L&G Interim Results Part 3

Legal & General Group PLC 24 July 2003 Part 3 Legal & General Group Plc P1 Consolidated Profit and Loss Account - Modified Statutory Solvency Basis Six months ended 30 June 2003 ----------------------------------------------------------------------------------------------------------------------- Notes Full year 30.6.03 30.6.02 2002 £m £m £m Profit on continuing operations Life and pensions 1 211 230 421 Institutional fund management 25 23 50 General insurance 19 22 46 Other operational income 3 (13) (24) ------- ------- ------- Operating profit on continuing operations 258 262 493 Profit on discontinued operations Other operational income - Banking - 3 4 ------- ------- ------- Operating profit 258 265 497 Variation from longer term investment return 20 (30) (63) Change in equalisation provision (4) (3) (5) Shareholder retained capital (SRC) contribution 2 (30) (424) (571) Profit on sale of banking operations - - 36 ------- ------- ------- Profit/(loss) on ordinary activities before tax 244 (192) (106) ''''''''''''''' ''''''''''''''' ''''''''''''''' Tax (charge) on operating profit (77) (81) (148) Tax credit on other losses 22 91 74 ''''''''''''''' ''''''''''''''' ''''''''''''''' Tax (charge)/credit on profit/(loss) on ordinary activities (55) 10 (74) ------- ------- ------- Profit/(loss) for the financial period 189 (182) (180) Dividends (102) (86) (297) ------- ------- ------- Retained profit/(loss) 87 (268) (477) ============================================================================== ======= ======= ======= Earnings per share P P P Based on operating profit after tax on continuing operations 2.79 3.22 5.88 Based on profit/(loss) for the financial period 2.91 (3.23) (3.07) Diluted earnings per share Based on operating profit after tax on continuing operations 2.75 3.16 5.78 Based on profit/(loss) for the financial period 2.87 (3.23) (3.07) Dividend per share 1.57 1.53 4.78 ============================================================================== ======= ======= ======= These financial statements were approved by the Board on 23 July 2003 and have been prepared for long term business using the Modified Statutory Solvency (MSS) basis. The Achieved Profits (AP) results are included in Part 2. The results for the six months to 30 June 2003 and 30 June 2002 are unaudited, but have been subject to a review by the auditors and constitute non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. They have been prepared on a basis which is consistent with the financial statements for the year ended 31 December 2002. The results for the year ended 2002 have been taken from the financial statements for the year ended 2002 which have been filed with the Registrar of Companies and include an auditors' report which is unqualified and does not contain a statement under either sections 237(2) or 237 (3) of the Companies Act 1985. ======================================================================================================================= Legal & General Group Plc P2 Consolidated Balance Sheet - Modified Statutory Solvency Basis Six months ended 30 June 2003 ----------------------------------------------------------------------------------------------------------------------- Notes At 30.6.03 At 30.6.02 At 31.12.02 Assets £m £m £m Investments 33,884 34,234 32,442 Assets held to cover linked liabilities 75,733 72,162 69,723 Other assets 5,575 3,458 4,528 ------- ------- ------- 115,192 109,854 106,693 ======= ======= ======= Liabilities Shareholders' funds 3 3,271 2,612 3,184 Fund for future appropriations 633 1,078 516 Technical provisions 108,267 102,035 100,437 Borrowings and other creditors 3,021 4,129 2,556 ------- ------- ------- 115,192 109,854 106,693 ============================================================================== ======= ======= ======= Statement of Total Recognised Gains and Losses At 30.6.03 At 30.6.02 At 31.12.02 £m £m £m Profit/(loss) for the financial period 189 (182) (180) Exchange gains/(losses) 0 1 (8) ------- ------- ------- Total recognised gains and losses 189 (181) (188) ============================================================================== ======= ======= ======= Legal & General Group Plc P3 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2003 ----------------------------------------------------------------------------------------------------------------------- 1. Life and pensions operating profit Full year 30.6.03 30.6.02 2002 £m £m £m With-profits business 38 56 91 Non-profit business 136 144 275 ------- ------- ------- UK 174 200 366 USA 28 26 52 Netherlands 9 6 8 France 0 (2) (5) ------- ------- ------- 211 230 421 ======= ======= ======= UK life and pensions operating profit is the accrued distributable transfer, grossed up at the corporate tax rate, and for non-profit business is augmented by the distribution in respect of the intra-group subordinated debt capital held within the SRC. Profits for international life and pensions business are reported on bases consistent with MSS or US GAAP. ======================================================================================================================= 2. Change in SRC Full year 30.6.03 30.6.02 2002 £m £m £m Investment income 37 30 60 Interest expense and charges (1) (1) (2) Realised investment (losses)/gains (13) 9 (23) Unrealised investment appreciation/ (depreciation) 93 (167) (377) ------- ------- ------- Investment return on SRC 116 (129) (342) Net capital (invested in)/released from non-profit business (10) (151) 46 Distribution of operating profit from non-profit business (136) (144) (275) ------- ------- ------- SRC contribution before tax (30) (424) (571) ======= ======= ======= SRC at 1 January 2,259 2,631 2,631 ''''''''''''''' ''''''''''''''' ''''''''''''''' SRC contribution before tax (30) (424) (571) Tax credit 15 87 63 ''''''''''''''' ''''''''''''''' ''''''''''''''' SRC contribution after tax (15) (337) (508) Change in the net asset values of SRC subsidiaries (1) 6 36 Movement in intra-group subordinated debt 0 100 100 ------- ------- ------- SRC at end of period 2,243 2,400 2,259 ======= ======= ======= SRC includes intra-group subordinated debt capital of £602m (1H02: £602m; FY02: £602m). ======================================================================================================================= Legal & General Group Plc P4 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2003 ----------------------------------------------------------------------------------------------------------------------- 3. Shareholders' funds Full year 30.6.03 30.6.02 2002 £m £m £m At 1 January 3,184 2,877 2,877 Total recognised gains and losses 189 (181) (188) Dividends (102) (86) (297) Increase in share capital/premium 0 2 792 ------- ------- ------- At end of period 3,271 2,612 3,184 ======= ======= ======= Comprising: Share capital 163 129 163 Share premium 905 149 905 Profit and loss account 2,203 2,334 2,116 ------- ------- ------- 3,271 2,612 3,184 ======= ======= ======= The number of fully paid ordinary shares of 2.5p in issue at the period end was 6,503m (1H02: 5,159m; FY02: 6,502m). The weighted average number of shares used for calculating earnings per share was 6,489m (1H02: 5,614m; FY02: 5,868m), diluted 6,783m (1H02: 5,915m; FY02: 6,167m). ======================================================================================================================= 4. Tax Although the SRC has been recognised as profit in these financial statements, there has been no corresponding recognition in the FSA regulatory returns, on which the taxation of life assurance business is currently based. As the payment of incremental tax on this profit depends upon a future event, the occurrence of which is under the company's control, no event giving rise to the need to provide deferred tax has occurred. Accordingly no additional deferred tax has been provided. The maximum amount of such deferred tax not provided at 30.6.03 was £676m (30.6.02, £690m; 31.12.02, £655m). ======================================================================================================================= Legal & General Group Plc P5 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2003 ------------------------------------------------------------------------------------------------------------------------ 5. Segmental analysis of shareholders' funds At 30.6.03 At 30.6.02 At 31.12.02 £m £m £m Life and Pensions - UK (SRC) * 2,255 2,329 2,270 - USA 460 461 453 - Netherlands 31 23 24 - France 38 39 36 ------- ------- ------- 2,784 2,852 2,783 Institutional fund management 179 165 161 General insurance 108 95 101 Corporate funds ** 200 (500) 139 ------- ------- ------- Shareholders' funds on the MSS basis 3,271 2,612 3,184 Less: Purchased interests in long term business included in above (27) (27) (39) AP long term in-force business asset 2,028 2,190 1,916 ------- ------- ------- Shareholders' funds on the AP basis 5,272 4,775 5,061 ======= ======= ======= * Excluding net liabilities of £12m (1H02: net assets of £71m; FY02: net liabilities of £11m) in respect of SRC subsidiaries, but including £602m (1H02: £602m; FY02: £602m) of intra-group subordinated debt capital attributed to the SRC. ** Corporate funds include the convertible debt of £517m (1H02: £515m; FY02: £516m), the senior debt of £602m (1H02: £602m; FY02: £602m) which has been onlent to the UK Long Term Fund and the net proceeds of £788m from the 2002 rights issue. ======================================================================================================================= 6. UK Long Term Fund At 30.6.03 At 30.6.02 At 31.12.02 £bn £bn £bn With-profits business 24.0 24.3 23.0 Non-profit business 12.9 11.1 11.6 ''''''''''''''' ''''''''''''''' ''''''''''''''' Sub-fund 0.2 0.2 0.2 SRC 2.2 2.4 2.3 ''''''''''''''' ''''''''''''''' ''''''''''''''' 2.4 2.6 2.5 ------- ------- ------- Value of fund 39.3 38.0 37.1 ============================================================================= ======= ======= ======= Legal & General Group Plc P6 Consolidated Cash Flow Statement (excluding long term business) Six months ended 30 June 2003 ----------------------------------------------------------------------------------------------------------------------- Full year 30.6.03 30.6.02 2002 £m £m £m Net cash inflow from operating activities 493 210 520 Interest paid (30) (21) (52) Tax received 6 5 18 Capital expenditure - net payments/(receipts) 1 0 (1) Net cash (invested in)/received on disposal of banking operations - (6) 20 Acquisition of subsidiaries from the long term fund - - (107) Dividends paid (211) (178) (263) ''''''''''''''' ''''''''''''''' ''''''''''''''' Issue of share capital 0 2 792 (Decrease)/increase in total borrowing (165) 120 249 (Decrease) in mortgage related borrowing 0 (160) (31) ''''''''''''''' ''''''''''''''' ''''''''''''''' Financing (165) (38) 1,010 ------- ------- ------- 94 (28) 1,145 ======= ======= ======= Cash flows (not including long term business) were invested/(divested) as follows: Increase/(decrease) in cash holdings 8 (11) 4 Net purchase/(sale) of investments 86 (17) 1,141 ------- ------- ------- Net investment/(divestment) 94 (28) 1,145 ======= ======= ======= Reconciliation of profit before tax to operating cash flow Profit/(loss) on ordinary activities before tax 244 (192) (106) (Profit)/loss relating to long term business (199) 187 112 Cash received from long term business 299 143 133 Increase in other operating creditors 246 99 199 Other items (97) (27) 182 ------- ------- ------- Net cash inflow from operating activities 493 210 520 ============================================================================== ======= ======= ======= This information is provided by RNS The company news service from the London Stock Exchange

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