linked					118,313	31,807	59,000	27,506
With-profits
Equity securities					-	-	-	-
Debt securities					-	-	-	-
Derivative assets					-	-	-	-
Loans at fair value					-	-	-	-
Investment property					-	-	-	-
Total With-profits					-	-	-	-
Unit linked
Equity securities					186,003	185,345	22	636
Debt securities					210,158	168,155	41,715	288
Derivative assets					3,695	224	3,471	-
Loans at fair value					12,429	-	12,429	-
Investment property					3,803	-	-	3,803
Total Unit linked					416,088	353,724	57,637	4,727
Total financial investments and investment property at fair value1					534,401	385,531	116,637	32,233
1. This table excludes loans (including accrued interest) of £131m, which are held at amortised cost.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 59

4.04 Financial investments and investment property (continued)

(b ) Level 3 assets measured at fair value

Level 3 assets, where modelling techniques are used, comprise property, unquoted securities, untraded debt securities and securities where unquoted prices are provided by a single broker. Unquoted securities include suspended securities, investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans, income strips and lifetime and retirement interest only mortgages.

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

The 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.

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

Equity securities

Level 3 equity securities amount to £1,900m (30 June 2020: £1,985m; 31 December 2020: £1,801m), of which the majority is made up of holdings in investment property vehicles and private investment funds. They are valued at the proportion of the group's holding of the Net Asset Value reported by the investment vehicles. Other equity securities are valued by a number of third party specialists using a range of techniques which are often dependent on the maturity of the underlying investment but can also depend of the characteristics of individual investments. Such techniques include transaction values underpinned by analysis of milestone achievement, and cash runway for early/start-up stage investments, discounted cash flow models for investments at the next stage of development and earnings multiples for more mature investments.

Other financial investments

Lifetime mortgage (LTM) loans amount to £6,325m (30 June 2020: £5,478m; 31 December 2020: £6,036m). They are valued using a discounted cash flow model by projecting best-estimate net asset proceeds and discounting using rates inferred from current LTM loan pricing. The inferred illiquidity premiums for the majority of the portfolio range between 100 and 350bps. This ensures the value of loans at outset is consistent with the purchase price of the loan, and achieves consistency between new and in-force loans. The mortgages include a no negative equity guarantee (NNEG) to borrowers. This ensures that if there is a shortfall between the sale proceeds of the house and the outstanding loan balance on redemption of the loan, the value of the loan will be reduced by this amount. The NNEG on loan redemption is valued as a series of put options, which we calculate using a variant of the Black-Scholes formula. Key assumptions in the valuation of lifetime mortgages include short-term and long-term property growth rates, property index volatility, voluntary early repayments and longevity assumptions. The valuation as at 30 June 2021 reflects a long-term property growth rate assumption of RPI + 0.1%, after allowing for the effects of dilapidation. The values of the properties collateralising the LTM loans are updated from the date of the last property valuation to the valuation date by indexing using UK regional house price indices.

Private credit loans (including commercial real estate loans) amount to £12,146m (30 June 2020: £11,661m; 31 December 2020: £11,889m). Their valuation is determined by discounted future cash flows which are based on the yield curve of the LGIM approved comparable bonds and the initial spread, both of which are agreed by IHS Markit who also provide an independent valuation of comparable bonds. Unobservable inputs that go into the determination of comparators include: rating, sector, sub-sector, performance dynamics, financing structure and duration of investment. Existing private credit investments, which were executed back as far as 2011, are subject to a range of interest rate formats, although the majority are fixed rate. The weighted average duration of the portfolio is 10.9 years, with a weighted average life of 13.1 years. Maturities in the portfolio currently extend out to 2064. The private credit portfolio of assets is not externally rated but has internal ratings assigned by an independent credit team in line with internally developed methodologies. These credit ratings range from AAA to BB.

