REG - Legal & General Grp - L&G Full Year Results 2024 Part 2
12/03/2025 07:15
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RNS Number : 2601A Legal & General Group Plc 12 March 2025
L&G Full Year Results 2024 Part 2
IFRS Disclosures on performance
1.01 Restatement
At a Capital Markets Event on 12 June 2024, the Group set out a refreshed
strategy and set of financial targets. As part of a new vision for a growing,
simpler and better-connected business, the Group has implemented a revised
business model, including the:
· creation of a single Asset Management division, bringing Legal
& General Investment Management (LGIM) and Legal & General Capital
(LGC) together as a unified, global, public and private markets asset manager
· maximisation of the value of non-strategic assets through a new
Corporate Investments unit.
As a result, the Group is now focused on three core business divisions, namely
Institutional Retirement, Asset Management and Retail, with a shared sense of
purpose and powerful synergies.
The new divisional organisation has an impact on the reportable segments of
the Group. Previously, the Group operated five reportable segments, comprising
Legal & General Retirement Institutional (LGRI), LGC, LGIM, Insurance and
Retail Retirement. Following the announcement, in line with the principles in
IFRS 8, 'Operating Segments', the Group operating and reportable segments have
been updated to the following:
· Institutional Retirement, which continues to focus on worldwide
pension risk transfer business opportunities
· Asset Management, the new combined investment management business
of the Group, committed to driving growth in public markets as well as
materially scale the Group's in-house and origination platform capability in
private markets across Real Estate, Private Credit and Infrastructure,
including through an accelerated programme of fund launches
· Insurance, which primarily represents UK protection (both group
and retail) and US retail protection business (US Insurance)
· Retail Retirement, which primarily represents retail annuity and
drawdown products, workplace savings and lifetime mortgage loans
· Corporate Investments, which represents a portfolio of
non-strategic assets managed separately with the goal of maximising
shareholder value ahead of potential divestment.
Group expenses, debt costs and assets held centrally are reported separately.
Transactions between segments are on normal commercial terms and are included
within the reported segments.
Segmental disclosures in relation to the prior year presented have been
restated to reflect the new divisional organisation.
1.02 Operating profit(#)
Restated
2024 2023
For the year ended 31 December 2024 Notes £m £m
Institutional Retirement 1.03 1,105 1,028
Asset Management 1.04 401 448
Retail 1.03 504 449
- Insurance 188 139
- Retail Retirement 316 310
Group debt costs(1) (216) (212)
Group investment projects and expenses (178) (182)
Core operating profit 1,616 1,531
Corporate Investments 95 136
Total operating profit 1,711 1,667
Investment and other variances 1.05 (1,383) (1,577)
Profits/(losses) attributable to non-controlling interests 4 (14)
Adjusted profit before tax attributable to equity holders 332 76
Tax (expense)/credit attributable to equity holders 3.06 (137) 367
Profit for the year 2.01 195 443
Total tax expense/(credit) 2.01 347 (248)
Profit before tax 2.01 542 195
Profit attributable to equity holders 191 457
Earnings per share:
Core (pence per share)(2) 1.07 20.23 19.04
Basic (pence per share)(2) 1.07 2.89 7.35
Diluted (pence per share)(2) 1.07 2.86 7.28
1. Group debt costs exclude interest on non-recourse financing.
2. All earnings per share calculations are based on profit attributable to
equity holders of the Company.
This supplementary adjusted operating profit information (one of the Group's
key performance indicators) provides additional analysis of the results
reported under IFRS, and the Group believes that it provides stakeholders with
useful information to enhance their understanding of the performance of the
business in the year. Core operating profit measures the operating performance
of the Group's core businesses, and is therefore calculated as the Group's
adjusted operating profit excluding the operating profit of the Corporate
Investments unit.
Adjusted operating profit measures the pre-tax result excluding the impact of
investment volatility, economic assumption changes caused by changes in market
conditions or expectations, and exceptional items. Adjusted operating profit
for insurance contracts primarily reflects the release of profit from the
contractual service margin and risk adjustment in the year (adjusted for
reinsurance mismatches), the unwind of the discount rate used in the
calculation of the insurance liabilities and incurred expenses that are not
directly attributable to the insurance contracts.
