Preliminary Results 2011

RNS Number : 2947Z

Legal & General Group Plc

14 March 2012

 



Legal & general group PLC

preliminary results 2011

LEGAL & GENERAL DELIVERS STRONG RESULTS, DIVIDEND UP 35%

·         FULL YEAR dividend up 35% to 6.40p per share (2010: 4.75p per share)

·         operational cash generation up 12% to £940m (2010: £840M)

   net cash generation up 11% to £846M (2010: £760M)

·         worldwide sales up 7% to £1.9BN APE (2010: £1.8BN ape)

·         OPERATING PROFIT £1,056m (2010: £1,002m)

  IFRS PROFIT BEFORE TAX £956m (2010: £1,092M)

·         eev operating profit £1,469m (2010: £1,224m)

  eev per share up 11% to 147p (2010: 132p)

·         IGD Surplus UP TO £3.8bn AFTER DIVIDEND (2010: £3.7BN)

·         IFRS return on equity 14.5% (2010: 18.2%)

Tim Breedon, Group Chief Executive, said:

"Legal & General had a strong 2011. All four of our operating business divisions - Risk, Savings, Investment management and International - delivered increased sales, cash generation and profits. Our balance sheet is strong, and our outlook for 2012 positive.

Following the combination of growth and strong cash generation the Board is recommending a full year dividend of 6.40p per share - a 35% increase. At this enhanced level, the dividend is 2.25 times covered by net cash generation.

Legal & General has significant scale: seven million customers and assets under management of over £370bn.  Our broad product range, diversified distribution and ability to deliver will enable us to grow the business, further enhance shareholder value, and take advantage of the opportunities created in a fast-changing market."

RETURNS - DIVIDEND INCREASED BY 35%

Financials per share	2011	2010
Average number of shares (m)	5,828	5,827
Net cash generation per share (pence)	14.52	13.04
Operating profit earnings after tax per share (pence) (basic)	13.50	12.89
IFRS earnings per share (pence) (basic)	12.46	14.07
Full year dividend per share (pence)	6.40	4.75

FINANCIAL SUMMARY

OPERATIONAL cash generation1 up 12% to £940m, net cash generation up 11% to £846m

2011 £m	Risk	Savings	Inv mgmt	Inter-national	Group capital & financing2	Investment projects	2011
Operational cash generation	482	174	189	51	44	-	940
New business strain	(31)	(63)	-	-	-	-	(94)
Net cash generation	451	111	189	51	44	-	846
Operating profit	561	128	234	137	52	(56)	1,056
2010 £m	Risk	Savings	Inv mgmt	Inter-national	Group capital & financing	Investment projects	2010
Operational cash generation	439	138	162	44	57	-	840
New business strain	(10)	(70)	-	-	-	-	(80)
Net cash generation	429	68	162	44	57	-	760
Operating profit	560	115	206	102	58	(39)	1,002

ASSETS - £371bn in LGIM, £65bn in savings, £28bn in annuities

Assets £bn	2011	2010
LGIM3	371	354
Savings	65	64
Annuities	28	25

eEV Results - embedded value per share up 11% to 147p

EEV highlights £m	2011	2010
Worldwide PVNBP	8,516	7,876
Worldwide new business margin (%)	5.1	4.8
EEV Operating profit	1,469	1,224
EEV Profit after tax	1,234	1,264
Shareholders' equity	8,608	7,730
Number of shares (m)	5,872	5,867
Equity per share (pence)	147	132

1.  Operational cash generation is defined as the post-tax operating profit on our Investment management, General insurance and Savings investments businesses together with the group capital and financing segment, the sustainable dividends remitted from our international businesses, the expected release from in-force business for the UK non profit Risk and Savings businesses, and the shareholders' share of bonuses on with-profits business. Net cash generation is defined as operational cash generation less new business strain for the UK non profit Risk and Savings businesses.

2. In Group capital and financing the rate used to calculate the smoothed return on cash and LIBOR benchmarked bonds has been reduced.  The cash rate previously used of 4% has been replaced with a 1 year LIBOR of 1%. This ensures our operating profit and cash metric maintains relevance in current macro economic conditions. This change has reduced operating profit by £52m and operational cash generation by £38m, with no impact on IFRS profit before tax.  It is our intention to continue with this prudent view in 2012.

3. LGIM assets include those assets managed on behalf of Risk and Savings divisions including £28bn for Annuities and £51bn for Savings.

group results

Financial highlights £m	2011	2010
Operational cash generation	940	840
New business strain	(94)	(80)
Net cash generation	846	760
Analysis of operating profit
Risk	561	560
Savings	128	115
Investment management	234	206
International	137	102
Group capital and financing	52	58
Investment projects	(56)	(39)
Operating profit	1,056	1,002
Asset related investment variances	(2)	185
Other investment variances	(95)	(95)
Property losses attributable to non-controlling interests	(3)	-
Profit before tax	956	1,092

FInal dividend increased by 39% to 4.74 pence per share

Strong cash generation delivering growth in dividend.

Double digit growth in operational cash and net cash generation, coupled with the high visibility of future cash flows, has led the Board to recommended a 39% increase in the final dividend to 4.74p (2010: 3.42p), bringing the full year dividend to 6.40p (2010: 4.75p) an increase of 35%. The cost of the full year dividend is £376m (2010: £279m) with a net cash generation coverage ratio of 2.25 times (2010: 2.72 times).

Double digit growth in Cash generation

Sustainable and diversified operational cash.

Operational cash generation was up 12% to £940m (2010: £840m) with all operating business divisions delivering higher operational cash than in 2010. Net cash generation was up 11% to £846m (2010: £760m) with the proportion backed by dividends to the Group of 83% (2010: 63%). Cash generation is diversified and has been achieved alongside a 7% growth in worldwide APE. We remain confident in our ability to deliver significant cash and profit to provide the basis for good growth in dividends in 2012 and beyond.

Operating profit OF £1.1bn

Risk division demonstrating strong operating performance and market leadership.	Risk delivered another strong performance with operating profit of £561m (2010: £560m) despite lower positive annuity strain (2011: £35m: 2010: £60m). Risk APE increased by 30% to £498m (2010: £382m) as we executed our first £1bn pension bulk annuity scheme, and our first ever longevity insurance transaction. Our Protection businesses continue to be the leading player in their chosen markets growing market share, premiums and profits.  Group protection adverse variances in H1 have trended back towards assumptions and Individual protection favourable expense variances have improved profitability.  Our General Insurance business had a successful year with profits improving by £50m to £42m (2010: £(8)m) helped by benign weather conditions.
Savings business is well placed to take advantage of the regulatory change.	Savings operating profit of £128m was up 11% (2010: £115m) and net cash generation was up 63% at £111m (2010: £68m), with continued focus on asset accumulation, sales of capital light products and improving operational efficiency. Sales APE and assets remain resilient at £1.3bn APE (2010: £1.3bn) and £65bn (2010: £64bn) respectively. Strain as a % of PVNBP has continued to reduce to 2.7% (2010: 2.8%).
LGIM growing operating profit whilst executing growth plans.	LGIM delivered a 14% growth in operating profit to £234m (2010: £206m) with net new business of £3.0bn (2010: £6.6bn) and assets under management of £371bn (2010: £354bn).  LGIM continues to expand its global footprint in response to customer demand. Working together, LGIM and the Risk division, have demonstrated Legal & General's ability to provide pension de-risking solutions across LGIM's strong corporate client customer base with our passive products, our Liability Driven Investment ("LDI") offering, through to longevity swaps and buy-outs / buy-ins.
Delivering top line growth and returning capital to the Group.	International operating profit has increased by 34% to £137m in 2011 (2010: £102m) driven by strong underlying growth in the US business. Sales were up 5% to £154m APE (2010: £146m).  International has continued with its capital restructuring programme releasing $100m of capital in the US, as well as increasing the level of ordinary and special dividends, totalling £80m (2010: £44m).
GC&F growth driven by higher asset pool as business units generate cash.	The growth in net cash generation from the operating business divisions, reinforced with dividends up from our subsidiaries, has seen Group Capital and Financing assets in the year up by £0.7bn to £4.3bn. With more prudent lower assumed return assumptions in 2011, the average assumed return on the larger average asset pool was 4.7% (2010: 5.8%). Contribution to Group operating profit was £52m (2010: £58m).

BALANCE SHEET STRENGTH IGD Surplus £3.8bn (2010: £3.7bn)

Resilient balance sheet with no defaults in 2010 and 2011.

The Group's balance sheet, aided by strong risk controls and capital management policies remains robust with an IGD surplus of £3.8bn (2010: £3.7bn) and a coverage ratio of 220% (2010: 226%).  The LGPL credit default provision of equivalent 61bps or £1.6bn (2010: £1.5bn) remains in place to fund against the risk of credit defaults, and in the year has experienced no defaults (2010: £nil).

PRINCIPAL RISKS AND UNCERTAINTIES

A detailed list of the Group's Principal Risks and Uncertainties can be found on page 32.

