REG - Legal & General Grp - L&G Full Year Results 2016 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 5
08/03/2017 07:07
- Part 5: For the preceding part double click ID:nRSH8033Yd
Payables and other financial liabilities 22,709 1,456 6,608 175 14,470
Future commission costs are modelled using expected cash flows, incorporating expected future persistency. They have therefore been classified as level 3 liabilities. The entire movement in the balance has been reflected in the Consolidated Income Statement during the year. A reasonably possible alternative persistency assumption would have the effect of increasing the liability by £5m (2015: £6m).
Significant transfers between levels There have been no significant transfers between levels 1, 2 and 3 for the year ended 31 December 2016 (2015: no significant transfers between levels 1, 2 and 3).
IFRS and Release from Operations
Page 46
2.17 Dividends
Per Per
Dividend share1 Dividend share1
2016 2016 2015 2015
£m p £m p
Ordinary share dividends paid in the year:
- Prior year final dividend 592 9.95 496 8.35
- Current year interim dividend 238 4.00 205 3.45
830 13.95 701 11.80
Ordinary share dividend proposed2 616 10.35 592 9.95
1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
2. The dividend proposed is not included as a liability in the Consolidated Balance Sheet.
2.18 Share capital
(i) Share capital and share premium
2016 2015
Number of 2016 Number of 2015
Authorised share capital shares £m shares £m
At 31 December: ordinary shares of 2.5p each 9,200,000,000 230 9,200,000,000 230
Share Share
Number of capital premium
Issued share capital, fully paid shares £m £m
As at 1 January 2016 5,948,788,480 149 976
Options exercised under share option schemes:
- Savings related share option scheme 5,867,986 - 5
As at 31 December 2016 5,954,656,466 149 981
Share Share
Number of capital premium
Issued share capital, fully paid shares £m £m
As at 1 January 2015 5,942,070,229 149 969
Options exercised under share option schemes:
- Savings related share option scheme 6,718,251 - 7
As at 31 December 2015 5,948,788,480 149 976
There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.
The holders of the company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company.
IFRS and Release from Operations
Page 47
2.19 Core Borrowings
Carrying Fair Carrying Fair
amount value amount value
2016 2016 2015 2015
£m £m £m £m
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1) 615 609 637 631
5.875% Sterling undated subordinated notes (Tier 2) 411 418 413 426
10% Sterling subordinated notes 2041 (Tier 2) 310 403 310 398
5.5% Sterling subordinated notes 2064 (Tier 2) 589 603 589 570
5.375% Sterling subordinated notes 2045 (Tier 2) 602 627 602 611
Client fund holdings of group debt1 (31) (31) (26) (27)
Total subordinated borrowings 2,496 2,629 2,525 2,609
Senior borrowings
Sterling medium term notes 2031-2041 609 845 609 779
Client fund holdings of group debt1 (34) (34) (42) (54)
Total senior borrowings 575 811 567 725
Total core borrowings 3,071 3,440 3,092 3,334
1. £65m (2015: £68m) of the group's subordinated and senior borrowings are currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.
All of the group's core borrowings are measured using amortised cost. The presented fair values of the group's core borrowings reflect quoted prices in active markets and they are classified as level 1 in the fair value hierarchy.
Subordinated borrowings
6.385% Sterling perpetual capital securities
In 2007, Legal & General Group Plc issued £600m of 6.385% Sterling perpetual capital securities. These securities are
callable at par on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset to
three month LIBOR plus 1.93% pa. For Solvency II purposes these securities are treated as tier 1 own funds.
5.875% Sterling undated subordinated notes
In 2004, Legal & General Group Plc issued £400m of 5.875% Sterling undated subordinated notes. These notes are callable at
par on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019 will be reset to the
prevailing five year benchmark gilt yield plus 2.33% pa. These notes are treated as tier 2 own funds for Solvency II
purposes.
10% Sterling subordinated notes 2041
In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. The notes are callable at par on 23 July
2021 and every five years thereafter. If not called, the coupon from 23 July 2021 will be reset to the prevailing five year
benchmark gilt yield plus 9.325% pa. These notes mature on 23 July 2041. They are treated as tier 2 own funds for Solvency
II purposes.
5.5% Sterling subordinated notes 2064
In 2014, Legal & General Group Plc issued £600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June
2044 and every five years thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year
benchmark gilt yield plus 3.17% pa. These notes mature on 27 June 2064. They are treated as tier 2 own funds for Solvency
II purposes.
5.375% Sterling subordinated notes 2045
On 27 October 2015, Legal & General Group Plc issued £600m of 5.375% dated subordinated notes. The notes are callable at
par on 27 October 2025 and every five years thereafter. If not called, the coupon from 27 October 2025 will be reset to the
prevailing five year benchmark gilt yield plus 4.58% pa. These notes mature on 27 October 2045. They are treated as tier 2
own funds for Solvency II purposes.
IFRS and Release from Operations
Page 48
2.20 Operational borrowings
Carrying Fair Carrying Fair
amount value amount value
2016 2016 2015 2015
£m £m £m £m
Short term operational borrowings
Euro Commercial paper 216 216 15 15
Bank loans and overdrafts 6 6 2 2
Total short term operational borrowings 222 222 17 17
Non recourse borrowings
US Dollar Triple X securitisation 2037 - - 302 258
Suffolk Life unit linked borrowings1 - - - -
LGV 6/LGV 7 Private Equity Fund Limited Partnership - - 98 98
Consolidated Property Limited Partnerships 208 208 184 184
Total non recourse borrowings 208 208 584 540
Group holding of operational borrowings2 - - (65) (56)
Total operational borrowings 430 430 536 501
1. On 25 May 2016, the group sold Suffolk Life Group Limited to Curtis Banks Group. At 2015, the Suffolk Life unit linked borrowings were transferred to held for sale, refer to note 2.12.
