L&G Interim Results Part 1

Legal & General Group PLC
24 July 2003

                           Legal & General Group Plc
                           =========================

               Interim Results for the six months to 30 June 2003
               ==================================================


  • Improved new business contribution

  • Record funds under management

  • Good operating performance from GI and international businesses

  • Improved Form 9 free asset ratio

  • Dividend increased by 2.6% to 1.57p per share


Group Chief Executive, David Prosser, said: 'Despite tough market conditions,
Legal & General has had a good start to the year with an improved new business
contribution. These results demonstrate the benefits of our prudent approach to
both product and capital management.

In our core UK market place, our leading position in providing e-support to
intermediaries has contributed to improvements in both our margin and our
distribution reach. Our financial strength, demonstrated by our Form 9 free
asset ratio, by our AAA financial strength rating from Standard & Poor's and by
our A++ rating from A M Best, remains an important differentiator for us.

With a more stable investment market anticipated for the second half of the year
and with the benefit of the management initiatives we have taken, we expect
improving demand for our products over the rest of the year.'

Highlights
==========
                                                            Achieved Profits           Modified Statutory 
                                                                       basis              Solvency  basis
                                                          1H 03  Change from           1H 03  Change from
                                                                       1H 02                        1H 02

Operating profit before tax (Note 1)                      £365m          +1%           £258m          -2%
Shareholders' funds (Note 2)                            £5,272m         +10%         £3,271m         +25%
Earnings per share (diluted) (Note 3)                     3.92p         -12%           2.75p         -13%

Worldwide new business APE (Note 4)                       £453m          -9%           £453m          -9%
Contribution from new business (Note 5)                   £150m         +34%             N/A          N/A

Interim dividend per share (Note 6)                       1.57p        +2.6%           1.57p        +2.6%


Note 1:- From continuing operations.

Note 2:- Shareholders' funds after providing for dividends.

Note 3:- Based on operating profit from continuing operations after tax and
assuming full dilution from the convertible bond issued in 2001. The change is
shown after adjusting for the bonus element of the rights issue.

Note 4:- Annual Premium Equivalent (APE) is total new annual premiums + 10% of
single premiums, including ISAs and unit trusts.

Note 5:- Contribution before tax from new worldwide life and pensions business.

Note 6:- Change is shown after adjusting the 2002 interim dividend for the bonus
element of the rights issue.

The Achieved Profits highlights are based on the methodology issued by the
Association of British Insurers in December 2001. Full details of the results
can be found in Parts 2 (Achieved Profits), 3 (MSS) and 4 (Legal & General
Investment Management).

Analysis of new business (APE)
==============================
                                                           1H 03            1H 02
                                                              £m               £m
UK life and pensions:
- individual                                                 231              279
- group                                                       52               39
                                                           -----            -----
- total                                                      283              318
UK ISAs and unit trusts                                      122              131
                                                           -----            -----
Total UK                                                     405              449
International                                                 48               49
                                                           -----            -----
Worldwide (including unit trusts)                            453              498
                                                           -----            -----
New institutional fund management                          5,980            7,217


UK new business
===============

Demand for retail savings products remained subdued in the second quarter as in
the first quarter, resulting in a 10% reduction in new business for the half
year at £405m APE (1H02: £449m). Within that result, individual new business
(including ISAs and unit trusts) was £353m APE (1H02: £410m).

Individual life
---------------

Annual premium sales were unchanged at £71m, benefiting from the strong position
we have built up in the life protection market.

Single premium bond sales were 34% lower at £515m (1H02: £776m) reflecting the
poor investment environment.

Individual pensions
-------------------

Following the initial take up of stakeholder schemes in 2002, annual premium
business this year fell back to £57m (1H02: £93m). Single premium pension new
business was £516m, 37% up from £378m in the first half of 2002, attributable
mainly to increased levels of individual annuity sales.

ISAs and Unit trusts
--------------------

Through the support of our strategic partners and the breadth of our product
range, we outperformed the overall market, which experienced a sharp decline in
demand. Reflecting this relative strength, our sales declined by only 7% to
£122m APE (1H02: £131m).

Regular payment business fell by 39% to £19m (1H02: £31m). However, single
payment sales were 2% ahead at £1,025m (1H02: £1,005m). Demand was strongest for
our UK Index Trust, the Fixed Interest Trust and for our Protected Portfolio
products.

Group business
--------------

As a consequence of higher volumes of bulk purchase annuities, group new
business increased by 33% to £52m APE (1H02: £39m). For the first half, bulk
purchase annuity single premiums more than doubled to £367m (1H02: £175m).