To remove investment volatility, adjusted operating profit reflects long-term
expected investment returns on the substantial majority of investments held by
the Group, including both traded and private market investments. For the
remainder of the asset portfolio, including certain operational businesses in
the Asset Management division and, up to its disposal on 31 October 2024, CALA
Group (Holdings) Limited (Cala), no adjustments are made to exclude investment
volatility. The investment margin for insurance business therefore reflects
the expected investment return above the unwind of the insurance liability
discount rate.
Following the refresh of the Group's strategy and the segmentation changes
described in Note 1.01, the Group has updated the application of its
methodology for the determination of adjusted operating profit for assets
allocated to the Asset Management and Corporate Investments segments, in order
to simplify and harmonise the methodology within the segments. This has not
had a material impact on the comparative adjusted operating profit of each
segment, and therefore has not led to a restatement.
The long-term expected investment return reflects the best estimate of the
long-term return at the start of the year, as follows:
· expected returns for traded equity, commercial property and
residential property (including lifetime mortgages) are based on market
consensus forecasts and long-term historic average returns expected to apply
through the cycle
· assumptions for fixed interest securities measured at fair value
through profit or loss (FVTPL) are based on asset yields for the assets held,
less an adjustment for credit risk (assessed on a best estimate basis). Where
securities are measured at amortised cost or fair value through other
comprehensive income (FVOCI), the expected investment return comprises
interest income on an effective interest rate basis
· equity direct investments incorporate investments in housing,
specialist commercial real estate, clean energy, alternative finance and
fintech. Where used for the determination of adjusted operating profit, the
long-term expected investment return is on average between 10% and 12%. Rates
of return specific to each asset are determined at the point of underwriting
and reviewed and updated annually. The rate of return for assets belonging to
Corporate Investments is determined at a portfolio level, and is updated
annually if required. The expected investment return includes current
financial assumptions as well as sector specific assumptions, including retail
and commercial property yields and power prices where appropriate.
# All references to 'Operating profit' throughout this report represent
'Adjusted operating profit', an alternative performance measure defined in the
alternative performance measures (APM) section.
The long-term expectations used in determining the expected investment returns
for traded equity and property assets are:
2024 2023
Equity returns 7% 7%
Commercial property growth 5% 5%
Residential property growth 3.5% 3.5%
Variances between actual and long-term expected investment returns are
excluded from adjusted operating profit, as are economic assumption changes to
insurance contract liabilities caused by movements in market conditions or
expectations (e.g. credit default and inflation), and any difference between
the actual allocated asset mix and the target long-term asset mix on new
pension risk transfer business. Assets held for future new pension risk
transfer business are excluded from the asset portfolio used to determine the
discount rate for annuities on insurance contract liabilities. The impact of
investment management actions that optimise the yield of the assets backing
the back book of annuity contracts is included within adjusted operating
profit.
Exceptional income and expenses which arise outside the normal course of
business in the year, such as acquisitions, disposals and start-up costs, are
excluded from adjusted operating profit.
1.03 Analysis of Institutional Retirement and Retail operating profit(#)
Restated
Institutional Institutional Restated
Retirement Retail Retirement Retail
2024 2024 2023 2023
£m £m £m £m
Amortisation of the CSM in the year(1) 650 469 591 446
Release of risk adjustment in the year 141 84 119 74
Experience variances (10) 26 (14) (17)
Development of losses on onerous contracts(2) - (10) 1 (27)
Other expenses(3) (168) (136) (160) (121)
Insurance investment margin(4) 485 106 486 122
Investment contracts and non-insurance operating profit 7 (35) 5 (28)
Total Institutional Retirement and Retail operating profit 1,105 504 1,028 449
1. Contractual service margin (CSM) amortisation for Retail has been reduced
by £18m (2023: £16m) to exclude the impact of reinsurance mismatches.
2. Development of losses on onerous contracts has been reduced by £35m (2023:
£6m) to remove gross contract losses where, net of reinsurance, the contracts
remain profitable. These accounting losses will be presented as a reduction to
the CSM amortisation in future periods.
3. Other expenses are non-attributable expenses on both new business and
existing business. These are overhead costs which are not allowed for in the
CSM or the best estimate liability unit cost assumptions, and instead are
reported within the Consolidated Income Statement as part of the profit or
loss for the year.
4. Insurance investment margin comprises the expected investment return on
assets backing insurance contract liabilities, the unwind of the discount rate
on insurance contract liabilities and the optimisation of the assets backing
the annuity back book. The insurance investment margin also incorporates the
impact of the change in segmentation (see Note 1.01).