Private placements held by the US business amount to £2,090m (30 June 2020: £1,870m; 31 December 2020: £2,049m). They are valued using a pricing matrix comprised of a public spread matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to calculate the discounted cash flows and establish a market value for each investment grade private placement. The valuation as at 30 June 2021 reflects illiquidity premiums between 10 and 70bps.

Commercial mortgage loans amount to £408m (30 June 2020: £469m; 31 December 2020: £419m) and are determined by incorporating credit risk for performing loans at the portfolio level and for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk free rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable inputs. The valuation as at 30 June 2021 reflects illiquidity premiums between 20 and 40bps.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 60

4.04 Financial investments and investment property (continued)

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

Income strip assets amount to £1,527m (30 June 2020: £1,400m; 31 December 2020: £1,449m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break terms, lease expiries and underlying residual value of the property. The valuation as at 30 June 2021 reflects equivalent yield ranges between 2% and 6% and estimated rental values (ERV) between £6 and £337 per sq.ft.
Other debt securities which are not traded in an active market have been valued using third party or counterparty valuations. These prices are considered to be unobservable due to infrequent market transactions.
Investment property
Level 3 investment property amounting to £9,080m (30 June 2020: £9,334m; 31 December 2020: £8,475m) is valued with the involvement of external valuers. All property valuations are carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value, including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market knowledge and professional judgement and not rely only upon historic market sentiment based on historic transactional comparables.
The valuation of investment properties also include an income approach that is based on current rental income plus anticipated uplifts, where the uplift and discount rates are derived from rates implied by recent market transactions. These inputs are deemed unobservable. The valuation as at 30 June 2021 reflects equivalent yield ranges between 2% and 18% and ERV between £1 and £356 per sq.ft.

The below table breaks down the investment property by sector.
					30 Jun	30 Jun1	31 Dec
					2021	2020	2020
					£m	£m	£m
Retail					962	1,052	999
Leisure					453	452	440
Distribution					1,277	994	1,142
Office space					3,832	3,641	3,703
Industrial and other commercial					1,803	1,422	1,588
Accommodation					753	480	603
Total					9,080	8,041	8,475
1. The 30 June 2020 investment property by sector excludes £1,293m relating to assets of operations classified as held for sale.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 61

4.04 Financial investments and investment property (continued)

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

		Other				Other
	Equity	financial	Investment		Equity	financial	Investment
	securities	investments	property	Total	securities	investments4	property	Total
	2021	2021	2021	2021	2020	2020	2020	2020
	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January	1,801	21,957	8,475	32,233	2,035	19,402	9,107	30,544
Total gains/(losses) for the period
- in other comprehensive income	-	(8)	-	(8)	-	(44)	-	(44)
- realised and unrealised gains/(losses) 1	98	(431)	249	(84)	(38)	924	(256)	630
Purchases/Additions	90	2,007	449	2,546	76	1,603	577	2,256
Sales/Disposals	(59)	(821)	(93)	(973)	(72)	(868)	(94)	(1,034)
Transfers into Level 3	-	8	-	8	44	5	-	49
Transfers out of Level 3	(30)	(44)	-	(74)	(61)	(26)	-	(87)
Foreign exchange rate movements 3	-	(28)	-	(28)	1	125	-	126
As at 30 June	1,900	22,640	9,080	33,620	1,985	21,121	9,334	32,440
						Other
					Equity	financial	Investment
					securities	investments	property	Total
					2020	2020	2020	2020
					£m	£m	£m	£m
As at 1 January					2,035	19,402	9,107	30,544
Total gains/(losses) for the year
- in other comprehensive income					-	2	-	2
- realised and unrealised gains/(losses) 1					(85)	1,367	(85)	1,197
Purchases/Additions					283	2,491	1,019	3,793
Sales/Disposals 2					(451)	(1,123)	(1,566)	(3,140)
Transfers into Level 3					52	-	-	52
Transfers out of Level 3					(32)	(87)	-	(119)
Foreign exchange rate movements					(1)	(95)	-	(96)
As at 31 December					1,801	21,957	8,475	32,233
1. Realised and unrealised gains/(losses) are recognised in investment return in the Consolidated Income Statement.
2. Disposals in 2020 include £926m of Investment property and £234m of Equity securities that relate to the sale of the Mature Savings business, which completed on 7 September 2020.
3. The 30 June 2020 balances have been restated to separately disclose foreign exchange rate movements from realised and unrealised gains/(losses).
4. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 1 January 2020 and 30 June 2020 balances for Other financial investments, as well as the realised gains for the period, have been restated to reflect the fair value of those assets at those reporting dates. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 62

4.04 Financial investments and investment property (continued)

(c) Effect of changes in 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.