Distribution
============

We have established a substantial network of business partners, reaching over
15m customers through our bancassurance links. A number of new relationships
have been established in the first half of the year, exceeding the level of
recruitment in the corresponding period last year. Our skills in managing multi
channel distribution position us well to grow this important part of our
business even further as the new regulatory framework unfolds.

Capital strength
================

As at 30 June 2003, the Form 9 ratio for Legal & General Assurance Society was
12.3% (31 December 2002: 12.1%). This includes an implicit item of £1.3bn but
makes no use of the realistic waivers granted by the FSA earlier this year.
Excluding the implicit item, the ratio was 8.9%.

At 31 December 2002, the market value of assets supporting the UK with-profits
business was £23.0bn. This amount exceeded that required to meet guaranteed
benefits, expected future bonuses and all other liabilities. The excess
comprises capital substantially provided by shareholders over many years and
retained in the with-profits fund. At 31 December 2002, this with-profits estate
was £1.1bn (31 December 2001: £1.6bn). The reduction over the period primarily
arose from the fall in the market value of equities.

Analysis of profit - Achieved Profits Basis
===========================================
                                                                       1H 03               1H 02
                                                                          £m                  £m
Profit on continuing operations:
UK life and pensions                                                     260                 277
International life and pensions                                           46                  36
Institutional fund management                                             37                  40
General insurance                                                         19                  22
Other operational income                                                   3                 (13)
                                                                       -----               -----
Operating profit on continuing operations                                365                 362
Discontinued operations                                                    -                   3
                                                                       -----               -----
Operating profit                                                         365                 365
Variation from longer term investment return                              86                (492)
Change in equalisation provision                                          (4)                 (3)
Effect of economic assumption changes                                     (8)                 (1)
Effect of Budget tax changes                                             (27)                  -
                                                                       -----               -----
Profit/(loss) on ordinary activities before tax                          412                (131)

Diluted earnings per share                                              3.92p               4.44p
                                                                       -----               -----
(Based on operating profit from continuing operations after tax)


UK life and pensions profit
----------------------------

Operating profit fell by £17m to £260m (1H02: £277m) as a result of the lower
opening embedded value for this business and lower assumed returns.

The contribution before tax from new life and pensions business, on an Achieved
Profits basis, has shown strong growth reflecting in part the increased volumes
of annuity business we have written in the past six months. Careful cost,
product and capital management, allied to our good value product strategy, have
helped this contribution, expressed as a percentage of APE, to increase to 46%
(1H02: 30%).

The contribution from in-force business was lower, reflecting operating
assumption changes mainly relating to endowment policies.

International life and pensions
-------------------------------

Operating profit from international life and pensions business increased to £46m
(1H02: £36m), including a new business contribution of £19m (1H02: £18m). The
contribution from in-force business was £20m (1H02: £10m) as claims in the USA
reduced towards expected levels.

In the USA, new business APE increased 7% in local currency terms. Operating
profit was £28m (1H02 £20m) reflecting the improved claims experience. The new
business contribution, as a percentage of APE, remains robust at 41%.

New business volumes for both the Netherlands and France were unchanged at £10m
APE. The operating profit was £14m in the Netherlands (1H02: £11m) and £4m in
France (1H02: £5m). The combined contribution from new business was £7m (1H02:
£6m).

Legal & General Investment Management
-------------------------------------

In the first half of 2003, Legal & General Investment Management maintained its
impressive track record, winning a further £6.0bn of new funds (1H02: £7.2bn).
We continued to win an increasing number of bond mandates for both active and
indexed management.

The profit from our fund management business was £37m (1H02: £40m), with an
unchanged result from managed pension funds, but a lower contribution from our
venture capital operation and other external clients. The contribution from new
business was £12m (1H02: £15m) reflecting a favourable mix and lower new
business volumes.

Group funds under management grew to a record £125bn at 30 June 2003 (31
December 2002: £116bn). Funds under management by Legal & General Investment
Management were £123bn (31 December 2002: £114bn), of which over 60% was held
for external clients.

General insurance
-----------------

Once again, all classes of business achieved underwriting profits. In addition,
net written premiums grew 30% to £184m (1H02: £141m) as the existing joint
venture with the Woolwich was extended to customers of Barclays Bank.

The household account, which represents nearly 80% of net premiums written,
produced an increased operating profit of £10m (1H02: £8m). The total operating
profit at £19m (1H02: £22m) reflected a lower profit from other business after a
very strong contribution in 2002.