1.04 Asset Management operating profit(#)
Restated
2024 2023
£m £m
Management fee revenue (excluding third-party market data)(1,2) 947 900
Transactional revenue(3) 20 26
Expenses (excluding third-party market data)(1,2) (711) (658)
Operating profit from fee related earnings 256 268
Operating profit from balance sheet investments(4) 145 180
Total Asset Management operating profit 401 448
1. Asset Management revenue has been presented net of costs of £30m in
relation to the provision of third-party market data (2023: £26m).
2. Asset Management revenue and expenses include the investment management
activities that the division undertakes on behalf of other Group businesses.
As indicated in Note 1.08, the revenue and expenses for the most significant
portion of these activities, previously undertaken by the LGIM division prior
to the restructure in June 2024, are included in the above table on a gross
basis. Any additional services provided by Asset Management to other
businesses, notably those inherited from the previous LGC division, are
eliminated in the above and segmental disclosures and presented on a net
basis. Prior year comparatives have been adjusted to be on a consistent basis.
3. Transactional revenue from external clients includes execution fees, asset
transition income, trigger fees, arrangement fees on property transactions and
performance fees.
4. Earnings from balance sheet investments across specialist commercial real
estate, clean energy, housing and alternative finance.
# All references to 'Operating profit' throughout this report represent
'Adjusted operating profit', an alternative performance measure defined in the
alternative performance measures (APM) section.
1.05 Investment and other variances
Restated
2024 2023
£m £m
Institutional Retirement and Retail
- Net impact of investment returns less than expectation and change in (711) (720)
liability discount rates
- Other (53) (6)
Total Institutional Retirement and Retail investment variance(1) (764) (726)
Asset Management investment variance (187) (123)
Other investment variance(2) (285) (529)
Investment variance (1,236) (1,378)
M&A related and other variances(3) (147) (199)
Total investment and other variances (1,383) (1,577)
1. The investment variance for Institutional Retirement and Retail is driven
by increases in interest rates and inflation expectations, in line with our
year end sensitivities, as well as non-recurring IFRS 17 modelling refinements
in the first half of 2024 and an adverse accounting mismatch from longevity
releases in the second half of the year.
2. Other investment variance includes a £110m valuation write down of
Salary Finance. In 2023, it includes the £167m one-off settlement cost
associated with the buyout of the Group's UK defined benefit pension schemes
along with the current service costs and net interest expense up until that
transaction.
3. M&A related and other variances includes £99m in respect of the
disposal of Cala.
Investment variance includes differences between actual and long-term expected
investment return on traded and non-traded assets, the impact of economic
assumption changes caused by changes in market conditions or expectations
(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 the yield associated with assets held for future
new pension risk transfer business. Note 1.02 includes details around the
determination of the long-term expected investment return in the calculation
of adjusted operating profit.
For the Group's long-term insurance businesses, reinsurance mismatches can
arise where the reinsurance offset rules in IFRS 17 do not reflect
management's view of the net of reinsurance transaction. In particular, during
a year of reinsurance renegotiation, reinsurance gains cannot be recognised to
offset any inception losses on the underlying contracts where they are
recognised before the new reinsurance agreement is signed. In these
circumstances, the onerous contract losses are reduced to reflect the net loss
(if any) after reinsurance, and future contractual service margin (CSM)
amortisation is reduced over the duration of the contracts. Additionally, in
some circumstances, profitable reinsurance does not mitigate onerous losses on
gross contracts whilst the net position remains profitable. Where this is the
case, onerous contract profits or losses are also presented below operating
profit and the CSM amortisation is adjusted over the remaining duration of the
contracts.
Changes in non-financial assumptions, including longevity, recalibrate the CSM
at locked-in, point-of-sale discount rates, whilst the fulfilment cash flows
change at the current discount rate. This creates a component of investment
variance reflecting the difference between these bases. Investment variance
for Institutional Retirement and Retail includes £79m expense (2023: £318m
expense) arising from interest rate differences on longevity assumption
changes in the year.
M&A related and other variances includes gains and losses, expenses and
intangible amortisation relating to acquisitions, disposals and
restructuring as well as business start-up costs.
