Information  X 
Enter a valid email address

Legal & General Grp (LGEN)

  Print      Mail a friend

Wednesday 05 August, 2020

Legal & General Grp

L&G Half Year Results 2020 Part 2

RNS Number : 1425V
Legal & General Group Plc
05 August 2020
 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

1. Independent review report to Legal & General Group Plc    Page 29

 

Conclusion 

We have been engaged by the Legal & General Group Plc ("the Group") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash flows (pages 42 to 47) and the related explanatory notes to the interim financial statements (pages 31 to 41 and 48 to 67). 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU

Our responsibility 

Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Group in accordance with the terms of our engagement to assist the Group in meeting the requirements of the DTR of the UK FCA.  Our review has been undertaken so that we might state to the Group those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group for our review work, for this report, or for the conclusions we have reached. 

 

 

 

 

 

 

 

 

 

 

 

 

Rees Aronson

 

for and on behalf of KPMG LLP 

 

Chartered Accountants  

 

15 Canada Square

London

E14 5GL

4 August 2020

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

    Page 30

 

 

 

 

 

This page is intentionally left blank

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 31

 

2.01 Operating profit#

For the six month period to 30 June 2020

 

 

 

6 months

6 months1

Full year1

 

 

 

2020

2019

2019

 

 

Notes

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

 

 

 

 

 

Legal & General Retirement (LGR)

 

2.03

721

655

1,569

 - LGR Institutional (LGRI)

 

 

585

524

1,216

 - LGR Retail (LGRR)

 

 

136

131

353

Legal & General Investment Management (LGIM)

 

2.04

196

192

394

Legal & General Capital (LGC)

 

2.05

123

173

363

Legal & General Insurance (LGI)

 

2.03

88

134

314

 - UK and Other

 

 

57

93

223

 - US (LGIA)

 

 

31

41

91

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit from divisions:

 

 

 

 

 

From continuing operations

 

 

1,128

1,154

2,640

From discontinued operations 2

 

 

26

19

11

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit from divisions

 

 

1,154

1,173

2,651

Group debt costs 3

 

 

(115)

(108)

(208)

Group investment projects and expenses

 

 

(72)

(60)

(157)

COVID-19 costs 4

 

 

(21)

-

-

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

946

1,005

2,286

Investment and other variances

 

2.06

(644)

57

(150)

Losses on non-controlling interests

 

 

(17)

(9)

(24)

 

 

 

 

 

 

Adjusted profit before tax attributable to equity holders

 

 

285

1,053

2,112

Tax expense attributable to equity holders

 

4.05

(12)

(188)

(302)

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

273

865

1,810

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders

 

 

290

874

1,834

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic (pence per share) 5

 

2.07

4.89p

14.74p

30.92p

Diluted (pence per share) 5

 

2.07

4.63p

14.66p

30.75p

 

 

 

 

 

 

 

 

 

 

 

 

1. 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to Legal & General Investment Management (LGIM) within Operating profit from divisions. This has reduced LGIM operating profit by £13m for the six months ended 30 June 2020, and by £29m for the full year 2019.

2. Discontinued operations include the results of the Mature Savings division following the group's announcement to sell the business to ReAssure Limited (2019 included the results of the General Insurance division following its sale to Allianz, which completed on 31 December 2019).

3. Group debt costs exclude interest on non recourse financing.

4. COVID-19 costs reflect incremental operational expenses incurred as a result of COVID-19 and include the provision of IT spend on remote working solutions.

5. All earnings per share calculations are based on profit attributable to equity holders of the company.

This supplementary operating profit information (one of the group's key performance indicators) provides further analysis of the results reported under IFRS and the group believes it provides shareholders with a better understanding of the underlying performance of the business in the period.

 

· LGR represents worldwide pension risk transfer business including longevity insurance (within LGRI), and individual retirement and lifetime mortgages (within LGRR).

· LGIM represents institutional and retail investment management and workplace savings businesses.

· LGC represents shareholder assets invested in direct investments primarily in the areas of housing, urban regeneration, clean energy and SME finance, as well as traded and treasury assets.

· LGI primarily represents UK and US retail protection business, UK group protection and Fintech business.

· Discontinued operations represent the results of the Mature Savings division following the group's announcement to sell the business to ReAssure Limited (2019 included the results of the General Insurance division following its sale to Allianz, which completed on 31 December 2019).

 

Operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and exceptional items. Operating profit therefore reflects longer-term economic assumptions for the group's insurance businesses and shareholder funds, except the operating profit for LGC's trading businesses (which reflects the IFRS profit before tax) and LGIA's non-term business (which excludes unrealised investment returns to align with the liability measurement under US GAAP). Variances between actual and long-term expected investment return assumptions are reported below operating profit, which include any differences between investment return on actual assets and the target long-term asset mix. Exceptional income and expenses which arise outside the normal course of business in the period, such as gains/losses from merger and acquisition, and start-up costs, are also excluded from operating profit.

 

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 32

 

2.02 Reconciliation of release from operations to operating profit# before tax

 

 

 

 

 

 

Changes in

valuation assump- tions

 

 

Operating profit/ (loss) after tax

 

Operating profit/ (loss) before

tax

 

 

New business surplus/ (strain)

Net

release from operations

 

 

 

 

 

Release from operations1

Exper- ience variances

Non-cash items

Other

Tax expense/ (credit)

 

For the six month period

to 30 June 2020

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGR

329

98

427

27

143

21

-

618

103

721

 - LGRI

246

71

317

20

143

21

-

501

84

585

 - LGRR

83

27

110

7

-

-

-

117

19

136

LGIM

173

(11)

162

(5)

-

-

-

157

39

196

 - LGIM (excluding

 

 

 

 

 

 

 

 

 

 

  Workplace Savings) 2

158

-

158

-

-

-

-

158

39

197

 - Workplace Savings 3

15

(11)

4

(5)

-

-

-

(1)

-

(1)

LGC

97

-

97

-

-

-

-

97

26

123

LGI

163

(1)

162

(25)

8

(5)

(81)

59

29

88

 - UK and Other

69

(1)

68

(25)

8

(5)

-

46

11

57

 - US (LGIA)

94

-

94

-

-

-

(81)

13

18

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

762

86

848

(3)

151

16

(81)

931

197

1,128

From discontinued operations 4

21

-

21

-

-

-

-

21

5

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total from divisions

783

86

869

(3)

151

16

(81)

952

202

1,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group debt costs

(93)

-

(93)

-

-

-

-

(93)

(22)

(115)

Group investment projects and expenses

(25)

-

(25)

-

-

-

(30)

(55)

(17)

(72)

COVID-19 costs 5

-

-

-

-

-

-

(17)

(17)

(4)

(21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

665

86

751

(3)

151

16

(128)

787

159

946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Release from operations within US (LGIA) includes £84m of dividends from the US.

