Statement re Restatement of I

RNS Number : 7933I

Legal & General Group Plc

18 March 2010

 



The following replaces the Restatement of IFRS operating profit, RNS number 7902I, released today at 11.01am.  In the fifth column of the table, under FY 2008 it should read Reported not Restated.

Legal & General Group plc
Stock Exchange Release
18 March 2010

Restatement of IFRS operating profit

As indicated at the half year results in August 2009, Legal & General has reviewed the definition of operating profit on an IFRS basis which is one of the Group's key performance indicators.  These changes do not affect the underlying performance of the Group but better reflect the profit which is under management's control.  Under the new definition, IFRS operating profit provides a more accurate measure of management performance, more closely aligning with operating profit on the European Embedded Value (EEV) basis.  Operating profit reflects the long term nature of operations within the businesses.  There are four components to the restatement:

Removal of investment variances
For our non profit Risk and Savings businesses, the difference between the actual investment return (net of the corresponding liability movement) and the expected investment return will be reported below operating profit in the Variation from longer term investment return. For 2008 this includes removing the £650 million credit default provision from Risk operating profit. This is consistent with the treatment of investment return on shareholder assets and the treatment of investment return on an EEV basis.  For 2008 these investment variances were £774m negative.  For H1 2009 they were £366m negative.

Removal of deferred tax variances
IFRS reporting requires deferred tax balances to be presented on an undiscounted basis. This, coupled with market value unit pricing structure, creates an accounting mismatch within unit linked funds which will be presented below operating profit.  For 2008 these deferred tax variances were £8m positive.  For H1 2009 they were £11m negative

Removal of pension scheme movements
Movements in the accounting value of annuities held by defined benefit pension schemes are driven by interest rate changes which are outside of management control. These will be removed from the Group capital and financing element of operating profit on an IFRS and EEV basis.  For 2008 these effects were £15m negative.  For H1 2009 they were £4m positive.

Removal of own debt holdings
The impact of eliminating own debt holdings is reflected below operating profit.  This arises from the difference between the carrying value of the debt and the fair value of the asset held in the balance sheet.  In previous reporting periods this amount has been nil.

The financial effect of the adjustments is provided below.

The financial effect of the adjustments is provided below.

IFRS profit restatement	H1 2009	H1 2009	FY 2008	FY 2008
£m	Restated	Reported	Restated	Reported
Risk	223	(128)	222	(603)
Savings	21	(5)	7	66
Investment Management	70	70	165	165
International	65	65	59	59
Group capital and financing	25	29	139	124
Operating profit/(loss)	404	31	592	(189)
Variation from longer term investment return	(527)	(154)	(2,020)	(1,239)
Property losses attributable to minority interests	(20)	(20)	(63)	(63)
Loss from continuing operations before tax	(143)	(143)	(1,491)	(1,491)
Tax credit	52	52	361	361
Loss for the period	(91)	(91)	(1,130)	(1,130)

Preliminary results for 2009 will be reported on the restated basis when they are announced on 23 March 2010.

Enquiries

Investors:
Matt Hotson	Director, Investor Relations and Strategy	020 3124 2150
Damian O'Reilly	Investor Relations Manager	020 3124 2151
Adrian Liew	Investor Relations Manager	020 3124 2044
Ching-Yee Chan	Investor Relations Co-ordinator	020 3124 2345
Media:
John Godfrey	Group Communications Director	020 3124 2090
Richard King	Head of Media Relations	020 3124 2095
James Bradley	Tulchan Communications	020 7353 4200
Mal Patel	Tulchan Communications	020 7353 4200

 

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