Risk management is a key focus for the Group.	The economic, regulatory and political environment poses significant challenges for the life assurance and investment management industry. We have significantly upgraded our risk management and financial analysis capability and our governance framework in recent years to match the Board's risk appetite. We are proceeding to the submission of our internal model to the FSA. We believe our market position and our robust balance sheet will enable us not only to ride out the current volatility and uncertainty, but also to take advantage of opportunities as they arise.
Managing prolonged low interest rate environment.	Legal & General has limited appetite for unhedged interest rate guarantees, our liabilities are well matched and all businesses must adhere to strict limits on such risks.
Solvency II and RDR regulatory uncertainty.	Although the high level regulation for Solvency II has been defined, there is still debate about detailed rules and therefore implementation could be two years or more away. There is still uncertainty about the final approach to how required capital is determined and the transition from the current capital regime. Debate continues in Europe and Legal & General is heavily engaged to help secure recognition that countercyclical dampeners need to be a part of the final package. In the Savings market, delivery of an integrated operating model for a post Retail Distribution Review ("RDR") environment is central to our strategy. We are investing to ensure that our business processes comply with the new regulatory requirements and that our business partners are able to distribute our products under the new regime.

strategy and OUTLOOK

Our strategy continues to deliver.	The Board is confident that the strategy put in place over the last five years is being shown to be the right one and is being executed successfully. Our success in 2011 was driven by organic growth. We remain convinced that attractive and increasing returns are achievable in our core UK markets.  The UK life assurance market is undergoing a period of considerable change. We are well positioned for these changes and believe significant profitable growth opportunities will result.
Further opportunities in offering our pension de-risking solutions....	In the UK and globally, the pension fund de-risking market will continue to grow as pension funds look to reduce their risks further. In 2011 we completed our largest ever pension bulk annuity scheme and announced our first ever longevity insurance transaction. These transactions leverage our expertise in both investment management and longevity risk pricing, and we remain confident of being at the forefront of this rapidly developing pensions market. Legal & General can provide comprehensive de-risking solutions, including buy-out, buy-in, longevity insurance and liability driven solutions to pension schemes of all sizes.
….and to expand our global footprint in response to customer demand	In 2011 global companies are increasingly looking at their pension arrangements on a holistic basis rather than purely regionally. LGIM has expanded its marketing and distribution capability to promote our de-risking product capability internationally particularly to clients in North America, the Gulf and Asia.
Delivery capability.	A key differentiator in the coming years of complex regulatory change will be our ability to deliver change programmes to the highest standards. In 2011, alongside our two larger de-risking transactions, we also carried out a back book reassurance for £390m and over 80 smaller bulk purchase annuity transactions with a value of over £35m APE.  We have completed distribution agreements with Nationwide Building Society and Yorkshire Building Society and been appointed by four workplace savings schemes for employers with more than 100,000 employees. We have established a leading position in the auto enrolment market and believe we have the delivery capability to succeed in this environment.
Economic outlook.	The size and frequency of global monetary policy intervention should ensure there is sufficient liquidity to allow financial markets to function and therefore avoid a repeat of the crisis that contributed to the 2008/09 recession.  There is little prospect of a substantial rebound in real economic growth in 2012 across the UK, Europe and probably the US. Although there have been positive upside surprises in the macro data, these need to be set against the size and structural nature of fiscal deficits, bank de-leveraging, an increase in regulatory intervention, a lack of consumer expenditure growth and an unwillingness of corporates to invest for growth.  We also expect global inflation to continue which will result in positive nominal economic growth.
Aim to continue to grow profits, cash and dividends.	We remain confident about the prospects for the Group.  We have a strong platform to continue to deliver growth in cash generation, dividends and shareholder value.

Business review - RISK

Financial highlights £m		2011	2010
Operational cash generation		482	439
New business strain		(31)	(10)
Net cash generation		451	429
Experience variances, assumption changes, tax and other variances		110	131
Operating profit		561	560
Asset related investment variances		172	102
IFRS profit before tax		733	662
Market leadership.	With leading positions in its key markets, the Risk division has achieved strong APE sales performance of £498m up 30% (2010: £382m); as well as executing our first £1 billion pension bulk annuity scheme, and our first ever longevity insurance transaction. The Group is at the forefront of these markets and is able to offer buy-out, buy-in, longevity insurance and liability driven investment solutions to pension schemes across a wide range of pension scheme sizes.
Cash generation growth.	Operational cash generation increased by 10% to £482m (2010: £439m), reflecting annual growth in both annuity assets, and protection and general insurance gross written premiums.  Net cash generation increased by 5% to £451m (2010: £429m) with lower new business strain in protection on higher volumes, and lower new business surplus in annuities of £35m (2010: £60m). Operating variances are positive, although not as high as 2010, with positive expense variances of £26m, as efficiency improvements come on stream.  The Group Protection adverse claims experience moved back towards expected levels from the exceptional experience observed in H1, with a total of £(35)m for the full year. IFRS profit before tax was £733m (2010: £662m).

annuities

Financial highlights £m		2011	2010
Operational cash generation		227	229
New business surplus		35	60
Net cash generation		262	289
Individual annuity new business APE		105	117
Bulk annuity new business APE		146	90
Total annuity new business APE		251	207
Longevity insurance new business APE		70	-
Annuities new business EEV margin (%)		10.0	11.9
Operational cash generation of £227m in 2011.  New business surplus of £35m.	Operational cash generation was £227m (2010: £229m) with an earned interest margin on assets in line with our long term target for the portfolio.   Net cash generation of £262m reflects reduced new business surplus of £35m (2010: £60m).  Annuities achieved another strong performance in 2011 with new business APE of £251m (2010: £207m). Sales volume and mix continue to be managed within risk appetite, helping annuity assets to grow to £28.4bn (2010: £25.4bn).
Individual annuities continuing to benefit from distribution relationships.	Individual annuity new business APE of £105m (2010: £117m) benefited from the flow of annuitants from our own pensions business as well as our distribution arrangements with Zurich Financial Services and SAGA. We continue to take a disciplined approach to writing new business, striving to provide the best possible retirement income to our customers whilst achieving our target return on economic capital.
First bulk annuity scheme over £1bn.	Bulk annuity sales were strong, writing 85 schemes worth £146m APE (2010: 115 schemes worth £90m). This includes the £1.1bn of premium relating to the bulk annuity scheme with the trustees of Turner & Newall ("T&N") pension scheme. As in previous years we continue to offer prices on all schemes tendering in the market, irrespective of scheme size, with a strong focus on meeting return on economic capital thresholds.  We have significant experience at the smaller end of the market where we have developed a market-leading position with trustees. We also bid for larger schemes where the liability characteristics and available returns on capital are attractive.
Our first longevity insurance deal.	We also closed our first longevity insurance deal with the Pilkington Superannuation Scheme, generating £70m APE, with c£1bn of associated liabilities, 90% of which were reinsured with our partner Hannover Re. The business acted to manage its overall longevity exposure by completing a back book bulk longevity reinsurance transaction during the year to reinsure approximately 85% of £460m of existing liabilities. We are actively pursuing new opportunities within the longevity insurance market, including the promotion of our small scheme longevity insurance offering. This can be a more attractive product for those schemes where a less costly and less complex solution is required.

housing & Protection

Financial highlights £m		2011	2010
Operational cash generation		255	210
New business strain		(66)	(70)
Net cash generation		189	140
Protection new business APE		177	175
Protection new business EEV margin (%)		9.3	6.4
Protection gross premiums		1,200	1,179
General Insurance gross premiums		304	281
Total gross premiums		1,504	1,460
General Insurance new business premiums		110	80
General Insurance combined operating ratio (%)		88	106
Net cash generation up 35% to £189m.	Operational cash generation is up 21% to £255m (2010: £210m).  New business strain has decreased to £66m (2010: £70m) which represents 37% of new business APE (2010: 40%). The business continues to grow with a 3% increase in gross premiums to £1,504m (2010: £1,460m).
Continued diversification into growing and higher margin markets.	Individual protection delivered an outstanding performance in 2011, building on the momentum of H2 2010. New business APE sales were up 11% to £131m (2010: £118m) providing cover for over 400,000 customers. Strong cost and reinsurance management has led to improved profitability. Gross premiums grew 3% to £914m (2010: £890m) and we maintain our market leading position. This has been delivered against a backdrop of a continuing stagnation in the housing market, fragile consumer confidence and a competitive market. Our distribution has been assisted by the strength of our intermediated distribution with Legal & General Network which captured a 20% share of the intermediated mortgage market (2010: 16%), equivalent to £15.7bn of lending, supporting growing volumes of housing-related protection and general insurance sales. We continued to diversify into more specialist areas of the market with 13% growth in high net-worth protection and 48% growth in direct business. Group Protection new business sales were down by 19% to £46m APE (2010: £57m) with increased focus on retaining existing schemes. Total protection new business EEV margins increased to 9.3% (2010: 6.4%).
General insurance grows by 8% and returns to profitability.	In General Insurance, new business premium income grew by 38% to £110m (2010: £80m) as a result of building our presence in the direct market and continuing to develop key broker relationships.  With a £50m improvement in operating performance, operating profit was £42m (2010: loss of £8m) and cash generation £31m (2010: loss of £6m).  A combined operating ratio of 88% (2010: 106%) benefited from more benign weather conditions in the UK compared with the two severe weather events experienced in 2010.