Where material, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative assumptions. The table below shows the impact of applying these sensitivities on the fair value of Level 3 assets as at 30 June 2021. Further disclosure on how these sensitivities have been applied can be found in the descriptions following the table.

					Sensitivities
			Fair value 30 June 2021 £m		Positive impact £m	Negative impact £m
Lifetime mortgages			6,325		300	(380)
Private credit portfolios			14,644		824	(824)
Investment property			9,080		799	(826)
Other investments1			3,571		310	(292)
Total Level 3 assets			33,620		2,233	(2,322)
1. Other investments include Level 3 equity securities, income strip assets and other traded debt securities which are Level 3.
The sensitivities are not a function of sensitising a single variable relating to the valuation of the asset, but rather a function of flexing multiple factors often at individual asset level. The following sets out a number of key factors by asset type, and how they have been flexed to derive reasonable alternative valuations.
Lifetime mortgages
Key assumptions used in the valuation of Lifetime mortgage assets are listed in Note 4.04(b) and sensitivities are applied to each assumption to arrive at the overall sensitised values in the above table. The most significant sensitivity by value is +/-10% instant reduction in property valuation across the portfolio which, applied in isolation produces sensitised values of £212m and £(297)m.
Private credit portfolios
The sensitivity in the private credit portfolio has been determined through a method which estimates investment spread value premium differences as compared to the institutional investment market. Individual investment characteristics of each holding, such as credit rating and duration are used to determine spread differentials for the purposes of determining alternate values. Spread differentials are determined to be lower for highly rated and/or shorter duration assets as compared to lower rated and/or longer duration assets. A significant component of the spread differential is in relation to the selection of comparator bonds, which is the potential difference in spread of the basket of relevant comparators determined by respective investors. If we were to take an AA rated asset it may attract a spread differential of 15bps on the selection of comparator bonds as opposed to 40bps for a similar duration BBB rated asset. Applied in isolation the sensitivity used to reflect the spread in comparator bond selection results in sensitised values of £312m and £(312)m.
Investment property
Investment property holdings 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 (RICS). As such, sensitivities are calculated through a mixture of asset level and portfolio level methodologies which make reference to individual investment characteristics of the holding but do not flex individual assumptions used by the independent expert in valuing the holdings. Each method is applied individually and aggregated with equal weighting to determine the overall sensitivity determined for the portfolio. One method is similar to that used in the private credit portfolio as it determines the impact of an alternate property yield determined in reference to credit ratings, remaining term and other characteristics of each holding. In this methodology we would apply a lower yield sensitivity to a highly rated and/or shorter remaining term asset compared with a lower rated and/or longer remaining term asset. If we were to take an AA rated asset with remaining term of 25 years in normal market conditions this would lead to a 15bps yield flex (as opposed to a 35bps yield flex for a BBB rated asset with 30 year remaining term). The methodology which leads to the most significant sensitivity at the balance sheet date is related to an example in case law where it was found that an acceptable margin of error in a valuation dispute is 10% either way, subject to the valuation being undertaken with due care. If this sensitivity were to be taken without a weighting it would produce sensitised values of £637m and £(637)m.
It should be noted that some sensitivities described above are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 63

4.04 Financial investments and investment property (continued)

(d) Interest rate benchmark reform

In July of 2017, Andrew Bailey, the then chief executive of the FCA, announced in a speech that after 2021 the FCA would no longer compel panel banks to submit rate information to determine LIBOR, and encouraged the market to develop replacement benchmark rates. 