1.06 Risk adjustment (RA) and contractual service margin (CSM) analysis
Net of Net of
reinsurance Net of reinsurance Net of
RA reinsurance CSM reinsurance
Institutional RA Institutional CSM
Retirement Retail Retirement Retail
£m £m £m £m
As at 1 January 2024 807 891 8,350 4,644
CSM recognised for services provided/received - - (650) (487)
Release of risk adjustment (141) (84) - -
Changes in estimates which adjust the CSM (50) (7) 160 (3)
Changes in estimates that result in losses or reversal of losses on underlying - (2) - -
onerous contracts
Contracts initially recognised in the year 94 45 489 351
Finance (income)/expenses from insurance contracts (2) (12) 275 147
Effect of movements in exchange rates 2 10 1 15
As at 31 December 2024 710 841 8,625 4,667
Net of Net of
reinsurance Net of reinsurance Net of
RA reinsurance CSM reinsurance
Institutional RA Institutional CSM
Retirement Retail Retirement Retail
£m £m £m £m
As at 1 January 2023 649 883 7,448 4,490
CSM recognised for services provided/received - - (591) (462)
Release of risk adjustment (119) (74) - -
Changes in estimates which adjust the CSM 6 (26) 424 204
Changes in estimates that result in losses or reversal of losses on underlying - (1) - 8
onerous contracts
Contracts initially recognised in the year 161 32 865 320
Finance expenses from insurance contracts 114 105 220 134
Effect of movements in exchange rates (4) (28) (16) (50)
As at 31 December 2023 807 891 8,350 4,644
The amounts presented reflect the net CSM amortisation expected to be
recognised in operating profit in future periods from the business in-force at
the end of the year, excluding the adjustment for reinsurance mismatches
relating to protection business (described in Note 1.03). Actual CSM
amortisation in future periods will differ from that presented due to the
impacts of future new business, recalibrations of the CSM and changes in the
future coverage units. The total amount presented exceeds the carrying value
of the CSM as it incorporates the future accretion of interest.
1.07 Earnings per share
(i) Basic and core operating earnings per share
Restated Restated
Total Per share(1) Total Per share(1)
2024 2024 2023 2023
£m p £m p
Profit for the year attributable to equity holders 191 3.24 457 7.73
Less: coupon payable in respect of restricted Tier 1 convertible notes after (21) (0.35) (22) (0.38)
tax relief
Total basic earnings 170 2.89 435 7.35
Less: Corporate Investments operating profit after allocated tax (71) (1.21) (104) (1.76)
Less: Investment variance after allocated tax 1,092 18.55 795 13.45
Total basic core operating earnings(2) 1,191 20.23 1,126 19.04
1. Basic earnings per share is calculated by dividing profit after tax by the
weighted average number of ordinary shares in issue during the year, excluding
employee scheme treasury shares.
2. Total basic core earnings includes allocated tax at the standard UK
corporate tax rate.
(ii) Diluted and core operating earnings per share
After tax Weighted Per share(1)
average
number of
shares
For the year ended 31 December 2024 £m m p
Profit for the year attributable to equity holders 191 5,886 3.24
Less: coupon payable in respect of restricted Tier 1 convertible notes after (21) - (0.35)
tax relief(2)
Net shares under options allocable for no further consideration - 62 (0.03)
Total diluted earnings 170 5,948 2.86
Less: Corporate Investments operating profit after allocated tax (71) - (1.19)
Less: Investment variance after allocated tax 1,092 - 18.36
Conversion of restricted Tier 1 notes(2) 21 307 (0.65)
Total diluted core operating earnings 1,212 6,255 19.38
Weighted
After tax average Per share(1)
number of
shares
For the year ended 31 December 2023 £m m p
Profit for the year attributable to equity holders 457 5,915 7.73
Net shares under options allocable for no further consideration - 59 (0.08)
Conversion of restricted Tier 1 notes - 307 (0.37)
Total diluted earnings 457 6,281 7.28
Less: Corporate Investments operating profit after allocated tax (104) - (1.66)
Less: Investment variance after allocated tax 795 - 12.66
Total diluted core operating earnings 1,148 6,281 18.28
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.
2. The conversion of restricted Tier 1 notes in 2024 is antidilutive for the
calculation of diluted earnings per share and dilutive for the calculation of
diluted core operating earnings per share. Where antidilutive, the conversion
has not been considered for the determination of the relevant amount per
share. The instrument could potentially dilute basic earnings per share in the
future.
1.08 Segmental analysis
Following the announcement of the Group's refreshed strategy in 2024, and the
associated business model revision, the Group now has five reportable
segments, comprising Institutional Retirement, Asset Management, Insurance,
Retail Retirement and Corporate Investments. Further information on the change
is set out in Note 1.02.