Outlook

Individual annuity market growth expected in the longer term.	The demographics of growing numbers of customers in Defined Contribution pensions savings products creates an increasing opportunity for the individual annuity market, although we do see evidence that consumers are delaying their retirement in the current climate of economic uncertainty. Our distribution of annuities is well diversified and we believe the direct market will become more active after the implementation of RDR.
Desire of bulk schemes to reduce risk creates an attractive market.	Growth in newer types of bulk annuity deals (Buy-in and Longevity Insurance) will continue, driven by a greater appetite to reduce risk, with a potential market of over £1,000bn and a deal flow of on average £8bn per year in which the Group is a key player. In the short term, market size and pricing will remain uncertain until the detailed rules for Solvency II are finalised.
Individual protection distribution well diversified.	The individual protection business benefits from scale and spread of distribution with secure distribution through the L&G Network, a strong IFA market presence, direct capability (now 8% of our business) and sole supplier partnerships with a number of leading Banks and Building Societies. In 2011 Protection added advised family protection to the relationship with Barclays, re-contracted the sole supplier arrangement through Sainsbury's and secured new distribution partnerships with a number of other banks and direct affinity partners.
Potential to increase protection market share.	The overall Individual Protection UK market contracted slightly through 2011, with future growth projected to be modest. The Council of Mortgage Lenders has forecast that gross mortgage lending will fall from £140bn to around £133bn in 2012. Against this background we will continue to increase our family protection sales and use our strength in distribution to generate growth from the available market. We do anticipate some disruption to the market from regulatory change (gender neutral pricing, RDR, I-E tax changes), but we are taking steps to minimise the associated risks and maximise any potential advantages.
Group protection market development.	The Group Protection market continues to show signs of recovery. Auto enrolment will affect up to 10 million employees in the UK and research shows that the majority of employers would consider introducing group risk benefits alongside auto enrolment. Also, the government's Sickness Absence Review will heighten employers' awareness and in the longer term employers will also need more support in managing the health of their ageing workforce as the state pension age increases. Our investment in a new platform and digital capability means we are well positioned to grow with the development of the market.
General Insurance opportunity.	Gross written premiums increased by 8% in 2011 and we are targeting further growth, particularly in our Direct business proposition where 2012 new business is expected to build further on the 100% uplift we saw in the second half of last year. We will also be broadening our personal lines insurance offering, working more closely with selected affinity partners and building on our existing relationships with brokers and financial advisers.

Business review - Savings

Financial highlights £m	2011	2010
Operational cash	174	138
New business strain	(63)	(70)
Net cash generation	111	68
Experience variances, assumption changes, tax and other variances	17	47
Operating profit	128	115
Asset related and other investment variances	(34)	(54)
IFRS profit before tax	94	61
Savings new business APE	1,255	1,253
Assets under administration (£bn)	65	64
Net inflows (£bn)	1.2	3.1
New business strain % PVNBP1	2.7	2.8
In force costs to funds (bps)	24	24

1. UK insured savings business.

Net cash and operating profits up.	Savings continues to grow on the back of asset accumulation, sales of capital light products and improving operational efficiency. Operational cash generation was up by 26% to £174m (2010: £138m) and net cash generation by 63% to £111m (2010: £68m). Operating profit grew by 11% to £128m (2010: £115m) with our mutual fund business contributing £34m, up 17% (2010: £29m). Strain as a % of PVNBP has continued to reduce to 2.7% (2010: 2.8%).
Readiness for Retail Distribution Review and auto enrolment.	Savings is successfully executing its strategy in readiness for the changes to the savings landscape taking place over the next few years. Increasing awareness of the need to save, the launch of auto enrolment into pensions in the workplace and the introduction of the RDR, provide our modern, fund based business with opportunities for further growth. In addition, our platform business has significantly grown in scale in 2011 with £6.8bn (2010: £3.8bn) of combined mutual fund and insured assets on our Investor Portfolio Service (IPS) platform. In 2011 we migrated £1.8bn of assets from legacy portfolios onto IPS.  The platform is approaching the scale where we expect it to breakeven.
Asset movements £bn		Savings Investments	Insured Savings	With-profits	Total
Assets under administration (at 1 January 2011)		23.3	18.7	22.1	64.1
Gross inflows		6.4	2.8	1.1	10.3
Gross outflows		(3.9)	(2.4)	(2.8)	(9.1)
Net flows		2.5	0.4	(1.7)	1.2
Market movements		(0.5)	-	0.1	(0.4)
Assets under administration (at 31 December 2011)		25.3	19.1	20.5	64.9

Savings Investments

Operating profits of £23m.

Operating profit in our Savings investments businesses grew by 10% to £23m (2010: £21m), while net cash increased by 5% to £22m (2010: £21m). Despite market volatility in the second half of the year, results have been underpinned by a 9% growth in assets under administration to £25.3bn (2010: £23.3bn), including net flows of £2.5bn (2010: £4.1bn). Combined with our growing scale, we have continued to improve operational efficiency including further process automation.

APE up 7% to £688m.

Total Savings investments gross fund flows were £6.4bn (2010: £6.4bn), supported by new business APE growth of 7% to £688m (2010: £643m).  Sales of mutual funds on our platform, IPS, continue to perform well, increasing by 58% to £204m (2010: £129m) and contributing a growing share of the total savings APE at 16% (2010: 10%).  Unit Trusts and ISAs grew by 13% to £294m (2010: £261m), with both direct and intermediated customers attracted to our funds proposition.  Uninsured SIPP new business grew by 26% during the year to £88m (2010: £70m) as we extend our proposition and distribution reach. Our Suffolk Life proposition is now available on eight third party platforms representing nearly 80% coverage of the SIPP market.

Insured Savings

Substantial increase in operating profit and cash contribution.	Insured savings net cash generation increased in the year to £38m (2010: £1m) as a result of successfully executing the strategic shift towards fee based products such as workplace pensions and focus on cost management. Operating profit increased by 16% to £36m (2010: £31m). Operational cash generation grew by 42% to £101m (2010: £71m), while new business strain reduced to £63m (2010: £70m).  We wrote business efficiently with new business strain as a percentage of PVNBP of 2.7% in 2011 (2010: 2.8%).
Workplace savings as an engine for growth.	We are seeing strong interest in our workplace proposition and innovative auto enrolment solutions, with a 30% year-on-year growth in schemes secured. In total, 133 new workplace pension schemes were secured during 2011 (2010: 102), generating the transfer of over 94,000 existing lives (2010: 24,000), plus additional opportunities from their auto enrolment populations, when all of these schemes come on stream. We are working with our customers to launch the majority of these schemes, totalling 85,000 of these existing lives, in 2012 and 2013 to align with employers' auto enrolment staging dates, when new business APE and asset transfers will be recognised. Against this backdrop, 2011 workplace pension non profit net flows grew by 50% to £0.9bn (2010: £0.6bn). As a result, non profit assets increased by 19% during the year to £3.8bn (2010: £3.2bn), with in-force non profit scheme lives numbering 211,000 (2010: 168,000). Total combined non profit and with-profits scheme lives now number 350,000 (2010: 335,000).
International bonds new business up 27%	Despite market weakness in the second half of the year, Insured bonds APE grew by 14% in the year to £119m (2010: £104m), primarily driven by the success of our International Bonds proposition which experienced APE growth of 27%.
Improving pensions EEV margin.	Our shift towards capital light products and the growth in our workplace business continues to improve the non profit pensions new business margin which grew to 0.4% (2010: 0.1%). The non profit bonds margin was 1.3% (2010: 1.4%).

with-profits Savings

Growth in cash and operating profit.

With-profits Savings operating profit, representing the shareholders' share of the with-profits bonus, was up 10% in 2011 at £69m (2010: £63m) with net cash generation of £51m (2010: £46m). New business APE has fallen by 8% to £122m (2010: £132m).

outlook

Challenging outlook for 2012.	Market weakness in the second half of the year led to a slowing of growth in the latter part of 2011 and economic and market conditions in the UK are likely to present a challenging backdrop in 2012. However, as conditions improve, our strong brand, diversified distribution and effective operating model mean our Savings business is well placed to capitalise in the medium term on the macro developments in the UK savings market. As such we continue to invest in our Savings business in 2012 to exploit these opportunities.
Strong growth opportunities in the UK savings market.	The introduction of auto enrolment, which will commence in 2012, will see increased demand for defined contribution pensions saving, together with the need for employers to revisit their existing pension provision. RDR will drive fundamental change to the provision of financial advice for savings and investment products and will reward those firms with attractive, good value product propositions, fee-based structures, diversified routes to market and cost efficient operations. The strength of our diversified distribution, including our continuing partnerships with Nationwide Building Society and Yorkshire Building Society further enhances our position.
Growing IPS platform with 420,000 customers.	Platforms will benefit from the changes RDR will bring.  Against a backdrop of late publication of the final rules, we are investing in the development of our platform model to reflect substantial changes to distribution processes and product fee and remuneration structures.  We aim to ensure that post-RDR we have an efficient end-to-end business model. Our own platform, IPS, has significantly grown in scale in terms of both mutual and insured assets and customers, which increased in 2011 to 420,000 (2010: 152,000) and included a migration of 215,000 customers from legacy portfolios onto IPS.  Our products are also offered on the Cofunds platform which has nearly £36bn of assets under administration and of which we have a 25% shareholding, together with other platforms that target our preferred market sectors.
Auto enrolment, 133 schemes secured in 2011 and strong pipeline.	Our workplace savings business is benefiting from the significant number of employers who are reviewing their employee pension arrangements in the light of auto enrolment. This, together with the trend towards holistic workplace savings solutions, will drive the growth of our workplace savings business. Membership of existing schemes is likely to increase. We have put in place a strong pipeline of business throughout 2011 which is set to continue. Our innovative auto enrolment solutions are attracting large employers, with their substantial existing memberships as well as their expected new populations of auto enrolees.