In the UK, LIBOR will be replaced by SONIA from the end of 2021, and in the US LIBOR is expected to be replaced by mid-2023. Euribor will remain but will be administered by EMMI (Euro Money Markets Institute).

The key challenges for the group arise in the following areas:

• all financial contracts that reference LIBOR will need to be amended;
• derivatives and assets on balance sheet will be exposed to changes in market value when the reference rate changes;
• discount rates that are based on risk free curves will change, which primarily impacts the Solvency II balance sheet, although due to the Credit Risk Adjustment and Transitional Measures on Technical Provisions, the expected impact is small;
• customers will need to understand the implications for the products that they hold, and agree to the necessary changes. 

To deal with these risks and to manage the groupwide conversion, the group initiated a project in 2019. To date, the group has made significant progress in identifying and addressing its investment exposures, remediating its contractual obligations, and has begun the necessary system upgrades to deal with the transition. LGIM is the reportable segment whose operations are most impacted regarding investments linked to LIBOR. Business as usual processes have been enhanced to include increased market surveillance on LIBOR trading, added record-keeping specific to LIBOR trades, increased client communications and additional complaints monitoring processes.

The largest shareholder exposures relate to LIBOR-linked derivates that are used for hedging the annuity business. In 2021 the group has stopped trading assets referenced to LIBOR (except in some very limited circumstances) and initiated a programme of replacing legacy assets denominated in LIBOR with new SONIA based positions. The unwinding of legacy exposure is well advanced across all asset types, with all GBP LIBOR interest rate swaps replaced. The group's plan is that, by the end of 2021, no GBP LIBOR risk remains on our balance sheet and non-GBP LIBOR exposure will continue to be unwound in line with the currency specific cessation dates.  

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 64

4.05 Tax

(a ) Tax charge in the Consolidated Income Statement The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows:
	Continuing		Continuing		Continuing
	operations	Total	operations	Total	operations	Total
	6 months	6 months	6 months	6 months	Full year	Full year
	2021	2021	2020	2020	2020	2020
	£m	£m	£m	£m	£m	£m
Profit before tax attributable to equity holders	1,320	1,320	261	285	1,430	1,788
Tax calculated at 19.00%	251	251	50	54	272	340
Adjusted for the effects of:
Recurring reconciling items:
Income not subject to tax	-	-	-	-	(1)	(1)
(Lower)/higher rate of tax on profits taxed overseas1	(32)	(32)	(49)	(49)	(111)	(111)
Non-deductible expenses	4	4	6	6	11	11
Differences between taxable and accounting investment gains	(9)	(9)	(2)	(2)	(10)	(10)
Adjustments for non-controlling interests	-	-	3	3	-	-
Foreign tax	-	-	2	2	1	1
Unrecognised tax losses	-	-	1	1	14	14
Non-recurring reconciling items:
Income not subject to tax	-	-	-	-	-	-
Non-deductible expenses	-	-	2	2	-	-
Adjustments in respect of prior years2	12	12	(14)	(14)	(42)	(42)
Impact of the revaluation of deferred tax balances3	32	32	7	7	16	16
Other	-	-	1	2	(1)	(1)
Tax attributable to equity holders	258	258	7	12	149	217
Equity holders' effective tax rate4	19.5%	19.5%	2.7%	4.2%	10.4%	12.1%
1. The lower rate of tax on overseas profits is principally driven by the 0% rate of taxation arising in our Bermudan reinsurance company, which provides the group with regulatory capital flexibility for both our PRT business and US term insurance business. This line also includes the impact of tax on our US operations which are taxed at 21%.
2. In line with normal practice, adjustments in respect of prior years relate to revisions of earlier estimates.
3. The Finance Act 2021 introduced a 25% tax rate on UK profits arising after 1 April 2023. As a result, UK deferred tax assets and liabilities previously recognised at 19% have been revalued to the appropriate tax rate which is expected to be in force when the deferred tax asset or liability is forecast to unwind. The group has spread the one-off forecasted tax impact of the revaluation of deferred taxes across the year as permitted by IAS 34, 'Interim Financial Reporting', recognising 50% of the forecasted impact as at 30 June 2021.
4. The tax charge attributable to equity holders has been calculated on a best estimate of the weighted average annual tax rate expected to apply for the year.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 65