2. LGIM (excluding Workplace Savings) includes profits on fund management services.

3. Workplace Savings represents administration business only.

4. Discontinued operations include the results of the Mature Savings division following the group's announcement to sell the business to ReAssure Limited.

5. COVID-19 costs reflect incremental operational expenses incurred as a result of COVID-19 and include the provision of IT spend on remote working solutions.

 

Release from operations for LGR, LGIM - Workplace Savings and LGI UK and Other represents the expected IFRS surplus generated in the period from the in-force non-profit annuities, workplace savings and UK protection businesses using best estimate assumptions. The LGIM release from operations also includes operating profit after tax from the institutional and retail investment management businesses. The LGI release from operations also includes dividends remitted from LGIA. The release from operations within discontinued operations primarily reflects the unwind of expected profits after tax under the risk transfer agreement with ReAssure Limited from the Mature Savings business.

 

 

 

 

 

 

 

 

 

 

 

New business surplus/strain for LGR, LGIM - Workplace Savings and LGI UK and Other represents the cost of acquiring new business and setting up prudent reserves in respect of the new business for UK non-profit annuities, workplace savings and protection, net of tax. The new business surplus and release from operations for LGR, LGIM and LGI excludes any capital held in excess of the prudent reserves from the liability calculation.

 

 

 

 

 

 

 

 

 

 

 

LGR's new business metrics are presented based on a target long-term asset portfolio. At certain period ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may continue to source high quality assets to support that business after the period end, as appropriate, taking into account the alternative risks and rewards of traded credit. At period end, any difference between the actual assets and the long-term asset mix is reflected in investment variance.

 

 

 

 

 

 

 

 

 

 

 

Net release from operations for LGR, LGIM - Workplace Savings, LGI and discontinued operations is defined as release from operations plus new business surplus/(strain).

 

 

 

 

 

 

 

 

 

 

 

Release from operations and net release from operations for LGC and LGIM (excluding workplace savings) represents the operating profit (net of tax).

 

 

 

 

 

 

 

 

 

 

 

See Note 2.03 for more detail on experience variances, changes to valuation assumptions and non-cash items.

 

 

 

 

 

 

 

 

 

 

 

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 33

 

2.02 Reconciliation of release from operations to operating profit# before tax (continued)

 

 

 

 

 

 

 

Changes in

valuation assump- tions

 

 

Operating profit/ (loss) after tax

 

Operating profit/ (loss) before

tax

 

 

New business surplus/ (strain)

Net

release from operations

 

 

 

 

 

Release from operations1

Exper- ience variances

Non-cash items

Other

Tax expense/ (credit)

 

For the six month period

to 30 June 2019

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGR

303

185

488

(37)

33

58

-

542

113

655

 - LGRI

212

165

377

(37)

33

61

-

434

90

524

 - LGRR

91

20

111

-

-

(3)

-

108

23

131

LGIM 2

168

(11)

157

(3)

-

(1)

-

153

39

192

 - LGIM (excluding

 

 

 

 

 

 

 

 

 

 

  Workplace Savings) 3

155

-

155

-

-

-

-

155

39

194

 - Workplace Savings 4

13

(11)

2

(3)

-

(1)

-

(2)

-

(2)

LGC

142

-

142

-

-

-

-

142

31

173

LGI

171

(1)

170

(21)

18

(2)

(59)

106

28

134

 - UK and Other

84

(1)

83

(21)

18

(2)

-

78

15

93

 - US (LGIA)

87

-

87

-

-

-

(59)

28

13

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

784

173

957

(61)

51

55

(59)

943

211

1,154

From discontinued operations 5

15

-

15

-

-

-

-

15

4

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total from divisions

799

173

972

(61)

51

55

(59)

958

215

1,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group debt costs

(87)

-

(87)

-

-

-

-

(87)

(21)

(108)

Group investment projects and expenses 2

(19)

-

(19)

-

-

-

(26)

(45)

(15)

(60)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

693

173

866

(61)

51

55

(85)

826

179

1,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Release from operations within US (LGIA) includes £81m of dividends from the US.

2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £10m and Workplace Savings operating profit by £3m.

3. LGIM (excluding Workplace Savings) includes profits on fund management services.

4. Workplace Savings represents administration business only.

5. Discontinued operations include the results of the Mature Savings and General Insurance divisions following the group's announcements to sell these businesses to ReAssure Limited and Allianz respectively. The sale of the General Insurance division completed on 31 December 2019.

 

# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 34

 

2.02 Reconciliation of release from operations to operating profit# before tax (continued)

 

 

 

 

 

 

Changes

 

 

 

 

Operating

 

 

New

Net

 

in

 

 

Operating

 

profit/

 

Release

business

release

Exper-

valuation

 

 

profit/

Tax

(loss)

 

from

surplus/

from

ience

assump-

Non-cash

 

(loss)

expense/

before

For the year ended

operations1

(strain)

operations

variances

tions

items

Other

after tax

(credit)

tax

31 December 2019

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGR

598

327

925

(53)

390

91

-

1,353

216

1,569

 - LGRI

418

265

683

(40)

313

88

-

1,044

172

1,216

 - LGRR

180

62

242

(13)

77

3

-

309

44

353

LGIM 2

348

(20)

328

(6)

-

(4)

-

318

76

394

 - LGIM (excluding Workplace

 

 

 

 

 

 

 

 

 

 

  Savings) 3

321

-

321

-

-

-

-

321

77

398

 - Workplace Savings 4

27

(20)

7

(6)

-

(4)

-

(3)

(1)

(4)

LGC

295

-

295

-

-

-

-

295

68

363

LGI

259

(7)

252

(11)

44

(12)

4

277

37

314

 - UK and Other

165

(7)

158

(11)

44

(12)

4

183

40

223

 - US (LGIA)

94

-

94

-

-

-

-

94

(3)

91

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

1,500

300

1,800

(70)

434

75

4

2,243

397

2,640

From discontinued operations 5

9

-

9

-

-

-

-

9

2

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total from divisions

1,509

300

1,809

(70)

434

75

4

2,252

399

2,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group debt costs

(168)

-

(168)

-

-

-

-

(168)

(40)

(208)

Group investment projects

 

 

 

 

 

 

 

 

 

 

and expenses 2

(44)

-

(44)

-

-

-

(79)

(123)

(34)

(157)

 

 

 

 

 

 

 

 

 

 

 

Total

1,297

300

1,597

(70)

434

75

(75)

1,961

325

2,286

 

 

 

 

 

 

 

 

 

 

 

1. Release from operations within US (LGIA) includes £81m of dividends from the US.

2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £23m and Workplace Savings operating profit by £6m.