Business review - Investment MANAGEMENT

Financial highlights £m			2011			2010
Operating profit			234			206
Total revenue			417			378
Total costs			(183)			(172)
Net cash generation			189			162
Average ad valorem fee margin (bps)			10.9			10.7
Average expense margin (bps)			5.3			5.5
Gross inflows (£bn)			32.8			32.6
Net inflows (£bn)			3.0			6.6
Closing assets under management (£bn)			371			354
Operating profit up 14% to £234m.	2011 was another successful year for LGIM. Despite the challenging market backdrop, LGIM delivered a 14% increase in operating profit to £234m (2010: £206m). Assets under management were up 5% to £371bn (2010: £354bn) with fee to asset margin of 10.9bps (2010: 10.7bps). Gross new business was £32.8bn in the year (2010: £32.6bn) with inflows particularly strong across the higher fee generating assets. Increased demand for LGIM's de-risking capabilities and additional services such as currency hedging, dynamic asset allocation and transition management helped drive strong revenues.
Pension de-risking solutions leveraging on Group expertise.	The de-risking of defined benefit pensions continues in both the UK and the US. LGIM's focus on delivering innovative LDI solutions to meet the evolving needs of clients resulted in healthy new asset flows of £5.8bn. LGIM's combined UK, European and US LDI assets grew 43% to £58.4bn (2010: £40.8bn). Through greater leveraging of Group wide expertise, LGIM has been able to offer a broad range of pension de-risking solutions. A particular highlight was the work done with our Annuities division to provide an innovative joint de-risking solution for the T&N pension scheme culminating in the buy-in of that scheme in October 2011.
Global expansion continues to gain momentum.	LGIM's geographic diversification is progressing well with an increasing number of new international clients. International AUM increased by 30% to £18.3bn (2010: £14.1bn) with gross new business of £6.5bn. LGIMA had strong asset performance and continues to be recommended by an increasing number of pension consultants in the US. LGIM will extend its geographic diversification with entry into the Asian market in 2012.
Asset movements £bn		Index		Active	Total
Assets under management (at 1 Jan 2011)		228.5		125.0	353.5
Gross inflows		22.2		10.6	32.8
Gross outflows		(24.1)		(5.7)	(29.8)
Net flows		(1.9)		4.9	3.0
Market and other movements		(2.4)		17.1	14.7
Assets under management (at 31 Dec 2011)		224.2		147.0	371.2

index assets

Continued focus on the provision of value for money solutions.	The performance of the index business is predicated on strong index tracking performance, excellent customer service and good cost control.  This results in sustained, strong gross new business flows, high persistency and good quality earnings. New business inflows of £22.2bn include increased Defined Contribution (DC) inflows of £3.5bn (up 39%) resulting in total DC assets of £21.3bn (2010: £19.2bn) LGIM has a reputation for innovation in product development. The range of alternatively weighted passive equity assets was extended, covering additional fundamentally weighted indices and a carbon efficient index for UK equities. In the fixed income area, the available range of index assets now includes emerging markets sovereign debt funds.
International growth of index assets.	Initiatives to extend the index assets franchise into selected international markets built strong momentum in 2011, where LGIM expanded into a number of Gulf and European markets.
Asset movements £bn		UK equities	Int'l equities	Fixed interest	Total - index
Assets under management (at 1 Jan 2011)		72.0	86.0	70.5	228.5
Gross inflows		4.7	9.8	7.7	22.2
Gross outflows		(7.2)	(9.0)	(7.9)	(24.1)
Net flows		(2.5)	0.8	(0.2)	(1.9)
Market and other movements		(6.2)	(4.6)	8.4	(2.4)
Assets under management (at 31 Dec 2011)		63.3	82.2	78.7	224.2

LDI and active assets

Liability driven investments a larger part of what we do.		LGIM is experiencing high demand for LDI solutions with gross inflows of £5.8bn (2010: £4.9bn). We continue to work closely with pension schemes and their consultants to establish their optimal de-risking strategies. Clients are embracing a wide range of instruments to help address the impact of equity market volatility, interest rate and inflation risk. As the nature of the pension market changes, we look to continue to provide innovative investment solutions to meet changing needs in both the Defined Benefit (DB) and DC sectors. In 2011 we have taken steps to expand our range of fund offerings in the DC area with the first of a stable of multi-asset funds available both directly to LGIM clients and via the Savings Division Workplace Pensions platform.
Fixed Income.		LGIM has been able to continue to deliver strong performance for its clients across the major credit asset classes despite volatile times. LGIM's focus has shifted towards developing products which embrace global diversification to respond to client demand and this has led to gross fixed income inflows of £4.6bn with total AUM up 9% to £72.4bn (2010: £66.6bn). Momentum continues to build in the US business which has seen significant growth.
Asset movements £bn		Equities	Fixed interest	Property & other	LDI	Total - active
Assets under management (at 1 Jan 2011)		9.1	66.6	8.5	40.8	125.0
Gross inflows		-	4.6	0.2	5.8	10.6
Gross outflows		-	(3.0)	-	(2.7)	(5.7)
Net flows		-	1.6	0.2	3.2	4.9
Market and other movements		(1.9)	4.2	0.3	14.5	17.1
Assets under management (at 31 Dec 2011)		7.2	72.4	9.0	58.4	147.0

Outlook

Market conditions.	Accounting and regulatory change in the UK continues to drive rapid change in the UK pension industry. We expect UK defined benefit schemes will remain focused on de-risking solutions and this is likely to lead to a decline in equity allocations. This in turn may have an impact on growth of AUM in the index business. Whilst we expect to see clients trim exposure to equities, we also expect to see increases in fixed income and LDI mandates. LGIM expects to benefit from this as existing clients move assets into higher revenue asset classes and new clients are attracted to LGIM's LDI and fixed income strategies.
LGIM playing central role in de-risking solutions.	Within the UK and US, demand for LDI solutions is expected to continue to grow. As a Group we are now able to provide trustees of defined benefit schemes with the complete range of de-risking solutions including LDI, longevity insurance contracts, buy-ins and buy-outs. Our product mix enables us to build tailored hedging solutions for a variety of schemes. LGIM anticipates ongoing demand for more complex index mandates with clients taking advantage of our growing array of passively managed strategies and core competencies in transition management, currency hedging and dynamic asset allocation services.
Build scale in the US and the Gulf. Implement plans to enter Asia.	The geographic diversification of the business will continue into 2012, with a focus on North America, continental Europe and the Gulf and plans are in place to enter Asia. The North American market provides an enormous opportunity, being the largest pension fund market in the world. Almost half of the world's top 300 pension schemes are based in the region.
Caution around volatility in the eurozone.	The eurozone sovereign debt situation has not yet been resolved and will remain a major influence on the financial services industry. Although there is significant uncertainty as to the impact of eurozone failure, we have undertaken contingency planning at an operational level with the aim of limiting the negative impact of potential third party or counterparty downgrades and defaults. The environment is likely to remain challenging due to expected low global growth and the eurozone crisis. However, in the longer term, these factors may represent an opportunity for LGIM as clients gain a greater understanding of the need to control risk and work with us to implement solutions to meet their long term objectives. In 2012 we will continue to focus on creating high quality solutions for clients using our full range of passive, active and LDI capabilities.

Business review - International

Financial highlights £m		2011	2010
USA		104	85
Europe (Netherlands and France)		41	26
Egypt, the Gulf and India		(8)	(9)
Operating profit		137	102
New Business APE		154	146
Net cash generation		51	44
Improved operating performance.	International operating profit has increased by 34% to £137m in 2011 (2010: £102m) with strong growth in Legal & General America ("LGA") new business contributing £17m. LGA and Legal & General France ("LGF") include investment gains realised in the period together with other operating variances in operating profit, and these account for £17m in 2011 (2010: £2m). Operational Cash generation by International division was £51m (2010: £44m) representing a 16% growth in sustainable cash generation. These underlying dividend flows from LGA and Legal & General Netherlands ("LGN") are expected to continue and grow in future years.
US growth and improved margins.	International sales were up 5% at £154m APE driven by strong US sales growth, up 33% to £69m in 2011 (2010: £52m), and improved margins.
Continue to deliver on capital program: LGA US$100m; and LGN €35m.	International division has continued with its capital restructuring programme releasing $100m of capital in LGA, as well as the first phase of our European capital restructuring programme delivering a one off special dividend of €35m from the LGN. LGA has seen its rating raised by Standard & Poors to AA- from A+ reflecting its strong competitive position, conservative investment portfolio, core status and strong liquidity position.

Legal & general America (LGA)

Financial highlights $m		2011	2010
Operating profit		167	132
IFRS profit before tax		165	175
New business APE		111	80
Gross premium income		836	778
Net cash generation		58	53
New business margin (%)		10.7	8.9
Embedded value		1,647	1,916
LGA is now the No. 6 (2010: No. 10) provider of term life business.	LGA focuses on writing mortality protection products in the term life and universal life markets. LGA competes in the protection market by being a low cost operator and delivering expert medical-based underwriting on higher sum assured policies, with in-force premiums of over US$830m.
Strong sales for LGA.	LGA recorded its best ever year in terms of new business, with sales of US$111m (2010: $80m).  This included 46% growth in the core term life product line. Margins further improved from 8.9% to 10.7% driven by expense and funding efficiencies. The capital restructuring plan has given LGA the capacity to price its products competitively and to finance the consequent volumes. At the same time, management has concentrated on building relationships with distributors, while refining underwriting and application handling processes.
$220m DAC impact in 2012	From the 1 January 2012 we will be applying the new US accounting policy for Deferred Acquisition Costs (DAC) recognition issued by the FASB in October 2010. This specifies that only costs directly relating to successful acquisition of new contracts can be capitalised as DAC. Applying this retrospectively will reduce the opening 2012 shareholders' equity of the Group and LGA by an estimated $220m.  There is no impact on IGD.

Legal & general EUROPE (LGN & LGF)

Financial highlights €m		2011	2010
Operating profit		47	30
Asset related investment variance		(23)	7
IFRS profit before tax		24	37
New business APE		76	84
Gross premium income		674	709
Net cash generation		17	12
New business margin (%)		(0.6)	0.9
Embedded value		556	628
Operating profit of €47m.	Our European businesses have delivered strong operating profit up 57% to €47m (2010: €30m). Given regulatory changes the Netherlands continues to be a difficult market, but the recent relaunch of the term assurance product increased sales of this product by 90% compared to H1 2011. The group protection business of LGF continues to grow with premiums up 6% year on year.

emerging markets

Response to regulatory changes in India.

