3rd Quarter Results

Legal & General Group PLC 26 October 2007 LEGAL & GENERAL GROUP PLC 9 MONTH 2007 NEW BUSINESS RESULTS Highlights: ----------- • UK new life and pensions growth of 11% to £869m APE(1) o Protection performed well despite slowing housing market o Annuity sales 1% higher o Savings product sales up 19% • Exceptional new Investment Management Business of £32.4bn • International sales up 14% Tim Breedon, Group Chief Executive, said: 'Legal & General has delivered robust new life and pensions business growth in the first nine months of 2007, building on last year's record levels. 'Volatility in equities and bonds, a slowdown in the housing market and tightening credit conditions have not made investment decisions any easier for our customers. However, it is in these more difficult markets that the fundamental strengths of our business matter most: a wide range of good value for money products, broad distribution capability, a commitment to deliver a positive experience to our customers, all backed by our brand and financial strength. 'Our investment business, Legal & General Investment Management, delivered outstanding growth during the quarter. Our life and pensions savings businesses also continued to deliver good growth. Our risk businesses have performed well in the face of short term challenges in housing and annuity markets. 'It is an important strength of our business that we can pursue opportunities wherever they emerge across a broad range of products and distribution channels. Looking ahead, we will continue to refine our product mix, add distribution, and make increasing use of the extensive opportunities for synergy that exist between our businesses.' (1) Annual Premium Equivalent comprises new annual premiums together with 10% of single premiums. UK life and pensions new business: up 11% to £869m APE ====================================================== Protection: down 2% at £168m APE -------------------------------- Protection business remained robust. Individual protection - including mortgage related business - grew by 1% in the first nine months. Individual protection volumes in Q3 - at £41m of APE - were moderately higher than in Q2 despite signs of a softening housing market. We estimate that, in the second quarter of this year, we further extended our market share to over 21%. Group risk sales were down 10% to £45m, but £16m in the third quarter shows some encouraging progression over the earlier quarters of the year. Outlook: The pace of housing market activity over the next 12 months remains uncertain - mortgage transactions underpin a large proportion of the individual protection contracts we sell at present. Industry sales of individual protection will likely struggle to grow over the next year if current housing market conditions persist. However we expect once again to outperform the industry next year, in particular as sales from our relationship with Nationwide Building Society begin to contribute from early 2008. Group risk sales remain subdued after a period of heightened activity in recent years. Against this backdrop we intend to invest further in our product and service in 2008 in order to build on our position as one of the major players in this market. Annuities(2): up 1% to £122m APE -------------------------------- Sales performance in the annuity business differs between individual and corporate (bulk purchase) annuity sales. Our individual business grew strongly in the year to date up 53%. Bulk purchase annuity (BPA) volumes were down 32% year to date and 50% in the third quarter. This reflected a fall in the number of schemes coming to market in the period. Recent changes to the operation of the Financial Assistance Scheme (FAS) have, temporarily, significantly limited the number of small schemes with insolvent employers able to buy out their liabilities. In addition capital market volatility - which drives pension scheme funding levels - has led to delays in some buyout decisions. Outlook: With the effect of the temporary - for a period of nine months from September - suspension in sales from part of the smaller schemes market as described above, underlying sales in terms of scheme numbers are likely to remain at lower levels. Reported headline quarterly sales will therefore be increasingly determined by the closure of larger schemes for a period of time. While the timing of closure of such larger schemes remains uncertain, quotation activity remains very high. Individual annuity business has strong long-term growth opportunities as more individuals reach retirement and do so with greater levels of accumulated pension savings. Short term volumes will continue to be determined by the market's capacity to meet our required level of return on shareholders' capital. Recent experience has been buoyant. We are pleased with the early progress in our pilot scheme that prices individual annuities based on postcode information. We intend to begin rolling this project out to a wider distribution audience in coming periods. Unit linked bonds: up 9% to £198m APE ------------------------------------- After rapid development in the competitive environment over 2006, affecting both volumes and margins in this marketplace, volumes remained robust in the first nine months of the year, up 9%. Outlook: There appears to be little sign yet of significant deterioration in general confidence in long term savings as a result