3. LGIM (excluding Workplace Savings) includes profits on fund management services.

4. Workplace Savings represents administration business only.

5. Discontinued operations include the results of the Mature Savings and General Insurance divisions following the group's announcement to sell these businesses to ReAssure Limited and Allianz respectively. The sale of the General Insurance business completed on 31 December 2019.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 35

 

2.03 Analysis of LGR and LGI operating profit

For the six month period to 30 June 2020

 

 

LGR

LGI

LGR

LGI

LGR

LGI

 

6 months

6 months

6 months

6 months

Full year

Full year

 

2020

2020

2019

2019

2019

2019

 

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net release from operations

427

162

488

170

925

252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience variances

 

 

 

 

 

 

 - Persistency

3

(11)

-

(13)

(4)

(9)

 - Mortality/morbidity

33

(17)

5

(8)

6

(5)

 - Expenses

(3)

(5)

(9)

(1)

(23)

-

 - Project and development costs

(4)

-

(4)

(1)

(12)

-

 - Other

(2)

8

(29)

2

(20)

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total experience variances

27

(25)

(37)

(21)

(53)

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes to valuation assumptions

 

 

 

 

 

 

 - Persistency

-

-

-

-

-

(16)

 - Mortality/morbidity

19

4

-

5

352

39

 - Expenses

-

-

-

-

5

-

 - Other 1

124

4

33

13

33

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total changes to valuation assumptions

143

8

33

18

390

44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movement in non-cash items

 

 

 

 

 

 - Acquisition expense tax relief

-

(2)

-

(1)

-

(2)

 - Other 2

21

(3)

58

(1)

91

(10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total movement in non-cash items

21

(5)

58

(2)

91

(12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

-

(81)

-

(59)

-

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit after tax

618

59

542

106

1,353

277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax gross up

103

29

113

28

216

37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit before tax

721

88

655

134

1,569

314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The £124m positive Other assumption change in LGR reflects a reduction in the assumed late retirement factors applied to deferred annuities.

2. LGR Other movement in non-cash items is driven by the net effect of the capitalisation and unwind of future asset management profits on activity managed by LGIM, and is a function of new business volumes and movements in the main unit cost assumptions.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 36

 

2.04 LGIM operating profit

 

 

 

 

 

6 months

6 months

Full year

 

 

 

 

2020

20195

20195

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset management revenue (excluding 3rd party market data) 1,2

 

458

425

889

Asset management transactional revenue 3

 

9

9

23

Asset management expenses (excluding 3rd party market data) 1,2

 

(270)

(240)

(514)

Workplace Savings operating loss 4

 

(1)

(2)

(4)

 

 

 

 

 

 

 

Total LGIM operating profit

 

196

192

394

 

 

 

 

 

 

 

1. Asset management revenue and expenses exclude income and costs of £13m in relation to the provision of third party market data (H1 19: £11m, FY 19: £24m).

2. The ETF operating result is included as part of asset management revenue and expenses.

3. Transactional revenue from external clients includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees. 

4. Workplace Savings represents administration business.

5. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. For the respective 2019 periods this has increased Asset management expenses (H1 19: £10m; FY19: £23m) and reduced the Workplace Savings operating result (H1 19: £3m; FY19: £6m).



 

2.05 LGC operating profit

 

 

 

 

 

 

 

 

 

 

 

6 months

6 months

Full year

 

 

 

 

2020

2019

2019

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct investments1

 

 

36

99

217

Traded investment portfolio including treasury assets2

 

 

87

74

146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total LGC operating profit

 

 

123

173

363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Direct Investments represents LGC's portfolio of assets across future cities (including urban regeneration and clean energy), housing and SME finance.

2. The traded investment portfolio holds a diversified set of exposures across equities, fixed income, multi-asset funds and cash.


 

2.06 Investment and other variances

 

 

 

 

 

 

 

 

 

 

 

6 months

6 months

Full year

 

 

 

 

2020

2019

2019

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment variance 1

 

 

 

(599)

84

(27)

M&A related and other variances

 

 

 

(45)

(27)

(123)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investment and other variances

 

 

 

(644)

57

(150)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Investment variance includes differences between actual and long term expected investment return on traded and real assets, economic assumption changes (e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business, and excludes the yield associated with assets held for future new pension risk transfer business from the valuation discount rate. The investment variance for the six months ended 30 June 2020 is a loss of £599m which is broadly made up of three significant items: 1) £483m in LGI, reflecting a reduction in the discount rate used to calculate protection liabilities, the rate being linked to UK government bond and US Treasury yields rates; 2) £307m in LGC, reflecting unrealised losses on our traded equity portfolio and valuation markdowns on certain retail assets; 3) offset partially by a positive variance of £96m in respect of the defined benefit pension scheme, reflecting the impact of the acquisition of annuity assets from LGR, and the beneficial rate difference between the IAS19 and annuity discount rates.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 37

 

2.07 Earnings per share

 

(a) Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After tax

Per share1

After tax

Per share1

After tax

Per share1

 

 

 

 

6 months

6 months

6 months

6 months

Full year

Full year

 

 

 

 

2020

2020

2019

2019

2019

2019

 

 

 

 

£m

p

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders

290

4.89

874

14.74

1,834

30.92

Less: earnings derived from discontinued operations

 

(19)

(0.32)

(27)

(0.46)

(23)

(0.39)

Basic earnings derived from continuing operations

 

 

271

4.57

847

14.28

1,811

30.53

 

 

 

 

 

 

 

 

 

 

1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the period, excluding employee scheme treasury shares.


 

(b) Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

After tax

Weighted

average

number of

shares

Per share1

For the six month period to 30 June 2020

 

 

 

 

£m

m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders

 

290

5,930

4.89

Net shares under options allocable for no further consideration

 

-

33

(0.03)

Conversion of restricted tier 1 notes

 

 

 

 

-

307

(0.23)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total diluted earnings

 

 

 

 

290

6,270

4.63

Less: diluted earnings derived from discontinued operations

 

(19)

-

(0.30)

Diluted earnings derived from continuing operations

 

271

6,270

4.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After tax

Weighted

average

number of

shares

Per share1

For the six month period to 30 June 2019

 

 

 

 

£m

m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders

874

5,931

14.74

Net shares under options allocable for no further consideration

-

30

(0.08)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total diluted earnings

874

5,961

14.66

Less: diluted earnings derived from discontinued operations

 

(27)

-

(0.45)

Diluted earnings derived from continuing operations

 

847

5,961

14.21

 

 

 

 

 

 

 

 

 

 

 

 

 

After tax

Weighted

average

number of

shares

Per share1

For the six month period to 31 December 2019

 

£m

m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders

1,834

5,932

30.92

Net shares under options allocable for no further consideration

-

33

(0.17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total diluted earnings

1,834

5,965

30.75

Less: diluted earnings derived from discontinued operations

 

(23)

-

(0.39)

Diluted earnings derived from continuing operations

 

1,811

5,965

30.36

1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees and conversion of restricted tier 1 notes.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 38

 

2.08 Segmental analysis

 

Reportable segments

 

The group has four reportable segments that are continuing operations, comprising LGR, LGIM, LGC and LGI, as set out in Note 2.01. Group central expenses and debt costs are reported separately. Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.