Group expenses, debt costs and assets held centrally are reported separately.
Transactions between segments are on normal commercial terms and are included
within the reported segments.
In the UK, annuity liabilities relating to Institutional Retirement and Retail
Retirement are backed by a single portfolio of assets, and once a transaction
has been completed the assets relating to any particular transaction are not
tracked to the related liabilities. Investment variance is allocated to the
two business segments based on the relative size of the underlying insurance
contract liabilities.
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 asset and liabilities are managed on a legal
entity rather than a 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 year
Group
expenses
Institutional Asset Retail Corporate and debt
Retirement Management Insurance Retirement Investments costs Total
For the year ended 31 December 2024 £m £m £m £m £m £m £m
Operating profit/(loss)(#) 1,105 401 188 316 95 (394) 1,711
Investment and other variances (557) (190) (52) (155) (388) (41) (1,383)
Profits attributable to non-controlling interests - - - - - 4 4
Profit/(loss) before tax attributable to equity holders 548 211 136 161 (293) (431) 332
Tax (expense)/credit attributable to equity holders (131) (46) (41) (37) - 118 (137)
Profit/(loss) for the year 417 165 95 124 (293) (313) 195
Group
expenses
Institutional Asset Retail Corporate and debt
Retirement Management Insurance Retirement Investments costs Total
For the year ended 31 December 2023 (Restated) £m £m £m £m £m £m £m
Operating profit/(loss)(#) 1,028 448 139 310 136 (394) 1,667
Investment and other variances (555) (123) (22) (149) (363) (365) (1,577)
Losses attributable to non-controlling interests - - - - - (14) (14)
Profit/(loss) before tax attributable to equity holders 473 325 117 161 (227) (773) 76
Tax credit/(expense) attributable to equity holders 236 (30) (44) 61 17 127 367
Profit/(loss) for the year 709 295 73 222 (210) (646) 443
# All references to 'Operating profit' throughout this report represent
'Adjusted operating profit', an alternative performance measure defined in the
alternative performance measures (APM) section.
(ii) Revenue
Total revenue includes insurance revenue, fees from fund management and
investment contracts and other operational income from contracts with
customers. Further details on the components of insurance revenue are
disclosed in Note 3.12.
Corporate
Institutional Asset Retail Investments
Retirement Management(1) Insurance Retirement and other(2) Total
For the year ended 31 December 2024 £m £m £m £m £m £m
Internal revenue(3) - 193 - - (193) -
External revenue 5,885 849 3,366 1,584 1,005 12,689
Total revenue 5,885 1,042 3,366 1,584 812 12,689
Corporate
Institutional Asset Retail Investments
Retirement Management(1) Insurance Retirement and other(2) Total
For the year ended 31 December 2023 (Restated) £m £m £m £m £m £m
Internal revenue(3) - 176 - - (176) -
External revenue 5,257 930 3,115 1,468 1,341 12,111
Total revenue 5,257 1,106 3,115 1,468 1,165 12,111
1. Asset Management internal revenue relates to investment management
services provided to other segments.
2. Other includes inter-segmental eliminations and Group consolidation
adjustments.
3. Asset Management revenue includes the investment management activities that
the division undertakes on behalf of other Group businesses. The revenue for
the most significant portion of these activities, previously undertaken by the
LGIM division prior to the restructure in June 2024, are included in the above
table on a gross basis. Any additional services provided by Asset Management
to other divisions, notably those inherited from the previous LGC division,
are eliminated in the segmental disclosures and presented on a net basis.
Prior year comparatives have been adjusted to be on a consistent basis.
IFRS Primary Financial Statements
2.01 Consolidated Income Statement
2024 2023
For the year ended 31 December 2024 Notes £m £m
Insurance revenue 3.12 10,574 9,624
Insurance service expenses 3.12 (9,091) (8,373)
Insurance service result before reinsurance contracts held 1,483 1,251
Net expense from reinsurance contracts held 3.12 (159) (137)
Insurance service result 3.12 1,324 1,114
Investment return(1) 21,744 32,973
Finance income/(expense) from insurance contracts 1,056 (5,830)
Finance (expense)/income from reinsurance contracts (30) 584
Change in investment contract liabilities (22,196) (27,116)
Insurance and investment result 1,898 1,725
Other operational income 1,204 1,571
Fees from fund management and investment contracts 864 825
Acquisition costs (175) (149)
Other finance costs (372) (347)
Other expenses (2,877) (3,430)
Total other income and expenses (1,356) (1,530)
Profit before tax 542 195
Tax expense attributable to policyholder returns (210) (119)
Profit before tax attributable to equity holders 332 76
Total tax (expense)/credit (347) 248
Tax expense attributable to policyholder returns 210 119
Tax (expense)/credit attributable to equity holders 3.06 (137) 367
Profit for the year 195 443
Attributable to:
Non-controlling interests 4 (14)
Equity holders 191 457
Dividend distributions to equity holders during the year 3.04 1,230 1,172
Dividend distributions to equity holders proposed after the year end 3.04 902 871
p p
Total basic earnings per share(2) 1.07 2.89 7.35
Total diluted earnings per share(2) 1.07 2.86 7.28
1. Investment return includes £467m (2023: £314m) of interest income
calculated using the effective interest method.