Despite the slowdown in the market with the changes imposed by local regulators in 2010, premium income rose 89% year on year. Single premiums were up from £7m in 2010 to £22m in 2011; however APE was down 50%.

 Outlook

Term product growth across all markets.	In the US we have the opportunity to further expand our product offering to continue to build scale and meet our customer requirements. We are experiencing growth in protection products across the US, Netherlands and France.
Continue to focus on efficient capital allocation.	We continue to focus on the efficient use of capital. The US business continues to present us with a number of opportunities to free up excess capital held as a result of the XXX/AXXX reserving regime in the US.

business review - group BUSINESS UNIT

Group capital and financing

Financial highlights £m			2011	2010
Investment return			191	187
Interest expense			(123)	(121)
Investment expenses and unallocated corporate expenses			(16)	(8)
Group capital and financing operating profit			52	58
Operational cash generation			44	57
Closing group capital and financing assets			4,344	3,656
Closing outstanding debt balances			2,732	2,748
	Higher shareholder assets have lead to an increase to smoothed investment returns.	The increase in the average Group Capital and Financing (GCF) assets has resulted in an increase in the smoothed investment return to £191m (2010: £187m). The smoothed return is calculated asset class by asset class and equates to an average smoothed investment return of 4.7% (2010: 5.8%) on the average balance of invested assets up £0.8bn to £4.0bn (2010: £3.2bn).

GROUP TAX Rates

The effective tax rate on IFRS profit is 24.4% (2010: 24.9%) compared to the UK's standard rate of corporation tax applicable for the period of 26.5% (2010: 28%).

The effective tax rate is lower than the UK's standard rate of tax in both 2010 and 2011 due to the Group achieving favourable resolution of historic tax issues with HM Revenue & Customs. This has resulted in the release of tax provided in prior years.  We continue to actively review our tax methodology, particularly in view of the changes to the tax regime for life assurance companies which come into effect from 2013.

Change in UK corporation tax rates - EEV impact on VIF (discounted and undiscounted)

The Government have made clear their commitment to reduce corporation tax rates to 23% by 2014.  As the reduction to 25% in 2012 has already been enacted, we are confident that the Government will deliver the proposed rate changes as announced.  

As such, our best estimate of the applicable tax rates are those which were announced on Budget day and we have reflected the stepped rate change to 23% in our EEV as at 2011.  This has given rise to a £155m benefit to discounted VIF and a £334m benefit to undiscounted VIF.

Deferred tax asset utilisation

The table below provides a breakdown of the key component parts of the IFRS UK net deferred tax asset of £493m (2010: £495m).  The overall UK deferred tax asset has reduced slightly by £2m due to the utilisation of trading losses and excess and deferred expenses in the period, which is offset by an increase in the deferred tax asset recognised in respect of capital losses as a result of a fall in equity markets during 2011.

The utilisation of trading losses is reflected within net cash generation and has contributed £80m in 2011 (2010: £82m). It is expected that the deferred tax asset recognised for trading losses will continue to be utilised in 2012, 2013 and 2014.

The overseas deferred tax liability of £403m (2010: £356m) mainly relates to deferred acquisition costs in Legal & General America. The rate at which acquisition costs are capitalised for accounting purposes is far greater than that for tax purposes and as such gives rise to a timing difference between the two bases which is deferred tax effected.

Deferred Tax £m	2011	2010
Excess and deferred expenses (XSE)	209	267
Capital losses	147	33
Trading losses	158	239
Other	(21)	(44)
UK net deferred tax asset	493	495
Overseas deferred tax liability	(403)	(356)

 

business review - Asset Related INVESTMENT VARIANCES

Investment variances £m			2011	2010
Risk			172	102
Savings			13	4
Investment management			(7)	(8)
International			(21)	35
Group capital and financing			(159)	52
Asset related investment variances			(2)	185
	Risk investment variance.	Risk investment variance increased to £172m (2010: £102m).  The contributing factors are; improved asset diversity which increased the risk adjusted yield, e.g. sale and leaseback, no defaults in the portfolio, improved asset liability matching, more efficient cash management and small one-off benefits from tax and interest rates movements.
	GCF variance due to equity falls.	Equity returns resulted in an adverse variance of £(139)m, out of a total variance of £(159)m.
	Reduction in short term LIBOR assumption.	In GCF the rate used to calculate the smoothed return on cash and LIBOR benchmarked bonds has been reduced.  The cash rate previously used of 4% has been replaced with a 1 year LIBOR of 1%. This ensures our operating profit and cash metric maintains relevance in current macro economic conditions. This change has reduced operating profit by £52m and operational cash generation by £38m with no impact on IFRS profit before tax.  It is our intention to continue with this prudent view in 2012.

 

business review - cash generation 

CASH GENERATION Up TO Group

Growing net cash generation leading to increased shareholder assets.

The total shareholder assets which include Group Capital and Financing assets and other shareholder assets increased by £0.6bn to £5.9bn (2010: £5.3bn) demonstrating the strong link between our cash metric and shareholder assets in our balance sheet.

Shareholder Assets £m
Opening group capital and financing assets (including shareholder assets in LGAS and LGPL)								3,656
Opening shareholder assets in other subsidiaries								1,688
Opening shareholder assets								5,344
Group operational cash generation								940
New business strain								(94)
Net cash generation								846
External dividend payments in the year								(298)
Other								40
Closing group capital and financing assets (including shareholder assets in LGAS and LGPL)								4,344
Closing shareholder assets in other subsidiaries								1,588
Closing shareholder assets								5,932
87% of net cash generated by divisions backed by dividends to Group.		In 2011 we have also taken steps to demonstrate that cash can be extracted from the businesses for the benefit of shareholders. In the year LGAS has approved an annual dividend of £500m (2010: £300m) payable to Group which relates to the net cash generated from its Risk and Savings operating business units, and LGIM has approved an annual dividend of £150m (2010: £132m). Together with the sustainable dividends, the Group capital and financing assets have received special dividends from LGN for €35m (2010: €nil).
	Dividends supporting cash generation		2011			2010
			Net cash £m	Dividend £m	Dividend % of cash	Net cash £m	Dividend £m		Dividend % of cash
	Risk		451	500	89	429	300		60
	Savings		111			68
	Investment management		189	150	79	162	132		81
	International		51	51	100	44	44		100
	Sub total		802	701	87	703	476		68
	Group capital and financing		44			57
	Total		846	701	83	760	476		63

PREDICTABILITY of cash generation

Predictability over recent years.

Sources of the Group's cash generation are transparent and we have used the format below to demonstrate the predictability of these cash flows since 2009.

Diversified and growing net cash.

The Group's net cash generation is well diversified. Operational cash generation in the year was up 12% to £940m (2010: £840m) with all business divisions delivering higher operational cash than in 2010. There has been a steady 13% per annum growth in the last 5 years. Net cash generation was up 11% to £846m (2010: £760m) with 34% of the total generated by LGIM, Group and International. In 2009 these divisions accounted for only 24% of the Group's net cash generation. The Group is more balanced as a result.

	2009				2010				2011
£m	Op cash	Strain	Net cash		Op cash	Strain	Net cash		Op cash	Strain	Net cash
Annuities	235	129	364		229	60	289		227	35	262
Protection	203	(79)	124		216	(70)	146		232	(66)	166
Insured savings	58	(77)	(19)		77	(70)	7		101	(63)	38
In-force cash generation	496	(27)	469		522	(80)	442		560	(94)	466
With-profits	46		46		46		46		51		51
Savings Investments and Other Savings	2		2		15		15		22		22
GI and Other risk	16		16		(6)		(6)		23		23
LGIM	125		125		162		162		189		189
International dividends	8		8		44		44		51		51
GCF	33		33		57		57		44		44
Total	726	(27)	699		840	(80)	760		940	(94)	846
Variances and other			28				(42)				(98)
International (excl. dividends)			78				33				39
Tax gross up			304				251				269
Operating profit			1,109				1,002				1,056

	2012 in-force operational cash generation to grow.	Operational cash generation from the in-force UK Risk and Savings businesses is forecast to grow to c£590m in 2012.  In addition we expect with-profits operational cash generation to be c£50m and dividends from our International businesses to exceed £55m.
	£8.4bn of undiscounted VIF to monetise in the future.	The monetisation of the Group's VIF will form the basis of the future profits and operational cash generation of the UK long-term Risk and Savings businesses.  The £8.4bn (2010: £8.0bn)  of undiscounted  future profits within the VIF is expected to monetise into profits in the following years:
Estimated monetisation of UK VIF (undiscounted)1 £bn			2012 - 2016	2017 - 2022	2023 - 2028	Beyond 2029
UK VIF monetisation			33%	23%	15%	29%

1. Management estimates

The VIF continues to be replaced.

The table below demonstrates how the VIF is being replaced by the new covered business written in the period and illustrates the movements between the opening and closing UK long term Risk and Savings VIF.  The contribution to VIF from new business written in 2011 and the unwind of the discount rate resulting as cash flows from new business written in previous periods are one year closer to the balance sheet date more than cover the expected releases from the non profit and with-profits businesses.  Over the medium term experience variances and assumption changes have been positive.

Reconciliation of UK long term Risk and Savings VIF £bn	Discounted	Undiscounted
Opening VIF at 1 January 2011	3.89	8.0
Contribution from new business	0.38	0.8
Unwind of discount rate	0.30	-
Expected release from non profit and with-profits businesses1	(0.61)	(0.6)
Closing operational VIF at 31 December 2011	3.96	8.2
Experience variances / assumption changes	0.15	0.3
Investment variance / economic assumption changes	0.01	(0.4)
Other	0.13	0.3
Closing VIF at 31 December 2011	4.25	8.4

1. Comprises the expected release from non profit business of £560m and with-profits transfer of £51m.

business review - balance sheet

Capital resources

As at 31 December 2011 the Insurance Group's Directive (IGD) Pillar 1 surplus was £3.8bn up from £3.7bn at end 2010.