 

Continuing operations exclude the results of the Mature Savings division, and for 2019 the General Insurance division, which have been classified as discontinued following the group's announcements to sell these businesses to ReAssure Limited and Allianz respectively.

 

Reporting of assets and liabilities by reportable segment has not been included, as this is not information that is provided to key decision makers on a regular basis. The group's assets and liabilities are managed on a legal entity rather than reportable segment basis, in line with regulatory requirements.

 

Financial information on the reportable segments is further broken down where relevant in order to better explain the drivers of the group's results.

 

(i) Profit/(loss) for the period

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

expenses

Total

 

 

 

 

 

and debt

continuing

 

LGR

LGIM

LGC

LGI

costs1

operations

For the six month period to 30 June 2020

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)#

721

196

123

88

(208)

920

Investment and other variances

80

(3)

(307)

(483)

71

(642)

Losses attributable to non-controlling interests

-

-

-

-

(17)

(17)

 

 

 

 

 

 

 

Profit/(loss) before tax attributable to equity holders

801

193

(184)

(395)

(154)

261

Tax (expense)/credit attributable to equity holders

(99)

(21)

33

70

10

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

702

172

(151)

(325)

(144)

254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

expenses

Total

 

 

 

 

 

and debt

continuing

 

LGR

LGIM2

LGC

LGI

costs2

operations

For the six month period to 30 June 2019

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)#

655

192

173

134

(168)

986

Investment and other variances

(17)

(5)

105

(134)

94

43

Losses attributable to non-controlling interests

-

-

-

-

(9)

(9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before tax attributable to equity holders

638

187

278

-

(83)

1,020

Tax (expense)/credit attributable to equity holders

(110)

(39)

(36)

-

3

(182)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

528

148

242

-

(80)

838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

expenses

Total

 

 

 

 

 

and debt

continuing

 

LGR

LGIM2

LGC

LGI

costs2

operations

For the year ended 31 December 2019

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)#

1,569

394

363

314

(365)

2,275

Investment and other variances

43

(9)

91

(234)

(58)

(167)

Losses attributable to non-controlling interests

-

-

-

-

(24)

(24)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before tax attributable to equity holders

1,612

385

454

80

(447)

2,084

Tax (expense)/credit attributable to equity holders

(234)

(75)

(75)

12

75

(297)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the year

1,378

310

379

92

(372)

1,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Group expenses and debt costs include £21m of incremental costs incurred as a result of COVID-19.

2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £13m for the six months ended 30 June 2020, and by £29m for the full year 2019.

# Operating profit for total continuing operations represents 'Group adjusted operating profit', an alternative performance measure defined in the glossary.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 39

 

2.08 Segmental analysis (continued)

 

(ii) Revenue

 

(a) Total revenue

 

 

 

 

 

6 months

6 months

Full year

 

 

 

 

 

 

2020

2019

2019

 

 

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

 

 

 

 

17,419

48,450

66,786

 

Adjusted for:

 

 

 

 

 

 

 

 

Share of loss/(profit) from associates and joint ventures net of tax

 

 

23

(6)

(17)

 

Gain on acquisition and disposal of subsidiaries, associates and joint ventures

 

 

-

(43)

(51)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from continuing operations 1

 

 

17,442

48,401

66,718

 

 

 

 

 

 

 

 

 

 

1. Continuing operations exclude the results of the Mature Savings division, and for 2019 the General Insurance division,which have been classified as discontinued operations.

 

 

 

(b) Total income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and

Total continuing

 

 

LGR

LGIM1,2

LGI

other3

operations

 

For the six month period to 30 June 2020

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal income

-

102

-

(102)

-

 

External income

6,530

(1,812)

1,016

11,685

17,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

6,530

(1,710)

1,016

11,583

17,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and

Total continuing

 

 

LGR

LGIM1,2

LGI

other3

operations

 

For the six month period to 30 June 2019

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal income

-

89

-

(89)

-

 

External income

10,602

25,376

1,141

11,331

48,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

10,602

25,465

1,141

11,242

48,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and

Total continuing

 

 

LGR

LGIM1,2

LGI

other3

operations

 

For the year ended 31 December 2019

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal income

-

188

-

(188)

-

 

External income

16,385

43,836

1,593

4,972

66,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

16,385

44,024

1,593

4,784

66,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. LGIM internal income relates to investment management services provided to other segments.

 

2. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds.

 

 

3. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.

 

 

 

 

 

 

 

 

 

 

                             

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 40

 

2.08 Segmental analysis (continued)

 

 (c) Fees from fund management and investment contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other1

Total continuing

 

 

 

LGIM

LGI

operations

For the six month period to 30 June 2020

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment contracts

 

 

38

-

-

38

Investment management fees

 

 

467

-

(96)

371

Transaction fees

 

 

9

-

-

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees from fund management and investment contracts 2

514

-

(96)

418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other1

Total continuing

 

 

 

LGIM

LGI

operations

For the six month period to 30 June 2019

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment contracts

 

 

34

-

-

34

Investment management fees

 

 

431

-

(74)

357

Transaction fees

 

 

10

-

(1)

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees from fund management and investment contracts 2

475

-

(75)

400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other1

Total continuing

 

 

 

LGIM

LGI

operations

For the year ended 31 December 2019

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment contracts

 

 

73

1

-

74

Investment management fees

 

 

903

-

(166)

737

Transaction fees

 

 

23

-

-

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees from fund management and investment contracts 2

999

1

(166)

834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.

2. Fees from fund management and investment contracts are a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a).

 

 

 

 

 

 

 

 

 

 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosures on performance and Release from operations    Page 41

 

2.08 Segmental analysis (continued)

 

(d) Other operational income from contracts with customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other

Total continuing

 

 

 

 

LGR

LGIM

LGI

operations

For the six month period to 30 June 2020

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

House building

 

 

 

-

-

-

220

220

Professional services fees

 

 

 

1

1

33

-

35

Insurance broker

 

 

 

-

-

13

-

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other operational income from contracts with customers1

1

1

46

220

268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other

Total continuing

 

 

 

 

LGR

LGIM

LGI

operations

For the six month period to 30 June 2019

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

House building

 

 

 

-

-

-

454

454

Professional services fees

 

 

 

1

1

43

-

45

Insurance broker

 

 

 

-

-

17

-

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other operational income from contracts with customers1

1

1

60

454

516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LGC and other

Total continuing

 

 

 

 

LGR

LGIM

LGI

operations

For the year ended 31 December 2019

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

House building

 

 

 

-

-

-

1,056

1,056

Professional services fees

 

 

 

2

2

91

-

95

Insurance broker

 

 

 

-

-

34

-

34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other operational income from contracts with customers1

2

2

125

1,056

1,185

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Total other operational income from contract with customers is a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a) and excludes the share of profit/loss from associates and joint ventures and gain on acquisition and disposal of subsidiaries, associates and joint ventures.

