REG - Legal & General Grp - L&G Full Year Results 2016 Part 3 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 4
08/03/2017 07:08
- Part 4: For the preceding part double click ID:nRSH8036Yc
- Cyclical 783 2,229 255 127 3,394
- Non-cyclical 1,059 2,420 201 13 3,693
- Health care 4 36 1 - 41
Infrastructure:
- Social 4,158 137 - 35 4,330
- Economic 1,934 74 - 223 2,231
Technology and Telecoms 582 1,306 745 424 3,057
Industrials 148 656 301 177 1,282
Utilities 3,673 1,191 2,387 907 8,158
Energy 176 1,030 303 624 2,133
Commodities 16 290 27 523 856
Oil and Gas 8 43 120 25 196
Property 709 7 - - 716
Property backed securities 1,629 340 17 58 2,044
Structured finance ABS / RMBS / CMBS / Other 1,016 50 375 18 1,459
Lifetime mortgages 852 - - - 852
CDOs1 - - - 73 73
Total 27,199 11,877 6,427 3,967 49,470
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding the levered super senior swaps. As the notes are now unlevered they have been reclassified to reflect the nature of the exposure.
Capital and Investments
Page 81
4.06 Bond portfolio summary (continued)
(a) LGR analysed by sector (continued)
Sectors analysed by domicile (continued)
EU Rest of
UK US excluding UK the World LGR
2015 2015 2015 2015 2015
£m £m £m £m £m
Sovereigns, Supras and Sub-Sovereigns 5,845 557 955 592 7,949
Banks 872 594 243 128 1,837
Financial Services 382 281 198 4 865
Insurance 277 380 40 73 770
Consumer Services and Goods:
- Cyclical 593 1,556 156 185 2,490
- Non-cyclical 905 1,824 138 64 2,931
- Health care 3 26 1 - 30
Infrastructure: - - - -
- Social 3,065 66 - 16 3,147
- Economic 1,348 29 - 106 1,483
Technology and Telecoms 506 1,200 786 197 2,689
Industrials 139 469 244 107 959
Utilities 3,024 974 1,902 771 6,671
Energy 194 983 325 471 1,973
Commodities 21 187 13 425 646
Oil and Gas 3 14 4 5 26
Property 689 4 - - 693
Property backed securities 1,342 320 12 32 1,706
Structured finance ABS / RMBS / CMBS / Other 972 29 211 3 1,215
Lifetime mortgages 207 - - - 207
CDOs1 - - 1,046 35 1,081
Total 20,387 9,493 6,274 3,214 39,368
1. The underlying reference portfolio has had no
reference entity defaults during the period . The CDOs
are termed as super senior since default losses on the
reference portfolio have to exceed 27.5%, on average
across the reference portfolio, before the CDOs incur
any default losses. Assuming an average recovery rate of
30%, then over 39% of the reference names would have to
default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is
based on observable market inputs. This is then
validated against the counterparty valuation.
Capital and Investments
Page 82
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector
Sectors analysed by credit rating
BB or
AAA AA A BBB below Other Total Total
2016 2016 2016 2016 2016 2016 2016 2016
£m £m £m £m £m £m £m %
Sovereigns, Supras and Sub-Sovereigns 1,115 10,216 370 394 102 - 12,197 23
Banks:
- Tier 1 - - - 1 12 - 13 -
- Tier 2 and other subordinated 210 49 73 54 1 - 387 1
- Senior 15 687 1,388 128 12 - 2,230 4
- Covered 259 - 16 - - - 275 1
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other subordinated - - 13 18 - - 31 -
- Senior - 468 193 174 3 112 950 2
Insurance:
- Tier 1 - - 2 4 - - 6 -
- Tier 2 and other subordinated - 48 8 72 1 - 129 -
- Senior 29 88 495 80 - - 692 1
Consumer Services and Goods:
- Cyclical - 403 1,167 1,808 244 - 3,622 7
- Non-cyclical 300 665 1,454 1,391 152 - 3,962 7
- Health Care 3 29 46 44 4 - 126 -
Infrastructure:
- Social - 346 3,164 675 148 - 4,333 8
- Economic - - 903 1,318 45 - 2,266 4
Technology and Telecoms 73 238 662 2,162 122 - 3,257 6
Industrials - 146 840 487 107 - 1,580 3
Utilities - 108 4,967 3,193 28 - 8,296 16
Energy - 174 619 1,156 240 - 2,189 4
Commodities - - 313 478 98 - 889 2
Oil and Gas - 120 69 111 39 - 339 1
Property - 278 109 394 6 - 787 1
Property backed securities - 305 628 1,066 53 - 2,052 4
Structured finance ABS / RMBS / CMBS / Other 341 729 617 90 53 - 1,830 3
Lifetime mortgage loans 388 322 91 51 - - 852 2
CDOs1 - - 59 14 - - 73 -
Total £m 2,733 15,419 18,266 15,363 1,470 112 53,363 100
Total % 5 29 34 29 3 - 100
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding the levered super senior swaps. As the notes are now unlevered they have been reclassified to reflect the nature of the exposure.