4.05 Tax (continued)

(b ) Deferred tax
		30 Jun 2021	30 Jun 2020 1	31 Dec 2020
Deferred tax (liabilities)/assets		£m	£m	£m
Deferred acquisition expenses		88	50	85
- UK		-	(40)	-
- Overseas		88	90	85
Difference between the tax and accounting value of insurance contracts		(652)	(557)	(557)
- UK		(231)	(232)	(207)
- Overseas		(421)	(325)	(350)
Unrealised gains on investments		(22)	(57)	(11)
Excess of depreciation over capital allowances		23	18	18
Excess expenses		1	19	1
Accounting provisions and other		(37)	(59)	(48)
Trading losses2		320	257	289
Pension fund deficit		15	34	22
Acquired intangibles		(1)	(2)	(1)
Total net deferred tax liabilities		(265)	(297)	(202)
Less: net deferred tax liabilities of operations classified as held for sale3		-	70	-
Net deferred tax liabilities		(265)	(227)	(202)
Analysed by:
- UK deferred tax assets
		12	5	5
- UK deferred tax liabilities		(209)	(186)	(168)
- Overseas deferred tax assets		-	5	-
- Overseas deferred tax liabilities4		(68)	(51)	(39)
Net deferred tax liabilities		(265)	(227)	(202)
1. US deferred tax liabilities have been restated following the change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01. The impact to overseas deferred tax liabilities is a reduction of £133m as at 30 June 2020.
2. Trading losses include UK trade and US operating losses of £12m (H1 20: £5m; FY 20: £5m) and £308m (H1 20: £252m; FY 20: £284m) respectively.
3. Liabilities of operations classified as held for sale relate to the Mature Savings business, the sale of which completed on 7 September 2020.
4. Overseas deferred tax liability is wholly comprised of US balances as at 30 June 2021.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 66

4.06 Share capital and share premium

							Number of
Authorised share capital							shares	£m
At 30 June 2021, 30 June 2020 and 31 December 2020: ordinary shares of 2.5p each						9,200,000,000		230
							Share	Share
						Number of	capital	premium
Issued share capital, fully paid						shares	£m	£m
As at 1 January 2021					5,967,358,713		149	1,006
Options exercised under share option schemes					2,500,221		-	5
As at 30 June 2021					5,969,858,934		149	1,011
							Share	Share
						Number of	capital	premium
Issued share capital, fully paid						shares	£m	£m
As at 1 January 2020					5,965,349,607		149	1,000
Options exercised under share option schemes						1,225,772	-	3
As at 30 June 2020					5,966,575,379		149	1,003
Options exercised under share option schemes						783,334	-	3
As at 31 December 2020					5,967,358,713		149	1,006
There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.
The holders of the company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company.

4.07 Restricted Tier 1 convertible notes

On 24 June 2020, Legal & General Group Plc issued £500m of 5.625% perpetual restricted Tier 1 contingent convertible notes. The notes are callable at par between 24 March 2031 and 24 September 2031 (the First Reset Date) inclusive and every 5 years after the First Reset Date. If not called, the coupon from 24 September 2031 will be reset to the prevailing five year benchmark gilt yield plus 5.378%.

The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the issuer and mandatory cancellation is upon the occurrence of certain conditions. The Tier 1 notes are therefore treated as equity and coupon payments are recognised directly in equity when paid. During the period a coupon payment of £14m was made (H1 20: £nil; FY 20: £7m). The notes rank junior to all other liabilities and senior to equity attributable to owners of the parent. On the occurrence of certain conversion trigger events the notes are convertible into ordinary shares of the Issuer at the prevailing conversion price.