 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 42

 

3.01 Consolidated Income Statement

 

 

6 months

6 months

Full year

 

 

 

2020

2019

2019

 

For the six month period to 30 June 2020

Notes

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

Gross written premiums

 

5,497

8,745

15,203

 

Outward reinsurance premiums

 

(1,303)

(1,522)

(3,452)

 

Net change in provision for unearned premiums

 

10

-

(66)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

4,204

7,223

11,685

 

Fees from fund management and investment contracts

 

418

400

834

 

Investment return

 

12,552

40,262

53,014

 

Other operational income

 

245

565

1,253

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

2.08

17,419

48,450

66,786

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

Claims and change in insurance contract liabilities

 

8,366

12,368

19,005

 

Reinsurance recoveries

 

(1,957)

(1,971)

(3,502)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net claims and change in insurance contract liabilities

 

6,409

10,397

15,503

 

Change in investment contract liabilities

 

9,190

35,412

45,809

 

Acquisition costs

 

438

395

805

 

Finance costs

 

155

137

269

 

Other expenses

 

885

1,048

2,244

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

17,077

47,389

64,630

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

342

1,061

2,156

 

Tax expense attributable to policyholder returns

 

(81)

(41)

(72)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax attributable to equity holders

 

261

1,020

2,084

 

 

 

 

 

 

 

 

 

 

 

 

 

Total tax expense

 

(88)

(223)

(369)

 

Tax expense attributable to policyholder returns

 

81

41

72

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense attributable to equity holders

4.05

(7)

(182)

(297)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit after tax from continuing operations

2.08

254

838

1,787

 

Profit after tax from discontinued operations1

4.02

19

27

23

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

273

865

1,810

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Non-controlling interests

 

(17)

(9)

(24)

 

Equity holders

 

290

874

1,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend distributions to equity holders during the period

4.03

754

704

998

 

Dividend distributions to equity holders proposed after the period end

4.03

294

294

753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

p

p

p

 

Total basic earnings per share2

2.07

4.89

14.74

30.92

 

Total diluted earnings per share2

2.07

4.63

14.66

30.75

 

 

 

 

 

 

 

Basic earnings per share derived from continuing operations2

2.07

4.57

14.28

30.53

 

Diluted earnings per share derived from continuing operations2

2.07

4.33

14.21

30.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Discontinued operations include the results of the Mature Savings division, following the group's announcement to sell the business to ReAssure Limited. (2019 included the results of the General Insurance division following its sale to Allianz, which completed on 31 December 2019).

2. All earnings per share calculations are based on profit attributable to equity holders of the company.

                 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 43

 

3.02 Consolidated Statement of Comprehensive Income

 

 

6 months

6 months

Full year

 

2020

2019

2019

For the six month period to 30 June 2020

£m

£m

£m

 

 

 

 

 

 

 

 

Profit for the period

273

865

1,810

Items that will not be reclassified subsequently to profit or loss

 

 

 

Actuarial losses on defined benefit pension schemes

(146)

(69)

(62)

Tax on actuarial losses on defined benefit pension schemes

45

13

11

 

 

 

 

 

 

 

 

Total items that will not be reclassified subsequently to profit or loss

(101)

(56)

(51)

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Exchange differences on translation of overseas operations

56

3

(67)

Movement in cross-currency hedge

75

27

13

Tax on movement in cross-currency hedge

(11)

(5)

(1)

Movement in financial investments designated as available-for-sale

(8)

65

72

Tax on movement in financial investments designated as available-for-sale

1

(11)

(15)

 

 

 

 

 

 

 

 

Total items that may be reclassified subsequently to profit or loss

113

79

2

 

 

 

 

 

 

 

 

Other comprehensive income/(expense) after tax

12

23

(49)

 

 

 

 

 

 

 

 

Total comprehensive income for the period

285

888

1,761

 

 

 

 

 

 

 

 

Total comprehensive income for the period attributable to:

 

 

 

Continuing operations

266

861

1,738

Discontinued operations

19

27

23

 

 

 

 

Total comprehensive income/(expense) for the period attributable to:

 

 

 

Non-controlling interests

(17)

(9)

(24)

Equity holders

302

897

1,785

 

 

 

 

 

 

 

 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 44

 

3.03 Consolidated Balance Sheet

 

 

 

As at

As at

As at

 

 

30 Jun 2020

30 Jun 2019

31 Dec 2019

As at 30 June 2020

Notes

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

Goodwill

 

68

62

64

Purchased interest in long term businesses and other intangible assets

 

221

158

190

Deferred acquisition costs

 

49

74

75

Investment in associates and joint ventures accounted for using the equity method

 

328

362

324

Property, plant and equipment

 

291

291

298

Investment property

4.04

8,041

7,140

7,695

Financial investments

4.04

513,584

471,118

498,376

Reinsurers' share of contract liabilities

 

6,530

5,413

5,810

Deferred tax assets

4.05

10

7

8

Current tax assets

 

508

476

468

Receivables and other assets

 

15,986

10,706

8,532

Assets of operations classified as held for sale

4.02

23,968

27,194

24,844

Cash and cash equivalents

 

21,700

14,224

13,923

 

 

 

 

 

 

 

 

 

 

Total assets

 

591,284

537,225

560,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

Share capital

4.06

149

149

149

Share premium

4.06

1,003

998

1,000

Employee scheme treasury shares

 

(76)

(62)

(65)

Capital redemption and other reserves

 

383

300

250

Retained earnings

 

7,453

7,376

8,033

 

 

 

 

 

 

 

 

 

 

Attributable to owners of the parent

 

8,912

8,761

9,367

Restricted tier 1 convertible notes

4.07

495

-

-

Non-controlling interests

4.08

34

66

55

 

 

 

 

 

 

 

 

 

 

Total equity

 

9,441

8,827

9,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

Non-participating insurance contract liabilities

 

82,792

73,869

77,317

Non-participating investment contract liabilities

 

327,380

315,603

320,594

Core borrowings

4.09

4,651

3,514

4,091

Operational borrowings

4.10

1,195

1,051

1,020

Provisions

4.13

1,336

1,202

1,220

UK deferred tax liabilities

4.05

186

193

189

Overseas deferred tax liabilities

4.05

184

197

182

Current tax liabilities

 

