Publication of FSA Return

Legal & General Group PLC
07 April 2005

7 April 2005



                     Legal & General Assurance Society Ltd.

         Publication of FSA Return for the year ended 31 December 2004



On 31 March 2005, Legal & General Assurance Society Ltd (Society) submitted its
Annual Return (Return) to the Financial Services Authority (FSA) for the year
ended 31 December 2004.



Commenting, Andrew Palmer, Group Director (Finance) said: 'The Return shows that
the total capital resources available to Society of £7.0bn exceed the total
capital requirement by £4.0bn.  These figures underline the financial strength
which underpins our strategy of delivering profitable market share growth.'



This is the first Return to be prepared under the rules of the FSA's Prudential
Sourcebook which came into effect on 31 December 2004.



Society's Return for 2004 is available in pdf format on the Legal & General
website at http://investor.legalandgeneral.com/financialreports.cfm. This
announcement gives a brief overview of the key solvency aspects of the Return.



The Return implements the FSA's 'twin peaks' approach to liability measurement
and capital requirements. Under this approach, an insurer is required to
calculate the liabilities and capital requirements for its with-profits business
using both a regulatory (Peak 1) and a realistic (Peak 2) basis and to have
assets sufficient to cover both results. For other long term insurance business,
only the regulatory basis is used.



The Return also implements the FSA's approach to capital tiering, which sets
minimum requirements for the quality and loss absorbency of an insurer's
capital.



References to lines or pages in parentheses below refer to the relevant
locations in the Return.





Components of capital resources, Form 3 (page 4)



This form sets out the capital resources available to Society, divided between
Tier 1, Upper Tier 2 and Lower Tier 2. These categories are specified by the FSA
to recognise the ability of different types of capital to absorb losses. Core
Tier 1 capital, the highest quality, includes equity capital, retained profits
and surpluses in long term insurance funds.



Society's capital resources for its long term insurance business, before
implicit items, are £6.2bn (line 79), of which £5.9bn (line 39) is Tier 1.





Statement of solvency - Long term insurance business, Form 2 (page 2)



This form compares the capital resources of Society's long term insurance
business with the FSA's capital requirements.



The Minimum Capital Requirement (MCR) (1) of £2.0bn is shown in line 34.  Tier 1
capital must cover at least 50% of the MCR. Tier 1 plus Upper Tier 2 capital
must cover 75% of the MCR.



Line 35 shows that Tier 1 capital exceeds the required amount by £4.9bn. Line 36
shows that Tier 1 plus Upper Tier 2 capital exceeds the required amount by
£4.7bn. Neither of these two excess amounts includes any credit for an implicit
item.



The Enhanced Capital Requirement (ECR) for Society's long term business of
£3.0bn is shown in line 38.  This is the MCR (line 34) plus the With-Profits
Insurance Capital Component (line 37) of £995m derived from Form 18 and
explained below.



The total capital resources available to Society of £7.0bn (line 13), which
include an implicit item of £755m in respect of non-profit business, exceed the
total capital requirement by £4.0bn (line 42).



Footnote:

(1) This includes the long term insurance capital requirement plus resilience
capital requirement. Previously, these two capital items were generally known as
the solvency margin and resilience reserve respectively.





With-Profits Insurance Capital Component, Form 18 (page 21)



This form gives effect to the FSA's twin peaks approach for with-profits
business by comparing the excess capital in the with-profits fund on both the
regulatory (Peak 1) and realistic (Peak 2) bases. The regulatory excess is then
limited, if necessary, to the realistic excess by means of an additional Peak 1
capital requirement, the With-Profits Insurance Capital Component (WPICC).



Line 49 shows that the excess capital on a regulatory basis (Peak 1) is £1,215m.
The excess capital on a realistic basis (Peak 2) is lower at £220m, as shown in
line 51. This is largely because liabilities calculated on a realistic basis
include an allowance for the value of future bonuses which for these purposes
are assumed to be added to with-profits policies. Therefore, a WPICC of £995m
(line 64) is added to Society's Peak 1 capital requirements.





Realistic balance sheet, Form 19 (page 22)



This form reports the realistic (Peak 2) valuation of the with-profits part of
Society's long term fund (with-profits fund), including the future costs of
guarantees, options and smoothing for with-profits policies (lines 41 to 44).



Line 68 of the Return shows that the Working Capital of the with-profits fund is
£864m. This is the excess of the realistic assets over the realistic liabilities
and is known as the with-profits estate.  It takes account of management actions
in relation to bonus policy but not of any other actions available to management
and assumes an unchanged investment mix from that in effect on 31 December 2004.



The required Risk Capital Margin (RCM) for the with-profits fund is £643m (line
65). This value is obtained by recalculating the realistic assets and
liabilities in financially stressed conditions.



The RCM was fully covered by the Working Capital of the with-profits fund at the
end of 2004. The increase in the RCM from £370m as at 30 June 2004 is
principally due to the more stringent stress tests required by the Prudential
Sourcebook.



The Society's Board remains committed to the objective of ensuring that the
assets of the with-profits fund are sufficient to meet its liabilities without
the need for additional capital.





Financial strength ratios



Traditionally, the financial strength of insurance companies has been measured
using a Free Asset Ratio calculated from Form 9 of the old FSA return. The new
Return does not lend itself readily to reproducing this ratio. However, for
information, the ratio is shown below:


                                          31 Dec 2004                31 Dec 2003
                                                    %                          %

Form 9 ratio                                     15.7                       13.0

Form 9 ratio excluding implicit items            13.9                       10.4







Enquiries


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


Media:
John Morgan, Media Relations Director                            020 7528 6213








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