REG - Legal & General Grp - L&G Full Year Results 2015 Part 3 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 4
15/03/2016 07:07
- Part 4: For the preceding part double click ID:nRSO0691Sc
1. Where external ratings are not available LGR bonds have been rated using an internal rating.
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European Embedded Value
85
Group embedded value - summary
Covered business
Insurance Non-
UK overseas covered
business business LGA business Total
For the year ended 31 December 2015 £m £m £m £m £m
At 1 January 2015
Value of in-force business (VIF) 6,118 147 518 - 6,783
Shareholder net worth (SNW) 3,519 325 209 139 4,192
Embedded value at 1 January 2015 9,637 472 727 139 10,975
Exchange rate movements - (31) 36 (6) (1)
Operating profit/(loss) after tax for the year 1,046 11 (56) 92 1,093
Non-operating profit/(loss) after tax for the year 270 (35) (18) 26 243
Profit/(loss) for the year 1,316 (24) (74) 118 1,336
Intra-group distributions1 (692) (201) (54) 947 -
Dividend distributions to equity holders of the company - - - (701) (701)
Transfer to non-covered business2 (25) - - 25 -
Other reserve movements including pension deficit3 56 - (34) (49) (27)
Embedded value at 31 December 2015 10,292 216 601 473 11,582
Value of in-force business4,5 5,802 81 399 - 6,282
Shareholder net worth6,7 4,490 135 202 473 5,300
Embedded value per share (p)8 195
Additional value of LGIM9
2015 2015
Indicative valuation including LGIM p per share £bn
EEV as reported 195 11.6
LGIM VIF 26 1.6
Total including LGIM 221 13.2
2015 2015
Estimated LGIM discounted cash flow valuation p per share £bn
Look-through value of profits on covered business 5 0.3
Net asset value 14 0.8
Current value of LGIM in group embedded value 19 1.1
LGIM VIF 26 1.6
Alternative discounted value of LGIM future cash flows 45 2.7
1. UK intra-group distributions primarily reflect a £700m (2014: £675m) dividend from Society to group and a £20m (2014: £nil) dividend from LGRe to group, partially offset by dividends of £28m (2014: £29m) from LGN to Society. Dividends of £54m (2014: £46m) from LGA and £1m (2014: £2m) from LGF were paid to group. The Insurance overseas business intragroup distribution also includes the impact of the LGF disposal and other related impacts.
2. The transfer to non-covered business represents the IFRS profits arising in the year from the provision of investment management services by LGIM to the UK covered business, which have been included in the operating profit of the covered business on the look-through basis.
3. The other reserve movements primarily reflect movement in the pension deficit, the effect of reinsurance transactions between UK and US covered business, and movements in the share options scheme and employee scheme treasury shares.
4. Value of in-force business is shown net of cost of capital, which consists of £497m (2014: £545m) from UK covered business, £8m (2014: £60m) from Insurance overseas business and £14m (2014: £11m) from LGA.
5. The time value of the options and guarantees deduction included in value of in-force business is £36m (2014: £43m).
6. Shareholder net worth of Insurance overseas business is made up of £94m (2014: £90m) of free surplus and £41m (2014: £235m) of required capital.
7. Shareholder net worth of LGA is made up of £145m (2014: £161m) of free surplus and £57m (2014: £48m) of required capital.
8. The number of shares in issue at 31 December 2015 was 5,948,788,480 (2014: 5,942,070,229).
9. Excludes workplace savings results, which are reflected in the UK covered business.
Further analysis of the UK covered business can be found in Note 5.01.
European Embedded Value
86
Group embedded value - summary (continued)
Covered business
Insurance Non-
UK overseas covered
business business LGA business Total
For the year ended 31 December 2014 £m £m £m £m £m
At 1 January 2014
Value of in-force business (VIF) 4,693 197 699 - 5,589
Shareholder net worth (SNW) 3,249 315 234 199 3,997
Embedded value at 1 January 2014 7,942 512 933 199 9,586
Exchange rate movements - (30) 44 (16) (2)
Operating profit/(loss) after tax for the year 1,264 31 (68) 107 1,334
Non-operating profit/(loss) for the year 709 (11) (11) (5) 682
Profit /(loss) for the year 1,973 20 (79) 102 2,016
Intra-group distributions1 (641) (30) (46) 717 -
Dividend distributions to equity holders of the company - - - (580) (580)
Transfer to non-covered business2 (26) - - 26 -
Other reserve movements including pension deficit3 389 - (125) (309) (45)
Embedded value at 31 December 2014 9,637 472 727 139 10,975
Value of in-force business4,5 6,118 147 518 - 6,783
Shareholder net worth6,7 3,519 325 209 139 4,192
Embedded value per share (p)8 185
Additional value of LGIM9
2014 2014
Indicative valuation including LGIM p per share £bn
EEV as reported 185 11.0
LGIM VIF 27 1.6
Total including LGIM 212 12.6
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