-

175

107

Payables and other financial liabilities

4.11

101,665

75,527

84,039

Other liabilities

 

540

719

804

Net asset value attributable to unit holders

 

33,883

24,909

31,507

Liabilities of operations classified as held for sale

4.02

28,031

31,439

30,115

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

581,843

528,398

551,185

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

591,284

537,225

560,607

 

 

 

 

 

 

 

 

 

 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 45

 

3.04 Condensed Consolidated Statement of Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee

Capital

 

Equity

Restricted

 

 

 

 

 

scheme

redemption

 

 attributable

Tier 1

Non-

 

 

Share

Share

treasury

and other

Retained

to owners

convertible

controlling

Total

For the six month period to 30 June 2020

capital

premium

shares

reserves1

earnings

of the parent

notes

interests

equity

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2020

149

1,000

(65)

250

8,033

9,367

-

55

9,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

113

189

302

-

(17)

285

Options exercised under share option schemes

-

3

-

-

-

3

-

-

3

Net movement in employee scheme treasury shares

-

-

(11)

(6)

11

(6)

-

-

(6)

Dividends

-

-

-

-

(754)

(754)

-

-

(754)

Restricted tier 1 convertible notes2

-

-

-

-

-

-

495

-

495

Movement in third party interests

-

-

-

-

-

-

-

(4)

(4)

Currency translation differences

-

-

-

26

(26)

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 June 2020

149

1,003

(76)

383

7,453

8,912

495

34

9,441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Capital redemption and other reserves as at 30 June 2020 include share-based payments £79m, foreign exchange £150m, capital redemption £17m, hedging reserves £96m and available-for-sale reserves £41m.

2. See Note 4.07 for details.

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Employee

Capital

 

Equity

 

 

 

 

 

scheme

redemption

 

 attributable

Non-

 

 

Share

Share

treasury

and other

Retained

to owners

controlling

Total

For the six month period to 30 June 2019

capital

premium

shares

reserves1

earnings

of the parent

interests

equity

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2019

149

992

(52)

230

7,261

8,580

72

8,652

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

79

818

897

(9)

888

Options exercised under share option schemes

-

6

-

-

-

6

-

6

Net movement in employee scheme treasury shares

-

-

(10)

(7)

(1)

(18)

-

(18)

Dividends

-

-

-

-

(704)

(704)

-

(704)

Movement in third party interests

-

-

-

-

-

-

3

3

Currency translation differences

-

-

-

(2)

2

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 June 2019

149

998

(62)

300

7,376

8,761

66

8,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Capital redemption and other reserves as at 30 June 2019 include share-based payments £74m, foreign exchange £122m, capital redemption £17m, hedging reserves £42m and available-for-sale reserves £45m.

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 46

 

3.04 Condensed Consolidated Statement of Changes in Equity (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee

Capital

 

Equity

 

 

 

 

 

scheme

redemption

 

 attributable

Non-

 

 

Share

Share

treasury

and other

Retained

to owners

controlling

Total

For the year ended 31 December 2019

capital

premium

shares

reserves1

earnings

of the parent

interests

equity

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2019

149

992

(52)

230

7,261

8,580

72

8,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

-

-

-

2

1,783

1,785

(24)

1,761

Options exercised under share option schemes

-

8

-

-

-

8

-

8

Net movement in employee scheme treasury shares

-

-

(13)

4

1

(8)

-

(8)

Dividends

-

-

-

-

(998)

(998)

-

(998)

Movement in third party interests

-

-

-

-

-

-

7

7

Currency translation differences

-

-

-

14

(14)

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2019

149

1,000

(65)

250

8,033

9,367

55

9,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Capital redemption and other reserves as at 31 December 2019 include share-based payments £85m, foreign exchange £68m, capital redemption £17m, hedging reserves £32m and available-for-sale reserves £48m.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Primary Financial Statements    Page 47

 

3.05 Consolidated Statement of Cash Flows

 

 

 

6 months

6 months

Full year

 

 

2020

2019

2019

For the six month period to 30 June 2020

Notes

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Profit for the period

 

273

865

1,810

Adjustments for non cash movements in net profit for the period

 

 

 

 

Net (gains)/losses on financial investments and investment property

 

(6,969)

(37,069)

(45,516)

Investment income

 

(4,578)

(5,588)

(10,501)

Interest expense

 

179

164

322

Tax expense

 

(17)

411

598

Other adjustments

 

18

62

117

Net (increase)/decrease in operational assets

 

 

 

 

Investments held for trading or designated as fair value through profit or loss

 

6,032

413

(18,031)

Investments designated as available-for-sale

 

(35)

97

(179)

Other assets

 

(8,098)

(6,033)

(4,660)

Net increase/(decrease) in operational liabilities

 

 

 

 

Insurance contracts

 

5,187

9,157

13,089

Investment contracts

 

6,789

22,524

27,514

Other liabilities

 

5,537

7,472

21,313

Net increase/(decrease) in held for sale net liabilities

 

(1,181)

223

1,206

 

 

 

 

 

 

 

 

 

 

Cash from/(utilised in) operations

 

3,137

(7,302)

(12,918)

Interest paid

 

(127)

(140)

(263)

Interest received

 

2,469

2,532

5,047

Tax paid1

 

(279)

(219)

(540)

Dividends received

 

2,284

2,819

5,389

 

 

 

 

 

 

 

 

 

 

Net cash flows from/(utilised in) operations

 

7,484

(2,310)

(3,285)

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Net acquisition of plant, equipment, intangibles and other assets

 

(42)

(28)

(89)

Net disposal/(acquisition) of operations, net of cash (transferred)/acquired

 

1

76

198

Net disposal/(investment) in associates and joint ventures

 

-

(88)

29

 

 

 

 

 

 

 

 

 

 

Net cash flows generated/(utilised) from investing activities

 

(41)

(40)

138

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Dividend distributions to ordinary equity holders during the period

4.03

(754)

(704)

(998)

Options exercised under share option schemes

4.06

3

6

8

Treasury shares purchased for employee share schemes

 

(22)

(10)

(20)

Payment of lease liabilities

 

(18)

(12)

(33)

Proceeds from borrowings

 

869

151

1,309

Repayment of borrowings

 

(237)

(593)

(958)

Proceeds from issuance of Restricted tier 1 convertible notes, net of associated expenses

 

495

-

-

 

 

 

 

 

 

 

 

 

 

Net cash flows from/(utilised in) financing activities

 

336

(1,162)

(692)

 

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

7,779

(3,512)

(3,839)

Exchange gains/(losses) on cash and cash equivalents

 

26

1

(16)

Cash and cash equivalents at 1 January (before reallocation of held for sale cash)

 

14,233

18,088

18,088

 

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents

 

22,038

14,577

14,233

Less: cash and cash equivalents of operations classified as held for sale

4.02

(338)

(353)

(310)

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at 30 June/31 December

 

21,700

14,224

13,923

 

 

 

 

 

 

 

 

 

 

1. Tax comprises UK corporation tax paid of £203m (H1 19: £126m; FY 19: £381m), withholding tax of £95m (H1 19: £105m; FY 19: £166m) and an overseas corporate tax refund of £19m (H1 19: £12m; FY 19: £7m).

