REG - Legal & General Grp - L&G Full Year Results 2015 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 3
15/03/2016 07:07
- Part 3: For the preceding part double click ID:nRSO0690Sb
(1,537) 5,270
Exchange losses on cash and cash equivalents (106) (15)
Cash and cash equivalents at 1 January 22,709 17,454
Cash and cash equivalents (before reallocation of held for sale cash) 21,066 22,709
Cash and cash equivalents classified as held for sale 2.13 (389) -
Cash and cash equivalents at 31 December 20,677 22,709
1. Tax comprises UK corporation tax paid of £128m (2014: £29m), overseas corporate taxes of £36m (2014: £24m) and withholding tax of £80m (2014: £23m).
2. Net cash flows from acquisitions includes cash paid of £5m (2014: £38m) less cash and cash equivalents acquired of £nil (2014: £nil).
3. Net cash flows from disposals includes cash received of £242m (2014: £56m) less cash and cash equivalents disposed of £324m (2014: £nil).
The group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including £856m (2014: £1,082m) relating to the with-profit fund policyholders and £16,116m (2014: £18,895m) relating to unit linked policyholders.
IFRS and Cash
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2.08 Basis of preparation
The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs)
issued by the International Accounting Standards Board (IASB) as adopted by the European Union, and with those parts of the
UK Companies Act 2006 applicable to companies reporting under IFRS. The group financial statements also comply with IFRS
and interpretations by the IFRS Interpretations Committee as issued by the IASB and as adopted by the European Union. The
group financial statements have been prepared under the historical cost convention, as modified by the revaluation of land
and buildings, available-for-sale financial assets and financial assets and financial liabilities (including derivative
instruments) at fair value through profit and loss.
The group has selected accounting policies which state fairly its financial position, financial performance and cash flows
for a reporting period. The accounting policies have been consistently applied to all years presented.
Financial assets and financial liabilities are disclosed gross in the balance sheet unless a legally enforceable right of
offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in
the income statement unless required or permitted by any accounting standard or interpretations by the IFRS Interpretations
Committee.
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of
the transactions. The functional currency of the group's foreign operations is the currency of the primary economic
environment in which the entity operates. The assets and liabilities of all of the group's foreign operations are
translated into sterling, the group's presentation currency, at the closing rate at the date of the balance sheet. The
income and expenses for each income statement are translated at average exchange rates. On consolidation, exchange
differences arising from the translation of the net investment in foreign entities and of borrowings and other currency
instruments designated as hedges of such investments, are taken to a separate component of shareholders' equity.
Use of estimates
The preparation of the financial statements 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. Although these estimates are based on management's best knowledge of current circumstances and
future events and actions, actual results may differ from those estimates, possibly significantly. This is particularly
relevant for the determination of fair values of investment property and unquoted and illiquid financial investments; the
estimation of deferred acquisition costs; tax balances and the estimation of insurance and investment contract liabilities.
The basis of accounting for these areas, and the significant judgements used in determining them, are outlined in the
respective notes to the financial statements.
Key technical terms and definitions
The report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive
list of these definitions is contained within the glossary of the group's 2015 Annual Report and Accounts.
2.09 Segmental analysis
Reportable segments
The group has six reportable segments comprising LGR, LGIM, LGC, Insurance, Savings and LGA. Central group expenses and
debt cost are reported separately.
LGR represents annuities (both individual and bulk purchase), longevity insurance and lifetime mortgages.
The LGIM segment represents institutional and retail investment management, and workplace savings businesses.
The LGC segment includes shareholders' equity supporting the non profit LGR, Insurance and Savings businesses held within
Society, and capital held by the group's treasury function. LGC and group expenses also incorporate inter-segmental
eliminations, consolidated unit trusts and property partnerships managed on behalf of clients, which do not constitute a
separately reportable segment.
Following changes to the organisational structure, Insurance and Savings are now reported as separate segments. Previously,
Insurance and Savings had been reported together as the LGAS segment. In addition, the workplace savings business is now
included in the LGIM segment. Workplace savings had previously been recognised in the Savings segment. Comparatives have
been amended in line with this reclassification. The impact of the workplace savings reclassification has been to reduce
LGIM 2014 operating profit by £15m, with an offsetting increase in the Savings segment's operating profit.
Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France
(LGF), sold on 31 December 2015, and Legal & General Netherlands (LGN).
Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.
The LGA segment represents protection business written in the USA.
Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.