The Group's capital resources totalled £6.9bn, covering the capital resources requirement of £3.1bn by 2.20 times.

Capital £bn			2011	2010
Group capital resources			6.9	6.7
Group capital resources requirement			3.1	3.0
IGD surplus1			3.8	3.7
Coverage ratio %			220	226
	Robust Group capital resources.	Under a Pillar 1 capital basis the Group has a surplus over the capital resources requirement of £3.8bn.  This capital buffer is in addition to the £1.6bn of LGPL credit default provision. During the year we have demonstrated that we remain committed to optimising the Group's worldwide capital structure for the benefit of our shareholders. The table below demonstrates how the post tax operational delivery of the Group's IFRS performance flows through to the capital position under Pillar 1. The IGD surplus has increased to £3.8bn as a result of the Group's cash generation. For the With-profits business, the surplus is calculated on both a Peak 1 (regulatory) and Peak 2 (realistic) basis.  The Peak 2 surplus is calculated based on the more onerous risk capital margin stress as defined by the FSA.
IGD Surplus1 £m
At 1 January 2010				3,148
At 1 January 2011				3,745
Operational cash				940
New business strain				(94)
Dividends				(376)
Experience variances, assumption changes and other variances				29
Group investment projects				(41)
Investment variance2				(126)
Increase in UK operational regulatory capital requirement				(90)
Release of capital from US capital management programme				65
Temporary capital usage (internal Triple X financing)				(78)
Differences between IFRS and International regulatory reporting				(57)
Other3				(148)
At 31 December 2011				3,769

1. All IGD amounts are estimated, unaudited and after accrual of the final dividend of £279m (2010: £201m).

2. Includes £(97)m of investment variances and £(29)m arising from regulatory treatment on LGF held to maturity investment bonds.

3. Includes £(80)m resulting from the utilisation of trading losses included in net cash.

International Capital restructuring programme.

In 2010 we completed the first tranche of our US capital restructuring programme, and we completed a further tranche of the US capital restructuring programme in December 2011 releasing an additional US$100m of capital in LGA. A first phase of European capital restructuring was also completed with LGN paying a special dividend of €35m, in addition to its underlying yearly dividend of €15m. It is anticipated that further phases of the international capital restructuring programme will be completed in 2012. LGA has seen its rating raised by Standard & Poors to AA- from A+ reflecting its strong competitive position, conservative investment portfolio, core status and strong liquidity position coupled with the stable outlook of the parent.

Movements in UK solvency capital

Solvency capital is analysed in two components:

1.   Changes to operational capital requirements.  This is the result of increases to required capital from new business written in the period less decreases in required capital from in-force business running off.

2.   Changes to technical capital requirements.  This is the result of the mechanical calculation of the capital required in the with-profits fund on the regulatory (Peak 1) and realistic (Peak 2) bases.  The interaction between the two bases will give rise, under certain market conditions, to a technical capital requirement called the With-profits insurance capital requirement (WPICC).

Pillar 1 capital requirement £bn	2011	2010
Risk	1.7	1.5
Savings	0.1	0.1
With-profits - operational	0.6	0.7
Other subsidiaries	0.3	0.4
Operational group capital resources requirement	2.7	2.7
With-profits insurance capital component (WPICC)	0.4	0.3
Group capital resources requirement	3.1	3.0

The increase in the Risk capital requirement to £1.7bn (2010: £1.5bn) is primarily due to the increase in annuity reserves and the reinsurance of  blocks of LGA business into LGAS.

GROUP Liquidity

Prudent approach to liquidity management.	Legal & General has a limited appetite for liquidity risk and seeks to maintain at Group level sufficient liquid assets and standby facilities to meet a prudent estimate of the Group's cash outflows over a period of two years.  The predicted cash flows are identified through the annual planning processes and take into account the provision of facilities to operational businesses to accommodate their liquidity requirements in extreme stressed scenarios e.g. pandemic and adverse weather events.  The liquidity position across our operational business units is very strong.  On average during 2011 daily overnight cash deposits of circa £500m were maintained as well as carrying significant holdings of liquid assets.
Renewal of £1bn syndicated facility.	We have also renewed our £1bn revolving credit facility with a larger syndicate that represent the Group's key relationship banks. The maximum individual commitment from these banks ranges from £40m to £51m. The renewal demonstrates our financial strength. The new facility will mature in 2016 with the option to extend through to 2018. In addition the Group has had in place for over 20 years a Commercial Paper programme providing the Group with access to short term funds from the domestic sterling and euro capital markets as and when required.
No bonds maturing before 2015.	The Group has no outstanding bonds with maturity or call dates before 2015.  There are no restrictive covenants and no credit rating or share price triggers in respect of group debt or liquidity positions.

 

Supplementary EEV disclosure

Analysis of EEV results - covered business £m	PVNBP		Margin (%)			Contribution
	2011	2010	2011	2010		2011	2010
Risk	3,446	2,925	9.8	10.3		345	300
Savings	3,896	3,934	0.8	0.8		31	33
International	1,174	1,017	5.5	4.3		65	44
Total	8,516	7,876	5.1	4.8
Contribution from new business						441	377
Expected return from in-force business						494	527
UK Persistency						14	(16)
UK Mortality / morbidity						(32)	(28)
UK Expenses						55	-
Other UK experience						176	174
International experience						57	(14)
Experience variances and assumption changes						270	116
Development costs						(10)	(15)
Contribution from shareholder net worth						178	160
Operating profit on covered business						1,373	1,165
Business reported on an IFRS basis						96	59
Operating profit						1,469	1,224
Analysis of EEV results - worldwide business £m					2011		2010
Risk					801		663
Savings					228		204
Investment management					210		179
International					242		163
Group capital and financing					44		54
Investment Projects					(56)		(39)
Operating profit					1,469		1,224
Variation from longer term investment return					(111)		161
Effect of economic assumption changes					(21)		292
Property losses attributable to non-controlling interests					(3)		-
Profit from ordinary activities before tax					1,334		1,677
Tax and other					(100)		(413)
Profit from ordinary activities after tax					1,234		1,264
Earnings per share (p)					21.17		21.71
Shareholders' equity					8,608		7,730
Number of shares (m)					5,872		5,867
Shareholders' equity per share (p)					147		132

operating profit

EEV operating profits up 20%.

The EEV operating profit increased by 20% to £1,469m in 2011 (2010: £1,224m).  New business contribution is up 17% to £441m (2010: £377m), with the strong sales performance and improvement in margins. Overall experience and assumption changes were again positive at £270m (2010: £116m). The expected return from in-force business decreased to £494m (2010: £527m) due to the unwind of a lower opening discount rate (7.3% vs 8.0%) and a lower tax gross-up rate in the UK (23% vs 27%).

New business contribution

New business contribution up 17% on higher margins.

Contribution from worldwide new business increased 17% to £441m (2010: £377m). Worldwide covered business APE grew 8% in the year to £1,219m (2010: £1,126m), which included a £70m contribution from the writing of the Longevity Insurance contract. The overall margin improved to 5.1% (2010: 4.8%) benefiting from higher sales of higher margin risk and US term products, and margin improvements delivered by tight cost management of our risk and administration costs.

New business MARGINS

risk

New business margin %			2011	2010
Protection			9.3	6.4
Annuities			10.0	11.9
Risk			9.8	10.3
	Stable risk new business margins continue.	The increased competitive environment in the protection market in 2011 was offset by improved reinsurance terms, expense reductions and favourable new business mix. This led to an increase in the new business margin to 9.3% (2010: 6.4%). The IRR on protection new business was greater than 15% (2010: 15%) with an improved payback period of 4 years (2010: 5 years). The annuities margin reduced to 10.0% (2010: 11.9%) reflecting shorter duration liabilities taken on in the year. Given positive strain on this business, annuities has an immediate IFRS payback and an infinite IRR in both 2011 and 2010.

savings

New business margin %			2011	2010
Unit linked bonds			1.3	1.4
Non profit pensions			0.4	0.1
With-profits			1.8	2.6
Savings			0.8	0.8
	Savings margins positive.	The focus on cost management and change in strategy from commission paying products to fee-based products has enabled a turnaround to positive margins for this business going forward. Unit linked bonds have a margin of 1.3% in 2011 (2010: 1.4%).  This translates into an IRR of 10% (2010: 11%) and a payback period of 7 years (2010: 7 years) In non profit pensions, the delivery of further growth in scale and unit cost efficiencies has delivered an improved margin of 0.4% in 2011 (2010: 0.1%).  This equates to an IRR and payback period of 8% and 12 years respectively (2010: IRR 8%, payback period 13 years). The with-profits margin has reduced to 1.8% in 2011 from 2.6% in 2010, reflecting lower EEV investment return assumptions compared to last year.

international

New business margin %			2011	2010
USA			10.7	8.9
Netherlands			(1.3)	1.4
France			(0.4)	0.6
International			5.5	4.3
		LGA's strong results were driven by a 33% increase in APE and a 73% increase in new business value add.  The consolidated International new business margin increased to 5.5% in 2011 (2010: 4.3%).

EEV EXPERIENCE VARIANCES AND ASSUMPTION CHANGES

UK experience and assumption changes.