2. All earnings per share calculations are based on profit attributable to
equity holders of the Company.
2.02 Consolidated Statement of Comprehensive Income
2024 2023
For the year ended 31 December 2024 £m £m
Profit for the year 195 443
Items that will not be reclassified subsequently to profit or loss
Actuarial remeasurements on defined benefit pension schemes 9 (29)
Tax on actuarial remeasurements on defined benefit pension schemes (2) 8
Total items that will not be reclassified subsequently to profit or loss 7 (21)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations (10) (6)
Movement in cross-currency hedge 3 (37)
Tax on movement in cross-currency hedge (1) 9
Movement in financial investments measured at FVOCI (258) 75
Tax on movement in financial investments measured at FVOCI 63 (18)
Insurance finance income/(expense) for insurance contracts issued applying the 428 (73)
OCI option
Reinsurance finance (expense)/income for reinsurance contracts held applying (204) 43
the OCI option
Tax on movement in finance income/(expense) for insurance and reinsurance (51) 6
contracts
Total items that may be reclassified subsequently to profit or loss (30) (1)
Other comprehensive expense after tax (23) (22)
Total comprehensive income for the year 172 421
Total comprehensive income/(expense) for the year attributable to:
Non-controlling interests 4 (14)
Equity holders 168 435
2.03 Consolidated Balance Sheet
2024 2023
As at 31 December 2024 Notes £m £m
Assets
Goodwill 30 73
Intangible assets 450 477
Investment in associates and joint ventures accounted for using the equity 872 616
method
Property, plant and equipment 395 433
Investment property 3.05 9,822 8,893
Financial investments 3.05 495,551 471,405
Reinsurance contract assets 3.12 9,165 7,306
Deferred tax assets 3.06 1,741 1,714
Current tax assets 857 885
Receivables and other assets 8,627 9,780
Cash and cash equivalents 16,657 20,513
Total assets 544,167 522,095
Equity
Share capital 3.07 147 149
Share premium 3.07 1,036 1,030
Employee scheme treasury shares (163) (147)
Capital redemption and other reserves 319 326
Retained earnings 1,714 2,973
Attributable to owners of the parent 3,053 4,331
Restricted Tier 1 convertible notes 3.08 495 495
Non-controlling interests (37) (42)
Total equity 3,511 4,784
Liabilities
Insurance contract liabilities 3.12 95,648 91,446
Reinsurance contract liabilities 3.12 170 220
Investment contract liabilities 323,957 316,872
Core borrowings 3.09 4,308 4,280
Operational borrowings 3.10 3,391 1,840
Provisions 3.15 152 258
Deferred tax liabilities 3.06 197 107
Current tax liabilities 118 77
Payables and other financial liabilities 3.11 87,362 78,439
Other liabilities 950 680
Net asset value attributable to unit holders 24,403 23,092
Total liabilities 540,656 517,311
Total equity and liabilities 544,167 522,095
2.04 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 year ended 31 December 2024 capital premium shares reserves(1) earnings of the parent notes interests equity
£m £m £m £m £m £m £m £m £m
As at 1 January 2024 149 1,030 (147) 326 2,973 4,331 495 (42) 4,784
Profit for the year - - - - 191 191 - 4 195
Exchange differences on translation of overseas operations - - - (10) - (10) - - (10)
Net movement in cross-currency hedge - - - 2 - 2 - - 2
Net actuarial remeasurements on defined benefit pension schemes - - - - 7 7 - - 7
Net movement in financial investments measured at FVOCI - - - (195) - (195) - - (195)
Net insurance finance income - - - 173 - 173 - - 173
Total comprehensive (expense)/income for the year - - - (30) 198 168 - 4 172
Options exercised under share option schemes - 6 - - - 6 - - 6
Shares purchased - - (33) - - (33) - - (33)
Shares vested - - 17 (51) - (34) - - (34)
Employee scheme treasury shares: - - - 72 - 72 - - 72
- Value of employee services
Share scheme transfers to retained earnings - - - - (5) (5) - - (5)
Share buyback(2) (2) - - 2 (201) (201) - - (201)
Dividends - - - - (1,230) (1,230) - - (1,230)
Coupon payable in respect of restricted Tier 1 convertible notes after tax - - - - (21) (21) - - (21)
relief
Movement in third-party interests - - - - - - - 1 1
As at 31 December 2024 147 1,036 (163) 319 1,714 3,053 495 (37) 3,511
1. Capital redemption and other reserves as at 31 December 2024 include
share-based payments £110m, foreign exchange £30m, capital redemption £19m,
hedging £48m, insurance and reinsurance finance for contracts applying the
OCI option £352m and financial assets at FVOCI £(240)m.