Capital and Investments
Page 83
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector (continued)
Sectors analysed by credit rating (continued)
BB or
AAA AA A BBB below Other Total Total
2015 2015 2015 2015 2015 2015 2015 2015
£m £m £m £m £m £m £m %
Sovereigns, Supras and Sub-Sovereigns 2,069 6,645 324 420 63 6 9,527 23
Banks:
- Tier 1 - - - 5 30 - 35 -
- Tier 2 and other subordinated - - 102 148 1 1 252 1
- Senior 97 698 1,004 140 11 1 1,951 4
- Covered 311 - - 15 - - 326 1
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other subordinated - 3 51 8 - - 62 -
- Senior 1 380 267 309 7 80 1,044 2
Insurance:
- Tier 1 - - - 6 - - 6 -
- Tier 2 and other subordinated - 3 93 105 1 1 203 -
- Senior 1 76 435 85 - - 597 1
Consumer Services and Goods:
- Cyclical - 304 661 1,521 191 - 2,677 6
- Non-cyclical 231 506 1,259 1,055 125 3 3,179 7
- Health care 4 8 68 22 9 - 111 -
Infrastructure:
- Social - 519 2,089 413 131 - 3,152 7
- Economic - - 729 737 19 14 1,499 3
Technology and Telecoms 61 169 467 2,077 135 1 2,910 7
Industrials - 99 600 514 66 1 1,280 3
Utilities 1 83 3,939 2,767 39 1 6,830 17
Energy 24 318 472 913 283 - 2,010 5
Commodities - - 270 365 23 - 658 1
Oil and Gas 4 24 48 44 19 1 140 -
Property - 257 111 386 7 1 762 2
Property backed securities - 414 292 990 15 - 1,711 4
Structured finance ABS / RMBS / CMBS / Other 530 730 299 76 71 - 1,706 4
Lifetime mortgage loans - - - 207 - - 207 -
CDOs1 - 552 468 14 47 - 1,081 2
Total £m 3,334 11,788 14,048 13,342 1,293 111 43,916 100
Total % 8 27 32 30 3 - 100
1. The underlying reference portfolio has had no
reference entity defaults during the period. The CDOs
are termed as super senior since default losses on the
reference portfolio have to exceed 27.5%, on average
across the reference portfolio, before the CDOs incur
any default losses. Assuming an average recovery rate of
30%, then over 39% of the reference names would have to
default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is
based on observable market inputs. This is then
validated against the market valuation.
Capital and Investments
Page 84
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector (continued)
Sectors analysed by domicile
EU
excluding Rest of
UK US UK the World Total
2016 2016 2016 2016 2016
£m £m £m £m £m
Sovereigns, Supras and Sub-Sovereigns 9,362 1,038 1,068 729 12,197
Banks 1,141 810 457 497 2,905
Financial Services 502 125 353 1 981
Insurance 189 566 18 54 827
Consumer Services and Goods:
- Cyclical 795 2,410 272 145 3,622
- Non-cyclical 1,073 2,653 209 27 3,962
- Health care 18 102 6 - 126
Infrastructure:
- Social 4,161 137 - 35 4,333
- Economic 1,937 102 1 226 2,266
Technology and Telecoms 588 1,468 753 448 3,257
Industrials 166 904 312 198 1,580
Utilities 3,687 1,293 2,401 915 8,296
Energy 178 1,044 321 646 2,189
Commodities 16 292 33 548 889
Oil and Gas 13 128 144 54 339
Property 709 71 4 3 787
Property backed securities 1,631 345 17 59 2,052
Structured Finance ABS / RMBS / CMBS / Other 1,020 323 469 18 1,830
Lifetime mortgages 852 - - - 852
CDOs1 - - - 73 73
Total 28,038 13,811 6,838 4,676 53,363
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding the levered super senior swaps. As the notes are now unlevered they have been reclassified to reflect the nature of the exposure.