Overall experience and assumption changes are £213m, up £83m in the year (2010: £130m). As the administration of our UK business is predominantly in house administration and not outsourced, we would expect positive expense benefits through our expense assumption changes.  In the year £55m (2010: £1m) was released as cost efficiencies translate to lower unit costs. The adverse mortality experience in the Group protection business which was impacted by a number of high value claims in the first half of 2011 is included in the overall mortality/ morbidity result of £(32)m (2010: £(28)m), but persistency has been a small positive compared to a small negative in 2010 showing an improvement of a further £30m.  Other UK experience: positive £176m (2010: positive £174m) experience in the UK included a reassessment of future BPA reserve release as data is loaded onto the BPA system (£42m), the unwind of the cost of capital in the UK (£54m), the impact of US capital restructuring (£15m) and one-off modelling improvements (£21m).

US experience and assumption changes.

Overall experience and assumption changes are £57m, up £71m in the year (2010: £(14)m). The main variance relates to the impact of moving the domicile of the reinsurance arrangement for part of the US term business onshore from Bermuda to Vermont which has accelerated the emergence of distributable profit, and therefore increased the US value of in-force.

Investment management

The Investment management business is reported on an IFRS basis; operating profit of £210m (2010: £179m) excludes £24m (2010: £27m) of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a "look through" basis and as a consequence are included in the Risk and Savings covered businesses on an EEV basis.

Group Capital and financing

The Group capital and financing operating profit primarily reflects the smoothed investment return on the shareholder net worth and shareholders' assets held at Group level less interest charges on Group debt.  The profit from Group capital and financing reduced to £44m in 2011 (2010: £54m) as higher average invested assets throughout 2011 were offset by a lower assumed return on the assets.

EEV PER SHARE

EEV per share at 147 pence.

The Group has delivered £1.23bn of EEV profit after tax in 2011 (2010: £1.26bn) which after external dividend payments of £298m in the year (2010: £238m) increases Shareholder's equity to £8.6bn (2010: £7.7bn).  This equates to a shareholder's equity per share of 147 pence (2010: 132 pence).

ADDITIONAL VALUE OF LGIM

Within the calculation of Group embedded value, investment management profits on internally sourced business is included in Group embedded value on a look through basis at £0.2bn (2010: £0.2bn) equivalent to 4p per share. 

The external assets element of the investment management business is included at the IFRS net asset value of £0.4bn (2010: £0.3bn), equivalent to 6p per share (2010: 6p per share). 

Calculating the external assets element of LGIM on an embedded value basis, using assumptions detailed below, would increase the contribution of LGIM to Group Embedded value from £0.6bn (10p per share) to £1.8bn (31p per share).  This excludes any value for LGIM's new business franchise.

Estimated LGIM discounted cash flow valuation	2011 (p per share)	2011 £bn
Look through value of profits on covered business	4	0.2
Net asset value	6	0.4
Current value of LGIM in Group embedded value	10	0.6
LGIM VIF (assuming stable margins and 10% outflows per annum)	21	1.2
Alternative discounted value of LGIM future cash flows	31	1.8

Including LGIM this scenario equates to an indicative valuation per share of 167 pence.

Indicative valuation including LGIM	2011 (p per share)	2011 £bn
EEV as reported	146.6	8.6
LGIM VIF	20.5	1.2
Total including LGIM	167.1	9.8

Principal risks and uncertainties 

Legal & General runs a portfolio of risk taking businesses; we accept risk in the normal course of business and aim to deliver sustainable returns on risk based capital to our investors in excess of our cost of capital. We manage the portfolio of risk that we accept to build a sustainable franchise for the interests of all our stakeholders; we do not aim to eliminate that risk.  We have an appetite for risks we are rewarded for and understand deeply, and which are consistent with delivery of our strategic objectives.  Risk management is embedded within the business.  The Group is exposed to a number of key risk categories.

Regulatory and legislation

Changes in regulation or legislation may have a detrimental effect on our strategy or profitability

Legislation and government fiscal policy can influence our product design, the retention of existing business and our required reserves for future liabilities. Regulation defines the overall framework for the design, marketing and distribution of our products; and the prudential capital that we hold. The nature of long term business can result in certain regulatory changes having a retrospective effect.

Principal uncertainties The Retail Distribution Review (RDR), the rules for which come into force on 31 December 2012, will change the regulations for the provision of sales advice for retail investment products and the relationship between advisers and manufacturers of these products.	Potential impact RDR has required us to make significant changes to our products and distribution processes, particularly for our savings business. While the majority of required change has been executed, factors that could still hinder successful transition include late publication of the final rules, consumers failing to understand the change and financial advisers exiting the market, all of which may adversely impact the earnings of our savings business.	Mitigation We continue to invest in ensuring that our business processes comply with the new regulatory requirements and that our business partners are positioned to distribute our products under the new regime. We remain committed to helping our customers and business partners transition to the new framework.
Solvency II (SII), the implementation of which has moved back 12 months to 1 January 2014, will lead to a fundamental change in the way that insurance companies are required to calculate prudential capital. While the high level regulation is defined, detailed rules governing the approaches to determining the quantum of capital and the transition from the current regime are still to be finalised.	Proposed rules have reduced the potential for firms writing long-term business, such as annuities, to hold a disproportionate amount of capital relative to the risk exposure. However, until detailed calibration rules for capital models are finalised, there remains a range of capital outcomes. The scope and duration of transitional arrangements remain undecided.	We continue to actively participate with Government and regulatory bodies in the UK and Europe to ensure capital requirements accurately reflect the risks implicit in insurance products. Our SII programme is on track to deliver required capabilities in advance of the SII implementation date.
The International Accounting Standards Board's (IASB's) project on accounting for insurance contracts, which seeks to improve and ensure consistency in accounting, is targeted to be either re-exposed or issued in near final form in late 2012, with possible implementation between 2014 and 2016.	We support the need for clear and consistent financial reporting; however, the proposals of the latest exposure draft may result in a significant change in the timing of profit recognition, inconsistencies with capital measurement under Solvency II and could result in increased complexity for users of accounts.	We are working with the IASB, the European Insurance CFO forum and the ABI to ensure that the IASB proposals are appropriate to the insurance sector and meet the needs of investors.
The FSA's With-Profits Consultation (CP11/5) proposed changes to the rules and guidance over the operation of with-profits funds, which may have a significant impact on the future operation, governance and strategy for with-profits business. The FSA published a Policy Statement (PS12/4) on 7 March 2012 and we are currently reviewing the impact of the rule changes.	Effective governance of with-profits business and the fair treatment of policyholders is sound business practice. However, the differing interpretation and application of regulation over time may have a detrimental effect on our strategy and profitability.	We have worked with the FSA and industry bodies to ensure that proposed rule changes reflect the needs of all stakeholders in those with-profit funds that remain open to business.
During 2012 the FSA will begin to transition into the Prudential Regulatory Authority and Financial Conduct Authority, two distinct and separate regulatory bodies. Each body will establish its own regulatory framework from 2013.	We support a robust regulatory regime for the financial services sector. However, there is a risk that the new regimes will not reflect differences between insurance and banking business models, resulting in additional capital requirements or lead to duplication of activities and increased costs of regulation.	We are engaged with our regulators to understand the impact of the new regimes on our business. The establishment of a CRO team and a separate Regulatory Compliance team will enable us to deploy resource and manage regulatory relationships in line with the new regime.
Changes in the corporation tax regime for life insurance companies will come into effect on 1 January 2013. Reform is made necessary by Solvency II which will replace the existing reporting framework upon which life company taxation is currently based.	Whilst, draft rules were published for industry consultation in December 2011, final rules are not anticipated until the publication of the 2012 Finance Act. The financial and operational impact of the proposals therefore remains uncertain.	We are actively participating in the consultation process with HM Treasury and HM Customs & Revenue and have commissioned an internal project to ensure that our business processes will be fully compliant with the new rules in time for 1 January 2013.

financial market and economic conditions

Investment market performance or conditions in the broader economy may adversely impact our earnings and profitability

The performance and liquidity of investment markets, interest rate movements and inflation can impact the value of investment assets we hold to meet the obligations arising from insurance business as well as the value of the obligations themselves, resulting in mismatches in the profile of cash flows of our assets and liabilities. Significant falls in investment values can also impact the fee income of our investment management business. Broader economic conditions can impact the timing of the purchase and retention of retail financial services products.

Principal uncertainties The outlook for the UK economy remains uncertain. Recent economic growth has been subdued with no sign of a sustained recovery. As well as impacting domestic economic conditions, ongoing concerns for the stability of the eurozone have resulted in volatile investment markets.	Potential impact Continuing economic uncertainty may increase propensity for consumer saving benefiting our retail savings business. However, other product segments such as protection may experience reduced demand, impacting our new business volumes and our earnings.	Mitigation We model our business plans across a broad range of economic scenarios and take account of alternative economic outlooks within our overall business strategy. As part of our medium-term plan we have sought to ensure focus upon those market segments that will be resilient in projected conditions.
Although European governments have taken action to stabilise the economies of weaker members of the eurozone, there is a risk that the euro will continue to be inherently unsustainable unless some countries default and leave the euro, or there is movement towards closer fiscal integration.	Market disruption from a major sovereign debt event may impact our ability to execute hedging strategies that ensure the profile of our assets and liability/cash flows are appropriately matched. An exit from the euro may result in the temporary closure of markets, uncertainty over the operation of financial instruments and imposition of capital controls, particularly impacting our investment management and European businesses..	We are actively monitoring the impact of the eurozone crisis on our businesses and the adequacy of our contingency plans. The Group Risk Committee has given specific consideration to the risks and how they may be mitigated.

counterparty and third party risks

In dealing with issuers of debt and other types of counterparty the Group is exposed to the risk of default

As part of our strategies to match long term assets and liabilities, exposures arise to the issuers of corporate debt and other financial instruments. We also have exposures to banking, money market and reinsurance counterparties, and the providers of settlement, custody and IT services.