of equity market volatility. As we enter the fourth quarter we have reintroduced an improved customer allocation offer promoting uptake of our open architecture portfolio bond. Recent proposed changes to capital gains tax for individuals outlined in the Pre-Budget Report have the potential to reduce the attraction of some bond products for a proportion of customers relative to other forms of investment. The industry is in discussion with HM Treasury in this respect. It remains a strength of our business that we can offer customers a wide choice of wrappers for their long-term savings, be it pensions, bonds or unit trusts, and combine this with leading product design and administration. Pensions(2): up 30% to £193m APE -------------------------------- Buoyant conditions for pension sales post A-day continued in the third quarter, up 9% year on year in Q3, and 30% year to date. We have seen growth in both individual and grouped individual (corporate client) business. Our Portfolio Plus SIPP, written on the Cofunds platform is performing strongly. Investors continue to pursue opportunities to improve and consolidate their pension provision, taking advantage of the greater flexibility which now exists in this market and the investment choice offered by open architecture investment solutions. Outlook: We continue to see greater opportunity now, than we have for many years, to build our position in the pensions market profitably and sustainably. Individuals continue to capitalise on the flexibility afforded by the change in regulations post A-day. Tender activity in the group schemes market remains high. We launched our Group SIPP product earlier this year - it is early days for this product, but it has been received well. We will continue to invest in our product and distribution capability to reinforce our ability to capitalize on these opportunities. With-profits: up 19% to £188m APE --------------------------------- 94% of all sales written in the with-profits part of the fund are pensions business, including new unit linked pensions which have the option to invest in a with-profits fund. As a result, the performance and outlook for these sales is driven in large part by the same themes as the non-profit pensions discussed above. Combining with-profits and non profit pensions business, sales grew 26% year to date, to £369m. In addition we saw a 17% increase in sales of with-profit bonds to £7m of APE. UK Retail investments: underlying retail sales stable ===================================================== Sales of underlying retail unit trust and ISA business were stable at £167m (2006 YTD: £168m). In 2006 we saw exceptional levels of institutional and wholesale inflows into our unit trust products of £265m for the nine month period - this has dropped to £64m in the same period of 2007 leading to the headline reduction in overall sales of unit trusts of 47%. Activity in the institutional and wholesale area is volatile, with total sales in any period skewed by the incidence of very few exceptionally large transactions. We expect to continue to attract substantial new business flows from institutional and wholesale clients in future, although the timing of new business flows from this source is inevitably unpredictable. International new business: up 14% to £92m APE ============================================== Stronger sales trends in the US business continued in the third quarter, driving 9 month sales growth of 16% in local currency terms. In France, sales of savings products were strong, stimulated by regulatory changes. Overall sales growth was 47%. In the Netherlands, sales remain at lower levels, down 12% in local currency terms, reflecting ongoing challenging industry conditions. Investment management: new business of £32.4bn - up 120% ======================================================== 2007 is proving an exceptional year for new business at Legal & General Investment Management. £32.4bn of new mandates were won in the first nine months of the year, already 57% higher than our record full year in 2006 of £20.7bn. These results included the first tranche of funds transferring from clients of Hermes, some £7bn in the third quarter. We expect the bulk of the remaining funds from the Hermes relationship to be transferred in the fourth quarter. Outlook: Our core product offering to pension scheme clients remains very strong, as does our reputation for superior client service. We aim to continue to win significant business in coming years, with an increasing proportion coming from new products. Due to the exceptional performance so far this year, however, 2008 sales can be expected to return to more normal levels in 2008. (2) Business not written in the with-profits part of the fund Enquiries to: ------------- Investors: Jonathan Maddock, Head of Investor Relations 020 3124 2150 Nicola Marshall, Investor Relations Manager 020 3124 2151 Media: John Morgan, Media Relations Director 020 3124 2095 Anthony Carlisle, Citigate Dewe Rogerson 07973 611888 Notes: ------ A copy of this announcement can be found in the News and Results section of our shareholder web site at http://investor.legalandgeneral.com/releases.cfm Issued share capital at 30 September 2007 was 6,435,943,438 shares of 2.5p each. Financial Calendar: ------------------- -------------------------------------------------------------------------------- Q4 2007 New business results 24 January 2008 -------------------------------------------------------------------------------- 2007 Preliminary results 13 March 2008 -------------------------------------------------------------------------------- Q1 2008 New business results 24 April 2008 -------------------------------------------------------------------------------- 2008 AGM 14 May 2008 -------------------------------------------------------------------------------- 2008 Interim and new business results 1 August 2008 -------------------------------------------------------------------------------- Q3 2008 New business results 23 October 2008 -------------------------------------------------------------------------------- Q4 2008 New business results 29 January 2009 -------------------------------------------------------------------------------- Forward-looking statements: --------------------------- This document may contain certain forward-looking statements with respect to certain of Legal & General Group Plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Legal & General Group Plc'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 governmental and regulatory authorities, the impact of competition, the timing impact and other uncertainties of future mergers or combinations within relevant industries. As a result, Legal & General Group Plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Legal & General Group Plc's forward-looking statements. 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. Legal & General Group Plc Unaudited New Business Premiums Nine months to 30 September 2007 WORLDWIDE NEW BUSINESS Nine months to 30 September 2007 Nine months to 30 September 2006 Annual Single APE Annual Single APE Increase/ premiums premiums premiums premiums (decrease) £m £m £m £m £m £m % ----------------------------------------------------------------------------------------------------------------------- Protection - Individual protection 123 - 123 122 - 122 1% - Group protection 45 - 45 50 - 50 (10%) ----------------------------------------------------------------------------------------------------------------------- 168 - 168 172 - 172 (2%) Annuities - Individual - 724 72 - 472 47 53% - Bulk purchase - 497 50 - 743 74 (32%) ----------------------------------------------------------------------------------------------------------------------- - 1,221 122 - 1,215 121 1% Savings - Unit linked bonds - 1,975 198 - 1,813 181 9% - Individual pensions - stakeholder and other non profit 104 889 193 95 535 148 30% - DWP rebates - 4 - - 4 - N/A ----------------------------------------------------------------------------------------------------------------------- 104 2,868 391 95 2,352 329 19% With-profits - Annuities - 45 5 - 66 7 (29%) - Individual pensions 101 581 159 90 385 129 23% - DWP rebates - 112 11 - 136 14 (21%) - Group pensions 6 3 6 2 1 2 200% - Bonds - 70 7 - 60 6 17% ----------------------------------------------------------------------------------------------------------------------- 107 811 188 92 648 158 19% ----------------------------------------------------------------------------------------------------------------------- 379 4,900 869 359 4,215 780 11% UK retail investment business - Unit trusts 5 1,747 180 1 3,778 379 (53%) - ISAs 12 385 50 15 390 54 (7%) ----------------------------------------------------------------------------------------------------------------------- 17 2,132 230 16 4,168 433 (47%) ----------------------------------------------------------------------------------------------------------------------- Total UK new business 396 7,032 1,099 375 8,383 1,213 (9%) ----------------------------------------------------------------------------------------------------------------------- - USA 34 - 34 32 - 32 6% - Netherlands 8 121 20 9 130 22 (9%) - France 16 201 36 11 145 25 44% ----------------------------------------------------------------------------------------------------------------------- 58 322 90 52 275 79 14% France retail investment business - 20 2 - 17 2 0% ----------------------------------------------------------------------------------------------------------------------- Total international new business 58 342 92 52 292 81 14% ----------------------------------------------------------------------------------------------------------------------- Total worldwide new business 454 7,374 1,191 427 8,675 1,294 (8%) ----------------------------------------------------------------------------------------------------------------------- WORLDWIDE NEW BUSINESS APE QUARTERLY PROGRESSION 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 30.09.07 30.06.07 31.03.07 31.12.06 30.09.06 30.06.06 31.03.06 £m £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------------------------- Protection - Individual protection 41 40 42 45 44 39 39 - Group protection 16 15 14 14 17 16 17 ----------------------------------------------------------------------------------------------------------------------- 57 55 56 59 61 55 56 Annuities - Individual 24 23 25 24 26 16 5 - Bulk purchase 12 21 17 29 24 22 28 ----------------------------------------------------------------------------------------------------------------------- 36 44 42 53 50 38 33 Savings - Unit linked bonds 62 62 74 80 60 60 61 - Individual pensions - stakeholder and other non profit (1) 60 64 69 59 55 52 41 - DWP rebates - - - 1 - - - ----------------------------------------------------------------------------------------------------------------------- 