2. On 13 June 2024, Legal & General Group Plc entered into an
irrevocable agreement to acquire £201m (including stamp duty) of ordinary
shares for cancellation. The programme completed on 8 November 2024, with a
total number of shares acquired and cancelled of 88,835,417.
Employee Capital Equity Restricted
scheme redemption attributable Tier 1 Non-
Share Share treasury and other Retained to owners convertible controlling Total
capital premium shares reserves(1) earnings of the parent notes interests equity
For the year ended 31 December 2023 £m £m £m £m £m £m £m £m £m
As at 1 January 2023 149 1,018 (144) 337 3,707 5,067 495 (29) 5,533
Profit/(loss) for the year - - - - 457 457 - (14) 443
Exchange differences on translation of overseas operations - - - (6) - (6) - - (6)
Net movement in cross-currency hedge - - - (28) - (28) - - (28)
Net actuarial remeasurements on defined benefit pension schemes - - - - (21) (21) - - (21)
Net movement in financial investments measured at FVOCI - - - 57 - 57 - - 57
Net insurance finance expense - - - (24) - (24) - - (24)
Total comprehensive (expense)/income for the year - - - (1) 436 435 - (14) 421
Options exercised under share option schemes - 12 - - - 12 - - 12
Shares purchased - - (18) - - (18) - - (18)
Shares vested - - 15 (69) - (54) - - (54)
Employee scheme treasury shares: - - - 59 - 59 - - 59
- Value of employee services
Share scheme transfers to retained earnings - - - - 24 24 - - 24
Dividends - - - - (1,172) (1,172) - - (1,172)
Coupon payable in respect of restricted Tier 1 convertible notes after tax - - - - (22) (22) - - (22)
relief
Movement in third-party interests - - - - - - - 1 1
As at 31 December 2023 149 1,030 (147) 326 2,973 4,331 495 (42) 4,784
1. Capital redemption and other reserves as at 31 December 2023 include
share-based payments £89m, foreign exchange £41m, capital redemption £17m,
hedging £46m, insurance and reinsurance finance for contracts applying the
OCI option £176m and financial assets at FVOCI £(43)m.
