L&G Realistic Balance Sheet

Legal & General Group PLC
13 April 2004

13 April 2004                 Stock Exchange Announcement


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

               With-profits Business Realistic Balance Sheet for
               =================================================
               Legal & General Assurance Society Ltd ('Society')
               =================================================
                             as at 31 December 2003
                             ======================

•  With-profits Estate in excess of £1bn on a fully market consistent basis
•  Guarantees and option costs represent only 5% of asset shares
•  Risk Capital Margin (RCM) relating to increased cost of policyholder
   benefits £560m out of a total RCM of £960m
•  RCM is 4.7 times covered by Society capital
•  Considerable scope for management actions

Legal & General Group Plc today announced details of the with-profits business
realistic balance sheet for Society as at 31 December 2003, which it recently
submitted to the Financial Services Authority.

The with-profits business realistic balance sheet* shows:

                                                                                                   £m

Total assets                                                                                   18,610
Total liabilities                                                                              17,580
                                                                                             --------
With-profits estate                                                                             1,030
RCM relating to:
    Increased cost of policyholder benefits                                                       560
    Discretionary mismatch on non-policyholder assets                                             400
                                                                                             --------
Total RCM                                                                                         960
                                                                                             --------
Excess over RCM                                                                                    70
                                                                                             --------


The RCM is 4.7 times covered by Society capital.

Commenting on the Society's with-profits business realistic balance sheet, David
Prosser, Group Chief Executive said 'Legal & General is a financially strong
company. It has an efficient financial structure with a clear separation between
its with-profits and non profit businesses. It has carefully controlled the
level of guarantees in its with-profits business with the result that the total
realistic liability for guarantees and options represents only 5% of
with-profits asset shares. In addition, these calculations have been made on a
basis which has taken no credit for a range of available asset management
actions. It remains our firm intention to operate the with-profits part of
Society's long term fund without the need for external capital support.'

*For full details of the Society's realistic balance sheet, please see the notes
below.



Enquiries to:

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

Investors:
Peter Horsman, Head of Investor Relations                         020 7528 6362


Notes to Editors:

The information contained herein has been reviewed by our consulting actuaries,
Tillinghast Towers-Perrin.

Legal & General Assurance Society Ltd
With-Profits Business Realistic Balance Sheet as at 31 December 2003


                                                                                   Note                 £m

Total statutory assets                                                              1               18,120
Additional assets on realistic basis                                                2                  490
                                                                                                  --------
Total assets                                                                                        18,610

Asset shares and other policyholder liabilities                                                     16,190
Smoothing                                                                                              150
Financial guarantees and options                                                                       780
Current liabilities                                                                 3                  460
                                                                                                  --------
Total liabilities                                                                   4               17,580
                                                                                                  --------
With-profits estate                                                                 5                1,030

Risk capital margin relating to:
                Increased cost of policyholder benefits                                                560
                Discretionary mismatch on non-policyholder assets                                      400
                                                                                                  --------
Total RCM                                                                           6                  960
                                                                                                  --------
Excess over RCM                                                                                         70
                                                                                                  --------

(This realistic balance  sheet can be found on page 186 of the 2003 FSA return.)

Basis of preparation

This with-profits realistic basis balance sheet has been prepared in accordance
with Association of British Insurers guidance dated 20 November 2003.

Note 1:

This line is the value, on a statutory basis, of the assets available within the
with-profits part of the Society's long term fund to support participating
with-profits policies.

Note 2:

This line includes the embedded value of non-participating business written in
the with-profits part of the long term fund. The assumptions used in calculating
this embedded value are consistent with those used to calculate the published
Achieved Profits balance sheet for Legal & General Group Plc as at 31 December
2003.

Note 3:

This line is the share of current liabilities attributable to the with-profits
business.

Note 4:

The calculation of the realistic liabilities takes account of bonus decisions
which are consistent with the Society Board's current policy.

The assumed investment policy is that investments supporting participating
with-profits policies are rebalanced to the end 2003 proportions at each
projected calendar year end in the stochastic modelling. Those proportions were:

                                                                                                   %
                Fixed interest                                                                    31
                Property                                                                          18
                UK equities                                                                       41
                Overseas equities                                                                 10
                                                                                            --------
                                                                                                 100
                                                                                            --------

The assets supporting the value of the guarantees and options and the
with-profits estate were assumed to be invested in the same proportions.

The liability in respect of Society's with-profits business includes an
assessment of the cost of any options and guarantees included in this business.
This assessment has been undertaken using a stochastic model of Society's
with-profits business with the investment return model calibrated so as to
reproduce the market prices of traded financial instruments as at 31 December
2003.

The assumed risk free rate of return has been determined by reference to the
yield curve underlying pricing of swaps contracts, less a deduction of 10 basis
points to allow for default risk.

Equity volatility has been set by reference to the market prices of traded
equity options. For a ten year at the money option this has led to implied
equity volatility of 20% p.a..

Property volatility has been set by reference to historic variations in property
prices leading to a uniform volatility assumption of 15% p.a..

Note 5:

As at 31 December 2003, the value of the with-profits estate, calculated on a
fully market consistent basis, was £1,030m.

The with-profits estate at 31 December 2002 was £1,090m. In this assessment the
liability for smoothing, guarantees and options was not calculated on a fully
market consistent basis. The equivalent figure as at 31 December 2003,
calculated on the 2002 methodology, would have been £1,350m.

Note 6:

The RCM is the value of the additional assets required at the balance sheet date
to cover the following instantaneous stress test:

a)  reduction in the market value of equities of 18%; and
b)  reduction in the market value of property investments of 20%; and
c)  downward shift in the yield curve of 20% at all terms; and
d)  increase of 50 basis points in credit spreads together with an increase of 
    approximately 10 basis points in future default rates.

Other assumptions, including volatilities, are unchanged.

The RCM can be split into two parts. The first part relates to the increase in
the cost of policyholder benefits (predominantly guarantees and options) arising
from applying the stress test. This comes to £560m. The remainder relates to the
effect of applying the stress test described above to the assets held to back
other reserves such as the RCM itself. At the year end, 69% of the with-profits
assets were held as equities and properties. The risk capital margin is 4.7
times covered by Society capital.


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