 

 

 

 

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosure Notes    Page 48

 

4.01 Basis of preparation

 

The group financial information for the six months ended 30 June 2020 has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting'. The group's financial information has also been prepared in line with the accounting policies which the group expects to adopt for the 2020 year end. These policies are consistent with the principal accounting policies which were set out in the group's 2019 consolidated financial statements, except where changes have been outlined below in "New standards, interpretations and amendments to published standards that have been adopted by the group". These are consistent with IFRSs iss ued by the International Accounting Standards Board as adopted by the European Commission for use in the European Union.

 

The preparation of the interim management report includes the use of estimates and assumptions which affect items reported in the consolidated balance sheet and income statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The economic and non-economic actuarial assumptions used to establish the liabilities in relation to insurance and investment contracts are significant. For half-year financial reporting, economic assumptions have been updated to reflect market conditions. Non-economic assumptions are consistent with those used in the 31 December 2019 financial statements, except as disclosed in Note 2.03.

 

The results for the half year ended 30 June 2020 are unaudited but have been reviewed by KPMG LLP. The interim results do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The results from the full year 2019 have been taken from the group's 2019 Annual Report and Accounts. Therefore, these interim accounts should be read in conjunction with the 2019 Annual Report and Accounts that have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and adopted by the European Commission for use in the European Union. KPMG LLP reported on the 2019 financial statements, and their report was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The group's 2019 Annual Report and Accounts has been filed with the Registrar of Companies. 

 

Key technical terms and definitions

The interim management report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive list of these definitions is contained within the glossary section of these interim financial statements.

 

Alternative performance measures

The group uses a number of alternative performance measures (APMs), including net release from operations and group adjusted operating profit, in the discussion of its business performance and financial position, as the group believes that they provide a better understanding of its underlying performance. Definitions of key APMs can be found in the glossary.

 

Tax attributable to policyholders and equity holders

The total tax expense shown in the group's Consolidated Income Statement includes income tax borne by both policyholders and shareholders. This has been apportioned between that attributable to policyholders' returns and equity holders' profits. This represents the fact that the group's long-term business in the UK pays tax on policyholder investment return, in addition to the corporation tax charge charged on shareholder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes.

 

For this apportionment, the equity holders' tax on long-term business is estimated by applying the statutory tax rate to profits attributed to equity holders. This is considered to approximate the corporation tax attributable to shareholders as calculated under UK tax rules. The balance of income tax associated with UK long-term business is attributed to income tax attributable to policyholders' returns and approximates the corporation tax attributable to policyholders as calculated under UK tax rules.

 

(a) Going concern

 

The group's business activities, together with the factors likely to affect its future development, performance and position in the current economic climate are set out in this Interim Management Report. The financial position of the group, its cash flows, capital and liquidity position and borrowing facilities are described in the Group Results. Principal risks and uncertainties are detailed on pages 24 to 25.

 

The Directors have made an assessment of the group's going concern, considering both the current performance and the group's outlook, which takes account of the current and future impact of the COVID-19 pandemic, using the information available up to the date of issue of this Interim Management Report.

 

The group manages and monitors its capital and liquidity under various stresses and adverse scenarios to understand the expected impact of market downturns, and the impact of a number of such capital stresses is disclosed on page 77. Our liquidity risk appetite requires sufficient sources of liquidity to be maintained to withstand liquidity shocks defined by a 1 in 200 scenario, and as a result of COVID-19 we have actively tested this through a series of simulations based upon an extreme but possible adverse scenario lasting twelve months. In addition, the group has tested the resilience of the balance sheet under a range of adverse scenarios which may arise as a result of the economic consequences of COVID-19. These scenarios of increasing severity ranged from short term market disruption to a persistence of the crisis into late 2021 and beyond with no successful vaccine development. These stresses, including the additional COVID-19 scenarios, and taking account of the wide range of management actions that are available, do not give rise to any material uncertainties over the ability of the group to continue as a going concern. Based upon the available information, the directors consider that the group has the plans and resources to manage its business risks successfully as it has a diverse range of businesses and remains financially strong despite the current increased uncertainty. Furthermore, in June 2020, the group completed the issuance of £500m of Restricted Tier 1 debt as an additional measure of prudence and to deliver further balance sheet strengthening, both to protect against longer-term economic uncertainty but also to enable the group to take advantage of opportunities as they arise.

 

Having reassessed the principal risks and uncertainties (both financial and operational) in light of COVID-19 and the current economic climate, as detailed on pages 24 to 25, the directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosure Notes    Page 49

 

4.01 Basis of preparation (continued)

 

(b) New standards, interpretations and amendments to published standards that have been adopted by the group

 

The group has applied the following standards and amendments for the first time in its six months reporting period commencing 1 January 2020.

 

Amendments to IFRS 3 - Business Combinations

These amendments, issued in October 2018, provide more guidance on the definition of a business. These amendments did not have any material impact on the group's consolidated financial statements.

 

Amendments to IAS 1 - Presentation of Financial Statements and IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors: 'Definition of Material'

These amendments, issued in October 2018, clarify the definition of 'material', and align the definition used in the Conceptual Framework and the standards themselves. These amendments did not have any material impact on the group's consolidated financial statements.

 

Amendments to References to the Conceptual Framework in IFRS Standards

These amendments, issued in March 2018, update the current conceptual framework with the aim to assist preparers of financial reports to develop consistent accounting policies for transactions. These amendments did not have any material impact on the group's consolidated financial statements.

 

Amendments to IFRS 9 - Financial Instruments, IAS 39 - Financial Instruments: Recognition and Measurement, and IFRS 7 - Financial Instruments: Disclosures: 'Interest Rate Benchmark Reform'

These amendments were issued in September 2019. They modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform. These amendments did not have any material impact on the group's consolidated financial statements.

 

Amendment to IFRS 16 Leases: 'COVID-19-Related Rent Concessions'

The amendment, issued in May 2020, provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. This amendment did not have any material impact on the group's consolidated financial statements.