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2.09 Segmental analysis (continued)
(a) Profit/(loss) for the year
Group
expenses
and debt
LGR LGIM LGC Insurance Savings LGA costs Total
For the year ended 31 December 2015 £m £m £m £m £m £m £m £m
Operating profit/(loss) 639 355 233 293 99 83 (247) 1,455
Investment and other variances1 79 (20) (116) (40) 3 (13) (12) (119)
Gains attributable to non-controlling
interests - - - - - - 19 19
Profit/(loss) before tax attributable to
equity holders 718 335 117 253 102 70 (240) 1,355
Tax (expense)/credit attributable to equity
holders of the company (131) (74) (9) (61) (15) (41) 70 (261)
Profit/(loss) for the year 587 261 108 192 87 29 (170) 1,094
Group
expenses
and debt
LGR LGIM2 LGC Insurance Savings2 LGA costs Total
For the year ended 31 December 2014 £m £m £m £m £m £m £m £m
Operating profit/(loss) 428 321 203 370 105 56 (208) 1,275
Investment and other variances 67 (7) (37) 12 (24) (13) (42) (44)
Gains attributable to non-controlling
interests - - - - - - 7 7
Profit/(loss) before tax attributable to
equity holders 495 314 166 382 81 43 (243) 1,238
Tax (expense)/credit attributable to equity
holders of the company (97) (68) (9) (90) (14) (19) 51 (246)
Profit/(loss) for the year 398 246 157 292 67 24 (192) 992
1. 2015 Investment and other variances - Insurance and Savings include the gain/(loss) resulting from the disposal of subsidiary and joint venture investments during the year.
2. LGIM includes the workplace savings business which was previously reported in Savings. Prior period comparatives have been amended. At 2014, the impact includes the reduction of operating profit by £15m and profit before tax by £10m. Offsetting movements have been reflected in the Savings segment.
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2.10 Earnings per share
(a) Earnings per share
Adjusted Adjusted
Profit Earnings profit earnings Profit Earnings
after tax per share1 after tax per share1,2 after tax per share1
2015 2015 2015 2015 2014 2014
£m p £m p £m p
Operating profit after tax 1,142 19.29 1,142 19.29 998 16.92
Investment and other variances (67) (1.13) (42) (0.71) (13) (0.22)
Earnings per share based on profit
attributable to equity holders 1,075 18.16 1,100 18.58 985 16.70
1. Earnings per share is calculated by dividing profit after tax derived from continuing operations by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares.
2. Adjusted earnings per share has been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments.
(b) Diluted earnings per share
Adjusted Adjusted
Number Profit Earnings profit earnings Number Profit Earnings
of shares1 after tax per share after tax per share1, 2 of shares1 after tax per share
2015 2015 2015 2015 2015 2014 2014 2014
m £m p £m p m £m p
Profit attributable to equity holders of the Company 5,920 1,075 18.16 1,100 18.58 5,897 985 16.70
Net shares under options allocable for no further consideration 38 - (0.12) - (0.12) 59 - (0.16)
Diluted earnings per share 5,958 1,075 18.04 1,100 18.46 5,956 985 16.54
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.
2. Adjusted earnings per share has been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments.
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2.11 Acquisition
On 1 April 2015, the group acquired 100% of New Life Home Finance Limited, a UK based lifetime mortgage provider for a
consideration of £5m. The acquisition gave rise to an increase in the group's goodwill of £2m and an increase in purchased
interest in long term businesses (PILTB) and other intangibles of £2m. This enables the group to offer lifetime mortgages
as part of the retirement solutions suite of products.
2.12 Disposals
During 2015, the Group made the following disposals: - Snow + Rock Group Holding Limited was sold to Cotswold Outdoor Limited for £34m. The carrying value of the investment was £6m, realising a profit on disposal of £28m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund. - Legal & General International (Ireland) Limited (LGII), the group's Dublin based offshore bond provider was sold to Canada Life for £16m.
The carrying value of the business was £14m, and disposal costs totalled £1m, realising a profit on disposal of £1m reported in operational income in the Consolidated Income Statement. - Commercial International Life Insurance Company SAE (CIL), the group's Egypt based life insurance joint venture, was sold to AXA for £33m. The carrying value of the business was £14m, realising a profit on disposal of £19m reported in operational income in the Consolidated Income Statement. - The group's interest in Legal
& General Gulf BSC (LGG), the group's Bahrain based life insurance joint venture, was sold to a third party for £1. The carrying value of the business was £2m, realising a loss on disposal of £2m reported in operational income in the Consolidated Income Statement. - Legal & General Holdings (France) S.A. (LGF), the group's French insurance business, was sold to APICIL Prévoyance. A loss on disposal of £43m is reported in operational income in the Consolidated Income Statement. None of the disposals
completed during 2015 are discontinued operations as they do not represent major lines of business or geographical segments of the group.
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2.13 Held for sale
On 15 January 2016, the group sold Suffolk Life Group Limited (SLG) to Curtis Banks Group plc for £45m (excluding transaction costs), subject to regulatory approval. The assets and liabilities of SLG have accordingly been assessed as a disposal group and have been classified as held for sale as at 31 December 2015. SLG formed part of the Savings segment in Note 2.09. SLG is not a discontinued operation as it does not represent a major line of business or geographical segment of the group.
Total
2015
£m
Assets classified as held for sale
Purchased interest in long term business and other intangible assets 28
Property, plant and equipment 1
Investment property 1,140
Financial investments 1,801
Reinsurers' share of contract liabilities 39
Cash and cash equivalents 389
Other assets 11
Total assets of the disposal group 3,409
Liabilities classified as held for sale
Investment contract liabilities (3,235)
Operational borrowings (102)
Tax liabilities (5)
Payables and other financial liabilities (10)
Other liabilities (17)
Total liabilities of the disposal group (3,369)
Total net assets of the disposal group
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