Capital and Investments
Page 85
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector (continued)
Sectors analysed by domicile (continued)
EU
excluding Rest of
UK US UK the World Total
2015 2015 2015 2015 2015
£m £m £m £m £m
Sovereigns, Supras and Sub-Sovereigns 6,200 878 1,696 753 9,527
Banks 979 710 455 420 2,564
Financial Services 472 368 252 14 1,106
Insurance 282 404 45 75 806
Consumer Services and Goods
- Cyclical 595 1,724 158 200 2,677
- Non-cyclical 926 2,007 169 77 3,179
- Health care 16 90 4 1 111
Infrastructure
- Social 3,068 67 - 17 3,152
- Economic 1,363 29 - 107 1,499
Technology and Telecoms 513 1,361 822 214 2,910
Industrials 175 678 301 126 1,280
Utilities 3,033 1,049 1,964 784 6,830
Energy 195 993 337 485 2,010
Commodities 22 187 12 437 658
Oil and Gas 11 71 22 36 140
Property 699 52 7 4 762
Property backed securities 1,342 324 11 34 1,711
Structured finance ABS / RMBS / CMBS / Other 975 518 209 4 1,706
Lifetime mortgage loans 207 - - - 207
CDOs1 - - 1,046 35 1,081
Total 21,073 11,510 7,510 3,823 43,916
1. The underlying reference portfolio has had no
reference entity defaults during the period. The CDOs
are termed as super senior since default losses on the
reference portfolio have to exceed 27.5%, on average
across the reference portfolio, before the CDOs incur
any default losses. Assuming an average recovery rate of
30%, then over 39% of the reference names would have to
default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is
based on observable market inputs. This is then
validated against the market valuation.
Capital and Investments
Page 86
4.06 Bond portfolio summary (continued)
(c) LGR and total group analysed by credit rating
Externally Internally Externally Internally Total
rated rated1 LGR rated rated1 Group
2016 2016 2016 2016 2016 2016
£m £m £m £m £m £m
AAA 1,813 388 2,201 2,345 388 2,733
AA 13,303 1,236 14,539 13,916 1,503 15,419
A 14,454 2,773 17,227 15,384 2,882 18,266
BBB 12,405 2,061 14,466 13,068 2,295 15,363
BB or below 960 77 1,037 1,322 148 1,470
Other - - - - 112 112
42,935 6,535 49,470 46,035 7,328 53,363
Externally Internally Externally Internally Total
rated rated1 LGR rated rated1 Group
2015 2015 2015 2015 2015 2015
£m £m £m £m £m £m
AAA 1,711 6 1,717 3,326 8 3,334
AA 9,426 1,551 10,977 10,234 1,554 11,788
A 11,349 1,903 13,252 12,084 1,964 14,048
BBB 10,721 1,659 12,380 11,497 1,845 13,342
BB or below 1,022 20 1,042 1,221 72 1,293
Other - - - - 111 111
34,229 5,139 39,368 38,362 5,554 43,916
Capital and Investments
Page 87
4.07 Property analysis
Property exposure within Direct Investments
Group property Direct Investments by status
LGI
(UK and
LGR1 LGC Other) Total
At At At At
2016 2016 2016 2016
£m £m £m £m %
Fully let 2,442 16 - 2,458 94
Part let - - - - -
Development - 101 - 101 4
Land - 45 - 45 2
2,442 162 - 2,604 100
1. The fully let LGR property includes £2.1bn let to investment grade tenants.
LGI
(UK and
LGR1 LGC Other) Total
At At At At
2015 2015 2015 2015
£m £m £m £m %
Fully let 2,157 25 4 2,186 93
Part let - - - - -
Development - 118 - 118 5
Land - 43 - 43 2
2,157 186 4 2,347 100
1. The fully let LGR property includes £1.9bn let to investment grade tenants.
Capital and Investments
Page 88
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Glossary
Page 89
Adjusted earnings per share*
Calculated by dividing profit after tax from continuing operations, attributable to equity holders of the company,
excluding recognised gains and losses associated with held for sale and completed business disposals, by the weighted
average number of ordinary shares in issue during the period, excluding employee scheme treasury shares. Excluding the
impact of anticipated and completed disposals provides an indication of the earnings per share from ongoing operations.