 

(c) Future accounting developments

 

IFRS 17 - Insurance Contracts

IFRS 17, 'Insurance Contracts' was originally issued in May 2017 and subsequent amendments were issued in June 2020.  The standard is expected to be effective for annual periods beginning on or after 1 January 2023.  This reflects a two year delay to the original 2017 timetable confirmed by the IASB in their June 2020 amendments and remains subject to endorsement for use in the UK.  The standard will be applied retrospectively, subject to the transitional options provided for in the standard, and provides a comprehensive approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure. The group has mobilised a project to assess the financial and operational implications of the standard, and work will continue throughout the remainder of 2020 to ensure technical compliance and to develop the required system and operational capability to implement the standard.

 

IFRS 9 - Financial Instruments

In July 2014, the IASB issued IFRS 9, 'Financial Instruments' which is effective for annual periods beginning on or after 1 January 2018. The standard replaces IAS 39 'Financial Instruments: Recognition and Measurement'. It includes new principles around classification and measurement of financial instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new requirements on hedge accounting. The IASB subsequently issued 'Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts' which allows entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17 or 1 January 2021, whichever is the earlier. In June 2020 the IASB agreed to extend the temporary exemption in IFRS 4 from applying IFRS 9 to annual reporting periods beginning on or after 1 January 2023. The group qualifies for, and is making use of, this deferral option.

 

The group has mobilised a project to assess the impact of IFRS 9 on its financial instruments, and work is on-going to develop the policies and operational changes required for the implementation of the standard, with a focus on the new expected credit losses impairment model.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosure Notes    Page 50

 

4.02 Assets and liabilities of operations classified as held for sale

 

 

 

 

 

 

 

 

Mature Savings

On 6 December 2017 the group announced the sale of its Mature Savings business to ReAssure Limited for a consideration of £650m. As part of the transaction, on 1 January 2018 the group entered into a risk transfer agreement with ReAssure Limited, whereby the group transferred all economic risks and rewards of the Mature Savings business to ReAssure Limited. The risk transfer agreement operates until the business is transferred under a court approved scheme under Part VII of the Financial Services and Markets Act 2000. The sale is expected to complete in the second half of 2020 following the completion of the Part VII transfer.  As the legal transfer of the business has not yet occurred the Mature Savings business has been classified as held for sale on the Group's balance sheet as at 30 June 2020. The profit arising from the Mature Savings business in accordance with the risk transfer agreement has been recognised as "Profit after tax from discontinued operations" in the Consolidated Income Statement. Up until the Part VII this primarily reflects the unwind of expected underlying profits, which will offset the final profit on disposal.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.03 Dividends and appropriations

 

 

Dividend

Per share1

Dividend

Per share1

Dividend

Per share1

 

 

6 months

6 months

6 months

6 months

Full year

Full year

 

 

2020

2020

2019

2019

2019

2019

 

 

£m

p

£m

p

£m

p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary dividends paid and charged to equity in the period:

 

 

 

 

 

 

 - Final 2018 dividend paid in June 2019

 

-

-

704

11.82

704

11.82

 - Interim 2019 dividend paid in September 2019

 

-

-

-

-

294

4.93

 - Final 2019 dividend paid in June 2020

 

754

12.64

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total dividends

 

754

12.64

704

11.82

998

16.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.

Subsequent to 30 June 2020, the directors declared an interim dividend of 4.93 pence per ordinary share. This dividend will be paid on 24 September 2020. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2020 and is not included as a liability in the Consolidated Balance Sheet as at 30 June 2020.

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosure Notes    Page 51

 

4.04 Financial investments and investment property

 

 

 

 

 

30 Jun 2020

30 Jun 2019

31 Dec 2019

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities1

 

 

 

189,798

192,387

200,365

Debt securities 2

 

 

 

299,168

275,086

286,916

Accrued interest

 

 

 

1,551

1,617

1,647

Derivative assets 3

 

 

 

25,207

13,198

14,828

Loans 4

 

 

 

19,357

12,861

16,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial investments

 

 

 

535,081

495,149

520,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment property

 

 

 

9,334

8,706

9,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total financial investments and investment property

 

 

 

544,415

503,855

529,677

Less: financial investments and investment property of operations classified as held for sale

(22,790)

(25,597)

(23,606)

Financial investments and investment property

521,625

478,258

506,071

1. Equity securities include investments in unit trusts of £13,615m (30 June 2019: £13,122m; 31 December 2019: £13,046m).

2. A detailed analysis of debt securities to which shareholders are directly exposed is disclosed in Note 7.03.

3. Derivatives are used for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities of £27,550m (30 June 2019: £11,778m; 31 December 2019: £13,113m).

4. Loans include £444m (30 June 2019: £447m; 31 December 2019: £437m) of loans valued at amortised cost.

 

(a) Fair value hierarchy

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the group's view of market assumptions in the absence of observable market information. The group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.

The levels of fair value measurement bases are defined as follows:

Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs).

 

All of the group's Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modeling and multiple source validation in order to determine consensus prices, with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit), internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have therefore classified them as Level 2.

 

The group's policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time.

 

There have been no significant transfers between Level 1 and Level 2 in the six month period to 30 June 2020 (30 June 2019; 31 December 2019: No significant transfers). Transfers into and out of Level 3 are disclosed in Note 4.04 (b).

 

 

Legal & General Group Plc

Half Year Report 2020 Part 2

 

IFRS Disclosure Notes    Page 52

 

4.04 Financial investments and investment property (continued)

 

(a) Fair value hierarchy (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Level 1

Level 2

Level 3

For the six month period to 30 June 2020

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder

 

 

 

 

 

 

 

 

Equity securities

 

 

 

 

2,622

1,476

-

1,146

Debt securities

 

 

 

 

4,570

1,433

2,304

833

Accrued interest

 

 

 

 

21

6

12

3

Derivative assets

 

 

 

 

293

6

287

-

Loans at fair value

 

 

 

 

569

-

569

-

Investment property

 

 

 

 

234

-

-

234

 

 

 

 

 

 

 

 

 

Non profit non-unit linked

 

 

 

 

 

 

 

Equity securities

 

 

 

 

190

186

-

4

Debt securities

 

 

 

 

75,867

9,689

46,570

19,608

Accrued interest

 

 

 

 

539

27

461

51

Derivative assets

 

 

 

 

22,095

-

22,095

-

Loans at fair value

 

 

 

 

1,309

-

1,309

-

Investment property

 

 

 

 

4,016

-

-

4,016

 

 

 

 

 

 

 

 

 

With-profits

 

 

 

 

 

 

 

 

Equity securities

 

 

 

 

2,846

2,664

-

182

Debt securities

 

 

 

 

4,922

1,534

3,388

-

Accrued interest

 

 

 

 

38

8

30

-

Derivative assets

 

 

 

 

295

3

292

-

Loans at fair value

 

 

 

 

450

-