Principal uncertainties A default event within the banking sector, or a major Sovereign debt event, could result in dislocation of bond markets, significantly widening credit spreads, and in extreme conditions contagion may result in default by strongly rated issuers of debt.

Potential impact Market reaction to significant credit rating downgrades or a default event could result in the short-term diminution in the market value of corporate bond assets held in respect of our annuities business and in extreme circumstances may require an increase in default provisions for potential or actual defaults. A failure by a key service provider may result in short-term operational disruption of our business processes.

Mitigation We actively manage our exposure to default risk, setting robust counterparty selection criteria and exposure limits. We continue to broaden asset classes backing our annuities business, including the use of property lending, and sale and leaseback assets. Our service providers are also subject to rigorous selection criteria.

UK financial services sector contagion risks

As a UK-based Group, our earnings are influenced by the performance and perception of the UK financial services sector as a whole

Investment market performance, actions by regulators against organisations operating in the financial services sector and shock events can impact the confidence of customers in the sector as a whole. Such events may also result in changes to the regulatory and legislative environment in which we operate.

Principal uncertainties The financial crisis, subsequent investment performance and low interest rate environment together with consumers' perceptions of the robustness of financial institutions may impact consumer attitudes to long-term savings. Recent regulatory action in the banking sector with regard to Payment Protection Insurance (PPI), may adversely impact consumers' perception of the value of Insurance products.	Potential impact As a significant participant in the long-term savings markets, we are inherently exposed to downturns in new business volumes and persistency levels as a consequence of changes in consumer sentiment.	Mitigation We actively manage our brand and seek to differentiate our business model from that of our competitors, focusing on our customers' needs through a diversified portfolio of risk, savings and investment management businesses. In addition we continue to focus on developing our international businesses. The Group Risk Committee has given specific consideration to how we manage reputation risk.
Regulatory and legislative responses to events in the banking sector continue. Within Europe, EIOPA has been established as an EU-wide policy setting body for the regulators of European insurers and, as outlined above, within the UK the FSA is to be split into separate Prudential and Conduct Regulators. Separately the US Foreign Account Tax Compliance Act will introduce new customer disclosure obligations on UK insurers from July 2013.	We support a robust regulatory regime for the financial services sector. However, there is a risk that regulatory responses to market events lead to excessively prudent regulation; capital inefficiencies as a result of regulation aimed at banks being read across to insurers without reference to the different business models; and a more aggressive supervision and enforcement regime; resulting in additional capital requirements and increased costs of regulation.	We seek to engage with regulators and legislators at a UK and European level to assist in the evaluation of change and influence the development of outcomes that meet the needs of all stakeholders. We encourage our executive and senior management to actively participate in a broad range of industry, regulatory and Intra-governmental forums including the ABI, FSA and EU bodies.

mortality, catastrophe and other assumption uncertainties

Reserves for long-term business may require revision as a result of changes in experience, regulation or legislation

The writing of long-term insurance business necessarily requires the setting of assumptions for long-term trends in factors such as mortality, persistency, valuation interest rates, expenses and credit defaults. Extreme events may require recalibration of these assumptions. Forced changes in reserves can also be required as a result of changes in regulation or legislation.

Principal uncertainties In writing annuity business, pricing requires assumptions to be made for factors such as improvements in the general health of the population and advances in medical science. For protection business assumptions are made for the expected level of mortality, taking account of factors such as pandemics.	Potential impact We undertake significant analysis of longevity and mortality risks to ensure an appropriate premium is charged for the risks we take on and that our reserves remain appropriate. However, extreme events, such as a rapid advance in medical science leading to significantly enhanced annuitant longevity or an event causing widespread mortality/morbidity, coupled with a reinsurer default, may require assumptions to be recalibrated impacting profitability and capital.	Mitigation We remain focused on developing a comprehensive understanding of annuitant mortality, including the development of 'cause of death' models using UK population data and engaging directly with the medical profession and scientific community. For our protection and general insurance businesses we continue to evolve and develop our underwriting capabilities.
There is an increasing trend for legislative intervention in the pricing of products irrespective of differing risk factors such as age or gender. There is a risk that European or national legislators interpret the application of legislation in a way that has unforeseen adverse consequences for insurance businesses and their customers or introduce a retrospection to requirements.	Our product pricing assumptions for annuities, protection and other insurance business reflect the risks we assess as being exposed to. A requirement to price products irrespective of differing risk factors, such as age or gender, will potentially increase the costs of insurance to certain consumers, reducing their propensity to purchase. Any retrospection of legislation would impact required reserves.	We continue to highlight to legislators the benefits to consumers of being able to price insurance products on the risks implicit in that business. We are supporting the UK legislator on the implementation approach for the 2011 ruling by the European Court of Justice (ECJ) that insurance product pricing must be gender neutral from 21 December 2012, without retrospective application to existing business.

industry change

The Group may not maximise opportunities from structural and other changes within the financial services sector

The financial services sector continues to go through a period of change. This presents a range of challenges as well as opportunities to providers of sufficient scale such as Legal & General.

Principal uncertainties The UK Government is consulting on a broad range of changes to the provision of state benefits, with Increased focus on self provision. Such changes will affect the way consumers approach protecting their income and planning for retirement. Separately, the implementation of the RDR and Solvency II will change the competitive landscape in which we operate.

Potential impact Significant changes in the markets in which we operate may require the review and realignment of elements of our business strategy. A failure to be sufficiently responsive to potential change and understand the implication to our businesses, or the incorrect execution of change may impact the achievement of our strategic objectives.

Mitigation We seek to ensure we have market leading expertise in the core fields in which we operate, and actively focus on retaining the best personnel with the knowledge to design and support our products, and manage their evolution as market and consumer requirements change. We believe we have a strong record on responding to change.

business processes

A material failure in our business processes may result in unanticipated loss or reputation damage

The financial services sector continues to go through a period of change. This presents a range of challenges as well as opportunities to providers of sufficient scale such as Legal & General.

Principal uncertainties Our product manufacturing, distribution  and administration activities, together with the management of a substantial portfolio of investment assets, necessarily requires significant investment in IT systems, people and processes to ensure that we meet the expectations of our customers, as well as complying with regulatory, legal and financial reporting requirements. The complexity of activities can increase our exposure to operational and reputation risks.

Potential impact We have constructed our framework of internal controls to minimise the risk of unanticipated loss or damage to our reputation. We seek to continually review and improve the framework. Our internal audit function also provides independent assurance on the adequacy and effectiveness of our controls. However, no system of internal control can completely eliminate the risk of error, financial loss, fraudulent actions or reputational damage.

Mitigation In October 2011 we completed the relocation of our UK data centre to IBM. The migration will further mitigate the IT system risks to which we are exposed. We also continue to invest in new systems, including those to support our Annuities, Group Protection General and Investment Management businesses.

Enquiries
Investors:
Wadham Downing	Group Financial Controller	020 3124 2120
Andrew Jones	Head of Group Financial Reporting	020 3124 2054
Kate Vennell	Head of Investor Relations	020 3124 2150
Media:
John Godfrey	Group Communications Director	020 3124 2090
Richard King	Head of Media Relations	020 3124 2095
Andrew Grant	Tulchan Communications	020 7353 4200

Notes

A copy of this announcement can be found in "Results", under the "Financial information" section of our shareholder website at http://www.legalandgeneralgroup.com/investors/results.cfm.

A presentation to analysts and fund managers will take place at 09.30 GMT today at One Coleman Street, London, EC2R 5AA. There will be a live webcast of the presentation which can be accessed at

http://investor.legalandgeneral.com/investors/results.cfm. A replay will be available on this website later today.

There will be a live listen only teleconference link to the presentation.  Details below:

Country You Are Dialling In From		Number You Should Dial
United Kingdom	020 3059 5845
All other locations	[phone]

A replay will be available on this website later today.

United Kingdom	0121 2604 861
All other locations	+ 44 121 2604 861

PARTICIPANT PIN:  7632105 FOLLOWED BY #

Financial Calendar 2012	Date
Ex dividend date	18 April 2012
Record date	20 April 2012
Annual General Meeting	16 May 2012
Payment date of 2011 final dividend	23 May 2012
Half Year Results 2012	26 July 2012

The Preliminary Results for the year ended 31 December 2011 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory accounts for 2010 and 2011 have been audited by PricewaterhouseCoopers LLP and their reports were unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's 2010 statutory accounts have been filed with the Registrar of Companies.

Forward looking statements

This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve uncertainty because they relate to future events and circumstances which are beyond Legal & General's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact of these events and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in these forward-looking statements and persons reading this announcement should not place reliance on forward-looking statements. These forward-looking statements are made only as at the date on which such statements are made and Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

Directors' Responsibility Statement (extracted from the 2011 annual report and accounts)

The directors are responsible for preparing the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).  In preparing the group financial statements, the directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board (IASB). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the company for that period.  In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether IFRSs as adopted by the European Union and IFRSs issued by IASB and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the group and parent company financial statements respectively;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

 Each of the directors listed below confirms that to the best of their knowledge:

(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group as a whole; and

(b) the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and Group as a whole, together with a description of the principal risks and uncertainties that they face.

J. M. Stewart	Chairman
T.J. Breedon	Group Chief Executive
M.E. Fairey	Non-Executive Director
Dame C.H.F. Furse	Non-Executive Director
M.J. Gregory	Group Executive Director (Savings)
R.H.P. Markham	Non-Executive Director
J.B. Pollock	Group Executive Director (Risk)
S.G. Popham	Non-Executive Director
N. Prettejohn	Non-Executive Director
H.E. Staunton	Non-Executive Director
N.D. Wilson	Group Chief Financial Officer
J.S Wilson	Non-Executive Director

NOTES

 

END

 

 

FR SFSFADFESEDD