Adjusted return on equity*
ROE measures the return earned by shareholders on shareholder capital retained within the business. Adjusted ROE is
calculated as IFRS profit after tax divided by average IFRS shareholders' funds excluding recognised gains and losses
associated with held for sale and completed business disposals. Excluding the impact of anticipated and completed disposals
provides an indication of the return on equity from ongoing operations.
Adjusted operating profit*
Operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and
exceptional items. Adjusted operating profit further removes exceptional restructuring costs to demonstrate the
profitability before these costs which are non-recurring in nature.
Advisory assets
These are assets on which Global Index Advisors (GIA) provide advisory services. Advisory assets are beneficially owned by
GIA's clients and all investment decisions pertaining to these assets are also made by the clients. These are different
from Assets under Management (AUM) defined below.
Alternative performance measures (APMs)
An alternative performance measure is a financial measure of historic or future financial performance, financial position,
or cash flows, other than a financial measure defined under IFRS or the regulations of Solvency II. The group uses a range
of these metrics to provide a better understanding of the underlying performance of the group. Where appropriate,
reconciliations of alternative performance measures to IFRS measures are provided. All APMs defined within this glossary
are marked with an asterisk.
Annual premium
Premiums that are paid regularly over the duration of the contract such as protection policies.
Assets under administration (AUA)*
Assets administered by Legal & General which are beneficially owned by clients. Services provided in respect of assets under
administration are of an administrative nature, including safekeeping, collecting investment income, settling purchase and
sales transactions and record keeping.
Assets under management (AUM)*
The total amount of money investors have trusted to our fund managers to invest across our investment products i.e. these
are funds which are managed by our fund managers on behalf of investors.
Backbook acquisition
New business transacted with an insurance company which allows the business to continue to utilise solvency II transitional
measures associated with the business.
Bundled DC solution
Where investment and administration services are provided to a scheme by the same service provider. Typically, all
investment and administration costs are passed onto the scheme members.
Bundled pension schemes
Where the fund manager bundles together the investment provider role and third-party administrator role, together with the
role of selecting funds and providing investment education, into one proposition.
Deduction and aggregation (D&A)
A method of calculating group solvency on a Solvency II basis, whereby the assets and liabilities of certain entities are
excluded from the group consolidation. The net contribution from those entities to group own funds is included as an asset
on the group's Solvency II balance sheet. Regulatory approval has been provided to recognise the (re)insurance subsidiaries
of LGA on this basis.
Glossary
Page 90
Direct investments
Direct investments, which generally constitute an agreement with another party and represent an exposure to untraded and
often less volatile asset classes. Direct investments also include physical assets, bilateral loans and private equity, but
exclude hedge funds.
Earnings per share (EPS)
EPS is a common financial metric which can be used to measure the profitability and strength of a company over time. It is
the total shareholder profit after tax divided by the number of shares outstanding. EPS uses a weighted average number of
shares outstanding during the year.
Economic capital*
Economic capital is the capital that an insurer holds internally as a result of its own assessment of risk. It differs from
regulatory capital, which is determined by regulators. It represents an estimate of the amount of economic losses an
insurer could withstand and still remain solvent with a target level of confidence over a specified time horizon.
Economic Capital Requirement (ECR)
The amount of Economic Capital required to cover the losses occurring in a 1-in-200 year risk event.
Economic Capital Surplus*
The excess of Eligible Own Funds on an economic basis over the Economic Capital Requirement. This represents the amount of
capital available to the company in excess of that required to sustain it in a 1-in-200 year risk event.
ECR coverage ratio*
The Eligible Own Funds on an economic basis divided by the Economic Capital Requirement (ECR). This represents the number
of times that the ECR is covered by Eligible Own Funds.
Eligible Own Funds
Eligible Own Funds
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