The notes are treated as restricted Tier 1 own funds for Solvency II purposes.

4.08 Non-controlling interests

Non-controlling interests represent third party interests in direct equity investments, including private equity, which are consolidated in the group's results.

As at 30 June 2021, non-controlling interests primarily represent third party ownership in Thorpe Park Holdings, a mixed residential/commercial retail space in which the group holds 50%.

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

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 67

4.09 Core borrowings

		Carrying		Carrying		Carrying
		amount	Fair value	amount	Fair value	amount	Fair value
		30 Jun	30 Jun	30 Jun	30 Jun	31 Dec	31 Dec
		2021	2021	2020	2020	2020	2020
		£m	£m	£m	£m	£m	£m
Subordinated borrowings
10% Sterling subordinated notes 2041 (Tier 2) 1		313	315	312	339	313	329
5.5% Sterling subordinated notes 2064 (Tier 2)		589	771	589	688	589	813
5.375% Sterling subordinated notes 2045 (Tier 2)		604	699	603	672	604	714
5.25% US Dollar subordinated notes 2047 (Tier 2)		621	703	693	733	628	703
5.55% US Dollar subordinated notes 2052 (Tier 2)		364	413	407	435	369	411
5.125% Sterling subordinated notes 2048 (Tier 2)		400	478	399	442	400	484
3.75% Sterling subordinated notes 2049 (Tier 2)		598	659	598	595	598	662
4.5% Sterling subordinated notes 2050 (Tier 2)		500	582	499	521	499	587
Client fund holdings of group debt (Tier 2) 2		(41)	(49)	(43)	(47)	(42)	(51)
Total subordinated borrowings		3,948	4,571	4,057	4,378	3,958	4,652
Senior borrowings
Sterling medium term notes 2031-2041		603	866	603	896	609	926
Client fund holdings of group debt 2		(9)	(12)	(9)	(13)	(9)	(12)
Total senior borrowings		594	854	594	883	600	914
Total core borrowings		4,542	5,425	4,651	5,261	4,558	5,566
1. These notes were subsequently called at par on 23 July 2021.
2. £50m (30 June 2020: £52m; 31 December 2020: £51m) of the group's subordinated and senior borrowings are held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.
The presented fair values of the group's core borrowings reflect quoted prices in active markets and they have been classified as Level 1 in the fair value hierarchy.

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 68

4.09 Core borrowings (continued)

Subordinated borrowings

10% Sterling subordinated notes 2041

In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. The notes were callable at par on 23 July 2021 and every five years thereafter. On 26 May 2021, notification was given of the group's intention to redeem these notes in full. Effective from the notification date, the notes were no longer treated as Tier 2 own funds for Solvency II purposes. The notes were subsequently called at par on 23 July 2021.

5.5% Sterling subordinated notes 2064

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

5.375% Sterling subordinated notes 2045

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

5.25% US Dollar subordinated notes 2047

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

5.55% US Dollar subordinated notes 2052

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

5.125% Sterling subordinated notes 2048

On 14 November 2018, Legal & General Group Plc issued £400m of 5.125% dated subordinated notes. The notes are callable at par on 14 November 2028 and every five years thereafter. If not called, the coupon from 14 November 2028 will be reset to the prevailing five year benchmark gilt yield plus 4.65% p.a. These notes mature on 14 November 2048.

3.75% Sterling subordinated notes 2049

On 26 November 2019, Legal & General Group Plc issued £600m of 3.75% dated subordinated notes. The notes are callable at par on 26 November 2029 and every five years thereafter. If not called, the coupon from 26 November 2029 will be reset to the prevailing five year benchmark gilt yield plus 4.05% p.a. These notes mature on 26 November 2049.

4.5% Sterling subordinated notes 2050

On 1 May 2020, Legal & General Group Plc issued £500m of 4.5% dated subordinated notes. The notes are callable at par on 1 November 2030 and every five years thereafter. If not called, the coupon from 1 November 2030 will be reset to the prevailing five year benchmark gilt yield plus 5.25% p.a. These notes mature on 1 November 2050.