2. Group investments in operational borrowings have been eliminated from the Consolidated Balance Sheet.
The presented fair values of the group's operational borrowings reflect observable market information and have been
classified as level 2 in the fair value hierarchy.
Short term operational borrowings
Short term assets available at the holding company level exceeded the amount of the non-unit linked short term operational
borrowings of £216m (2015: £15m). Short term operational borrowings comprise Euro Commercial paper, bank loans and
overdrafts.
Non recourse borrowings
US Dollar Triple X securitisation 2037
In 2006, a subsidiary of LGA issued US$450m of non recourse debt in the US capital markets to meet the Triple X reserve
requirements of part of the US term insurance written after 2005 and 2006. It was secured on the cash flows related to that
tranche of business. On 15 June 2016, this securitisation was redeemed at par.
LGV 6/LGV 7 Private Equity Fund Limited Partnerships
These borrowings were non recourse bank borrowings.
Consolidated Property Limited Partnerships
These borrowings are non recourse bank borrowings.
Syndicated credit facility
As at 31 December 2016, the group had in place a £1.00bn syndicated committed revolving credit facility provided by a
number of its key relationship banks, maturing in December 2021. No amounts were outstanding at 31 December 2016.
IFRS and Release from Operations
Page 49
2.21 Insurance contract liabilities
(a) Analysis of insurance contract liabilities
Re- Re-
Gross insurance Gross insurance
2016 2016 2015 2015
Notes £m £m £m £m
Participating insurance contracts 2.21(b)(iii) 5,794 (1) 5,618 (1)
Non-participating insurance contracts 2.21(c)(iv) 60,511 (5,297) 49,470 (3,861)
General insurance contracts 2.21(v) 268 (9) 284 (8)
Insurance contract liabilities 66,573 (5,307) 55,372 (3,870)
During the year, the group continued utilising prospective reinsurance arrangements which resulted in a profit of £535m (2015: £503m). This profit has been reflected in the Consolidated Income Statement for the year and arises from new reinsurance arrangements or the reinsurance of new business under existing arrangements.
(b) Movement in participating insurance contract liabilities
Re- Re-
Gross insurance Gross insurance
2016 2016 2015 2015
£m £m £m £m
As at 1 January 5,618 (1) 6,579 (1)
New liabilities in the year 40 - 52 -
Liabilities discharged in the year (749) - (977) -
Unwinding of discount rates 27 - 40 -
Effect of change in non-economic assumptions (3) - 5 -
Effect of change in economic assumptions 642 - 81 -
Disposals1 - - (171) -
Modelling and methodology changes 202 - - -
Other 17 - 9 -
As at 31 December 5,794 (1) 5,618 (1)
1. Reflects the disposal of Legal & General France during 2015.
(c) Movement in non-participating insurance contract liabilities
Re- Re-
Gross insurance Gross insurance
2016 2016 2015 2015
£m £m £m £m
As at 1 January 49,470 (3,861) 49,589 (2,587)
New liabilities in the year 6,273 (613) 2,866 (768)
Liabilities discharged in the year (2,890) 86 (2,744) (39)
Unwinding of discount rates 1,574 (129) 1,451 (93)
Effect of change in non-economic assumptions 51 (43) (384) 157
Effect of change in economic assumptions 6,870 (546) (1,335) (513)
Foreign exchange adjustments 795 (66) 27 (18)
Transfer of liabilities classified as held for sale (1,709) 1 - -
Modelling and methodology changes 61 (127) - -
Other 16 1 - -
As at 31 December 60,511 (5,297) 49,470 (3,861)
IFRS and Release from Operations
Page 50
2.22 Investment contract liabilities
(a) Analysis of investment contract liabilities
Re- Re-
Gross insurance Gross insurance
2016 2016 2015 2015
Note £m £m £m £m
Participating investment contracts 5,271 - 4,912 -
Non-participating investment contracts 321,177 (286) 278,554 (250)
Investment contract liabilities 2.22(b) 326,448 (286) 283,466 (250)
(b) Movement in investment contract liabilities
Re- Re-
Gross insurance Gross insurance
2016 2016 2015 2015
£m £m £m £m
As at 1 January 283,466 (250) 296,225 (310)
Reserves in respect of new business 27,832 (27) 37,639 (598)
Amounts paid on surrenders and maturities during the year (43,217) 35 (46,557) 164
Investment return and related benefits 58,622 (44) 5,160 455
Management charges (251) - (303) -
Foreign exchange adjustments - - (162) -
Disposals1 - - (5,321) -
Transfer to held for sale - (3,235) 39
Other (4) - 20 -
As at 31 December 326,448 (286) 283,466 (250)
1. Reflects the disposal of Legal & General France and Legal & General International (Ireland) during 2015.
IFRS and Release from Operations
Page 51
2.23 IFRS sensitivity analysis
Impact on Impact on
pre-tax Impact on pre-tax Impact on
group profit group equity group profit group equity
net of re- net of re- net of re- net of re-
insurance insurance insurance insurance
2016 2016 2015 2015
£m £m £m £m
Economic sensitivity
Long-term insurance
100bps point increase in interest rates 173 42 48 (36)
100bps point decrease in interest rates (280) (120) (168) (49)
100bps point increase in long term inflation expectations (90) (72) (38) (31)
Credit spread widens by 100bps with no change in expected defaults (19) (100) (102) (138)
10% decrease in listed equities (127) (164) (124) (103)
10% fall in property values (116) (102) (81) (65)
10bps increase in credit default assumption (426) (339) (324) (258)
10bps decrease in credit default assumption 437 348 366 292
Non-economic sensitivity
Long-term insurance
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