122 126 143 140 115 112 102 With-profits - Annuities 2 1 2 1 3 2 2 - Individual pensions 48 56 55 36 42 46 41 - DWP rebates(2) 4 6 1 2 10 2 2 - Group pensions - 5 1 - 1 - 1 - Bonds 2 2 3 2 2 2 2 ----------------------------------------------------------------------------------------------------------------------- 56 70 62 41 58 52 48 ----------------------------------------------------------------------------------------------------------------------- 271 295 303 293 284 257 239 UK retail investment business - Unit trusts 51 63 66 217 78 191 110 - ISAs 12 24 14 14 13 27 14 ----------------------------------------------------------------------------------------------------------------------- 63 87 80 231 91 218 124 ----------------------------------------------------------------------------------------------------------------------- Total UK new business 334 382 383 524 375 475 363 ----------------------------------------------------------------------------------------------------------------------- - USA 12 11 11 10 11 10 11 - Netherlands 6 6 8 7 6 7 9 - France 9 17 10 7 5 13 7 ----------------------------------------------------------------------------------------------------------------------- 27 34 29 24 22 30 27 France retail investment business - 1 1 - 1 1 - ----------------------------------------------------------------------------------------------------------------------- Total international new business 27 35 30 24 23 31 27 ----------------------------------------------------------------------------------------------------------------------- Total worldwide new business 361 417 413 548 398 506 390 ----------------------------------------------------------------------------------------------------------------------- (1) Includes the re-categorisation of £1m APE in Q1 2007 and £6m Q2 2007 previously reported as non profit DWP rebates. Total non profit pensions APE is unchanged. (2) Includes the re-categorisation of £1m APE in Q1 2007 and £6m Q2 2007 previously reported as with-profit individual pensions. Total with-profit APE is unchanged. INVESTMENT MANAGEMENT Nine months to 30 September Increase/ 2007 2006 (decrease) £m £m % ----------------------------------------------------------------------------------------------------------------------- UK Managed Funds - Pooled funds 29,557 12,077 145% - Segregated funds 2,373 607 291% ----------------------------------------------------------------------------------------------------------------------- 31,930 12,684 152% UK Other 445 2,005 (78%) ----------------------------------------------------------------------------------------------------------------------- Total new funds 32,375 14,689 120% ----------------------------------------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT QUARTERLY PROGRESSION 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 3 months to 30.09.07 30.06.07 31.03.07 31.12.06 30.09.06 30.06.06 31.03.06 £m £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------------------------- UK Managed Funds - Pooled funds 13,989 10,646 4,922 5,801 3,814 4,500 3,763 - Segregated funds 1,925 380 68 1 8 538 61 ----------------------------------------------------------------------------------------------------------------------- 15,914 11,026 4,990 5,802 3,822 5,038 3,824 UK Other 235 141 69 159 109 157 1,739 ----------------------------------------------------------------------------------------------------------------------- Total new funds 16,149 11,167 5,059 5,961 3,931 5,195 5,563 ----------------------------------------------------------------------------------------------------------------------- INTERNATIONAL OPERATIONS IN LOCAL CURRENCY Nine months to 30 September 2007 Nine months to 30 September 2006 Increase/ Annual Single APE Annual Single APE (decrease) premiums premiums premiums premiums % ----------------------------------------------------------------------------------------------------------------------- USA ($m): 67 - 67 58 - 58 16% Netherlands (€m): 11 178 29 14 189 33 (12%) France (€m): - Life and pensions 23 297 53 15 212 36 47% - Unit trusts - 29 3 - 24 2 50% ----------------------------------------------------------------------------------------------------------------------- UK INDIVIDUAL APE BY CHANNEL Nine months to 30 September 2007 Annual Single Total APE % of £m £m £m total ----------------------------------------------------------------------------------------------------------------------- Independent financial advisers 251 4,503 701 70% Tied 79 1,878 267 27% Direct 15 151 30 3% ----------------------------------------------------------------------------------------------------------------------- Total 345 6,532 998 100% ----------------------------------------------------------------------------------------------------------------------- Nine months to 30 September 2006 Annual Single Total APE % of £m £m £m total ----------------------------------------------------------------------------------------------------------------------- Independent financial advisers 218 4,427 661 61% Tied 89 3,047 394 36% Direct 16 165 32 3% ----------------------------------------------------------------------------------------------------------------------- Total 323 7,639 1,087 100% ----------------------------------------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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