All of the above subordinated notes are treated as Tier 2 own funds for Solvency II purposes unless stated otherwise.

Senior borrowings

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

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 69

4.10 Operational borrowings

	Carrying		Carrying		Carrying
	amount	Fair value	amount	Fair value	amount	Fair value
	30 Jun	30 Jun	30 Jun	30 Jun	31 Dec	31 Dec
	2021	2021	2020	2020	2020	2020
	£m	£m	£m	£m	£m	£m
Euro Commercial Paper	50	50	100	100	50	50
Non-recourse borrowings	1,064	1,064	1,000	1,000	941	941
Bank loans and overdrafts	2	2	104	104	54	54
Total operational borrowings 1	1,116	1,116	1,204	1,204	1,045	1,045
Less: liabilities of operations classified as held for sale	-	-	(30)	(30)	-	-
Operational borrowings	1,116	1,116	1,174	1,174	1,045	1,045
1. Unit linked borrowings with a carrying value of £22m (30 June 2020: £21m; 31 December 2020: £10m) are excluded from the analysis above as the risk is retained by policyholders. Operational borrowings including unit linked borrowings are £1,138m (30 June 2020: £1,195m; 31 December 2020: £1,055m).

Syndicated Credit Facility
As at 30 June 2021, the group had in place a £1bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2023. No amounts were outstanding at 30 June 2021.

4.11 Movement in core and operational borrowings
				30 Jun	30 Jun	31 Dec
				2021	2020	2020
				£m	£m	£m
As at 1 January				5,613	5,140	5,140
Cash movements:
- Proceeds from borrowings				269	869	1,022
- Repayment of borrowings				(162)	(237)	(501)
- Net (decrease)/increase in bank loans and overdrafts				(17)	59	64
Non-cash movements:
- Amortisation				1	1	2
- Foreign exchange rate movements				(19)	104	(56)
- Other				(5)	(60)	(58)
Total core and operational borrowings				5,680	5,876	5,613
Less: liabilities of operations classified as held for sale				-	(30)	-
Core and operational borrowings				5,680	5,846	5,613

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IFRS Disclosure Notes   Page 70

4.12 Payables and other financial liabilities

					30 Jun 2021	30 Jun 2020	31 Dec 2020
					£m	£m	£m
Derivative liabilities					18,249	27,550	23,208
Repurchase agreements 1					47,703	55,309	53,853
Other financial liabilities 2					14,833	19,544	14,881
Total payables and other financial liabilities					80,785	102,403	91,942
Less: Payables and other liabilities of operations classified as held for sale					-	(738)	-
Payables and other financial liabilities					80,785	101,665	91,942
1. The repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements. The vast majority of the repurchase agreements are unit linked.
2. Other financial liabilities includes trail commission, lease liabilities, FX spots and the value of short positions taken out to cover reverse repurchase agreements. The value of short positions as at 30 June 2021 was £4,320m (30 June 2020: £5,882m; 31 December 2020: £5,147m).
Fair value hierarchy
							Amortised
			Total	Level 1	Level 2	Level 3	cost1
As at 30 June 2021			£m	£m	£m	£m	£m
Derivative liabilities			18,249	397	17,780	72	-
Repurchase agreements			47,703	-	47,703	-	-
Other financial liabilities			14,833	5,484	15	10	9,324
Total payables and other financial liabilities			80,785	5,881	65,498	82	9,324
							Amortised
			Total	Level 1	Level 2	Level 3	cost1
As at 30 June 2020			£m	£m	£m	£m	£m
Derivative liabilities			27,550	232	27,301	17	-
Repurchase agreements			55,309	-	55,309	-	-
Other financial liabilities			19,544	6,552	61	138	12,793
Total payables and other financial liabilities			102,403	6,784	82,671	155	12,793
							Amortised
			Total	Level 1	Level 2	Level 3	cost1
As at 31 December 2020			£m	£m	£m	£m	£m
Derivative liabilities			23,208	300	22,826	82	-
Repurchase agreements			53,853	-	53,853	-	-
Other financial liabilities			14,881	5,222	29	11	9,619
Total payables and other financial liabilities			91,942	5,522	76,708	93	9,619
1. The carrying value of payables and other financial liabilities at amortised cost approximates its fair value.
Trail commission (included within Other financial liabilities) is modelled using expected cash flows, incorporating expected future persistency. It has therefore been classified as a Level 3 liability.
Significant transfers between levels There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the period ended 30 June 2021 (30 June 2020 and 31 December 2020: no significant transfers).