Other operational income
------------------------

Other operational income comprises the longer term investment return arising
from investments held outside the UK long term fund, interest expense,
unallocated corporate expenses and the results of the Group's other operations.
The contribution of £3m (1H02: £13m loss) reflects the additional investment
return on the proceeds of the 2002 rights issue. This was partly offset by
increased interest expense on a higher level of shareholder debt following the
transfer in 2002 of our US subsidiary to the Group holding company from Legal &
General Assurance Society and by new business strain and reduced fee income from
our retail investment business.

Profit on ordinary activities
-----------------------------

The Group's operating profit on continuing operations before tax was £365m
(1H02: £362m). The result from ordinary activities before tax, which includes
the effect of variances in investment return from the longer term return assumed
at the end of 2002, was a profit of £412m (1H02: £131m loss). This includes a
positive investment return variance of £86m (1H02: a negative variance of
£492m). The largest impact came from UK life and pensions, where there was a
positive variance of £56m (1H02: a negative variance of £425m). The investment
return on the equity and property portfolio was 2.8% above the assumption for
the period (1H02: 9.7% below assumption).

Effect of UK Budget tax changes
-------------------------------

Changes in the 2003 Budget to the corporation tax rates applicable to the
policyholders' share of certain income and gains reduced the UK life and
pensions embedded value by £19m. The effect has been reported as a charge before
tax of £27m.

Balance sheet
-------------

At 30 June 2003, the embedded value of the Group's long term businesses was
£4,930m (31 December 2002: £4,790m). At 30 June 2003, shareholders' funds on the
Achieved Profits basis amounted to £5,272m (31 December 2002: £5,061m), an
increase of 6% before providing for the 2003 interim dividend of £102m.

Analysis of profit - Modified Statutory Solvency (MSS) basis
============================================================
                                                                           1H 03               1H 02
                                                                              £m                  £m
Profit on continuing operations:
Life and pensions operating profit                                           211                 230
Institutional fund management                                                 25                  23
General insurance                                                             19                  22
Other operational income                                                       3                 (13)
                                                                           -----               -----
Operating profit on continuing operations                                    258                 262
                                                                           -----               -----
Profit/(loss) before tax                                                     244                (192)

Diluted earnings per share                                                  2.75p               3.16p
(Based on operating profit from continuing after tax)

Operating profit on continuing operations was £258m (1H02: £262m), reflecting
lower profits from life and pensions and general insurance business partly
offset by improved profits from institutional fund management and an increased
contribution from other operational income.

The UK life and pensions operating profit before tax fell to £174m (1H02:
£200m), reflecting lower levels of with-profits bonuses. The accrued transfer
from non-profit business has been calculated as a smoothed investment return on
the shareholder net worth and the embedded value of non-profit business,
augmented by the distribution in respect of the intra-group subordinated debt
capital attributed to the shareholder retained capital. The external servicing
cost of that debt has been reflected in interest expense reported within other
operational income.

The operating profit from our overseas life and pensions businesses increased to
£37m (1H02: £30m). Results for the USA and the Netherlands have benefited from
strong growth in the book of business over recent years.

The contribution to profit before tax from the shareholder retained capital in
the UK long term fund was a negative £30m (1H02: negative £424m). This reflected
significantly improved investment returns, the lower net capital invested in new
non-profit business and the transfer to shareholders from this business.

Payment of dividend
===================

The interim dividend of 1.57p per share will be paid on 1 October 2003 to
shareholders registered at the close of business on 12 September. The shares go
ex-dividend on 10 September. A Dividend Re-investment Plan is available to
shareholders.

Enquiries to:
=============

Investors:
Andrew Palmer, Group Director (Finance)                         020 7528 6286
Peter Horsman, Head of Investor Relations                       020 7528 6362

Media:
John Morgan, Head of Public Relations                           020 7528 6213
Anthony Carlisle, Citigate Dewe Rogerson                        07973 611888

Notes:

  • These financial statements have been reviewed by PricewaterhouseCoopers
    and prepared in conjunction with our consulting actuaries - Tillinghast
    Towers-Perrin and, in the USA, Milliman USA.

  • Issued share capital at 30 June 2003 was: 6,502,831,625 shares of 2.5p
    each.

  • A copy of this announcement can be found in the News and Results section
    of our Shareholder site at http://investor.legalandgeneral.com/releases.cfm

  • The results presentation to analysts and fund managers will also be
    available later today at http://investor.legalandgeneral.com/
    presentations.cfm

Financial Calendar:
===================

Third quarter 2003 new business results                                       20 October 2003

Full year 2003 new business results                                           19 January 2004

Preliminary results for 2003                                                  26 February 2004

Annual General Meeting and first quarter 2004 new business results            28 April 2004

Interim results for 2004 and second quarter new business results              29 July 2004

Third quarter 2004 new business results                                       20 October 2004



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