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 71

4.13 Foreign exchange rates

Principal rates of exchange used for translation are:
Period end exchange rates				30 Jun 2021	30 Jun 2020	31 Dec 2020
United States dollar				1.38	1.24	1.37
Euro				1.17	1.10	1.12
				6 months	6 months	Full year
Average exchange rates				2021	2020	2020
United States dollar				1.39	1.26	1.28
Euro				1.15	1.14	1.13

4.14 Retirement benefit obligations

The Legal & General Group UK Pension and Assurance Fund (Fund) and the Legal & General Group UK Senior Pension Scheme (Scheme) account for the majority of the UK and worldwide assets of, and contributions to, such arrangements. The Fund and Scheme were closed to future accrual on 31 December 2015. During the period, modelling of the Fund and Scheme's liabilities has been brought in-house. This has resulted in minor changes to the actuarial assumptions that are applied, which have had an immaterial impact on the valuation of the retirement benefit obligation as at 30 June 2021.

As at 30 June 2021, the combined obligation arising from these arrangements has been estimated at £980m (30 June 2020: £1,199m; 31 December 2020: £1,138m). The retirement benefit obligations are a component of Provisions on the Consolidated Balance Sheet. The after tax deficit, net of annuity obligations insured by Legal and General Assurance Society, has been calculated to be £28m (30 June 2020: £122m; 31 December 2020: £70m).

4.15 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.

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

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Half Year Results 2021 Part 2

IFRS Disclosure Notes   Page 72

4.16 Related party transactions

(i) Key management personnel transactions and compensation
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 £52m (30 June 2020: £47m; 31 December 2020: £137m) for all employees.
At 30 June 2021, 30 June 2020 and 31 December 2020 there were no loans outstanding to officers of the company.
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:
					6 months	6 months	Full year
					2021	2020	2020
					£m	£m	£m
Salaries					3	3	8
Share-based incentive awards					5	4	5
Key management personnel compensation					8	7	13

(ii) Services provided to and by related parties

All transactions between the group and associates, joint ventures and other related parties during the period are on commercial terms which are no more favourable than those available to companies in general.

Loans and commitments to related parties are made in the normal course of business.

The group has the following material related party transactions:

- Annuity contracts issued by Legal and General Assurance Society Limited of £nil (30 June 2020: £50m; 31 December 2020: £50m) were purchased by the group's UK defined benefit pension schemes during the period, priced on an arm's length basis;

- During the period, the Legal & General Group UK Pension & Assurance Fund (the Fund) completed an Assured Payment Policy (APP) transaction with Legal and General Assurance Society Limited (LGAS), a group company. An APP is an investment contract product sold by LGR which, issued to a pension scheme, provides the scheme with a fixed or inflation linked schedule of payments to match the scheme's expected liabilities. In June 2021, £925m was paid by the Fund to LGAS, and LGAS and the Fund recognised an investment contract liability and an APP plan asset of the same amount, respectively.

- Loans outstanding from related parties at 30 June 2021 of £22m (30 June 2020: £86m; 31 December 2020: £89m), with a further commitment of £84m;

- The group has total other commitments of £1,206m to related parties (30 June 2020: £1,253m; 31 December 2020: £1,207m), of which £738m has been drawn at 30 June 2021 (30 June 2020: £820m; 31 December 2020: £772m).

 

END

 

 

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