2.05 Consolidated Statement of Cash Flows
2024 2023
For the year ended 31 December 2024 Notes £m £m
Cash flows from operating activities
Profit for the year 195 443
Adjustments for non-cash movements in net profit for the year
Net gains on financial investments (8,496) (22,492)
Net (gains)/losses on investment property (42) 925
Investment income (13,206) (11,406)
Interest expense 372 347
Tax expense/(credit) 347 (248)
Other adjustments 138 112
Net (increase)/decrease in operational assets
Investments mandatorily measured at FVTPL (900) (7,478)
Investments measured at FVOCI (102) (1,344)
Investments measured at amortised cost (1,032) (126)
Other assets (248) 3,218
Net increase/(decrease) in operational liabilities
Insurance contracts and reinsurance contracts held 2,372 11,153
Investment contracts 7,083 30,045
Other liabilities (3,001) (26,682)
Cash utilised in operations (16,520) (23,533)
Interest paid (365) (469)
Interest received(1) 6,954 5,210
Rent received 446 437
Tax paid(2) (190) (186)
Dividends received 5,229 4,297
Net cash flows from operations (4,446) (14,244)
Cash flows from investing activities
Acquisition of property, plant and equipment, intangibles and other assets (95) (237)
Acquisition of operations, net of cash acquired - (9)
Disposal of subsidiaries, net of cash transferred 3.03 455 -
Investment in joint ventures and associates (121) (184)
Disposal of joint ventures and associates - 8
Net cash flows utilised in investing activities 239 (422)
Cash flows from financing activities
Dividend distributions to ordinary equity holders during the year 3.04 (1,230) (1,172)
Coupon payment in respect of restricted Tier 1 convertible notes, gross of tax 3.08 (28) (28)
Options exercised under share option schemes 3.07 6 12
Employee scheme treasury shares purchased (33) (18)
Purchase of shares under share buyback programme 3.07 (201) -
Payment of lease liabilities (35) (32)
Proceeds from borrowings 2,325 1,226
Repayment of borrowings (473) (544)
Net cash flows utilised in financing activities 331 (556)
Net decrease in cash and cash equivalents (3,876) (15,222)
Exchange gains/(losses) on cash and cash equivalents 20 (49)
Cash and cash equivalents at 1 January 20,513 35,784
Total cash and cash equivalents at 31 December 16,657 20,513
1. Interest received includes net cash flows arising from interest rate
swaps.
2. Tax paid comprises withholding tax of £221m (2023: £179m), UK
corporation tax refund of £31m (2023: £nil) and overseas corporate tax of
£nil (2023: £7m).
IFRS Disclosure Notes
3.01 Basis of preparation
The preliminary announcement for the year ended 31 December 2024 does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. The financial information in this preliminary announcement has been
derived from the Group financial statements within the Group's 2024 Annual
report and accounts (including financial information for 31 December), which
will be made available on the Group's website on 19 March 2024. The Group's
2023 Annual report and accounts have been filed with the Registrar of
Companies, and those for 2024 will be delivered in due course. KPMG have
reported on the 2024 and 2023 Annual report and accounts. Both their reports
were: (i) unqualified; (ii) did not include a reference to any matters to
which they drew attention by way of emphasis without qualifying their report;
and (iii) did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
The Group financial statements have been prepared in accordance with
UK-adopted international accounting standards, comprising International
Accounting Standards and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB), and related
interpretations issued by the IFRS Interpretations Committee. Endorsement is
granted by the UK Endorsement Board. The Group financial statements have been
prepared under the historical cost convention, as modified by the revaluation
of investment property, certain financial assets and financial liabilities
(including derivative instruments) at fair value through profit or loss and
financial assets at fair value through other comprehensive income.
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,
unless otherwise stated.
Financial assets and financial liabilities are disclosed gross in the
Consolidated 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 Consolidated 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 the 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.
Critical accounting judgements and the 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 valuation of insurance
contract liabilities, unquoted illiquid assets and investment property. From a
policy application perspective, the major areas of judgement are the
assessment of whether a contract transfers significant insurance risk to the
Group, and whether the Group controls underlying entities and should therefore
consolidate them. The basis of accounting for these areas, and the significant
judgements used in determining them, are outlined in the respective notes to
the Group's 2024 Annual report and accounts.
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.
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 equity holders. This has
been split between tax attributable to policyholders' returns and equity
holders' profits. Policyholder tax comprises the tax suffered on policyholder
investment returns, while equity holder tax is corporation tax charged on
equity holder profit. The separate presentation is intended to provide more
relevant information about the tax that the Group pays on the profits that it
makes.
3.02 Post balance sheet events
Sale of US insurance entity
On 7 February 2025 the Group announced that it had agreed the sale of its US
insurance entity(1), comprising its US protection and US pension risk transfer
(PRT) businesses, to Meiji Yasuda Life Insurance Company (Meiji Yasuda), a
Japanese mutual life insurance company, for an equity value of $2.3bn
(£1.8bn) payable in cash at completion (subject to certain purchase price
adjustments). Following completion, Meiji Yasuda will own the Group's US
protection business and have a 20% economic interest in its US PRT business,
with L&G retaining 80% of existing and new PRT through reinsurance
arrangements with Meiji Yasuda.
The transaction is expected to complete towards the end of 2025 and is subject
to customary closing conditions and regulatory approvals.
Management undertook an assessment of the facts and circumstances related to
the transaction as at 31 December 2024 and concluded that the criteria for
classification as held for sale were not met at that date. However, as a
result of the announcement on 7 February 2025, subsequent to the year end, the
Group's US insurance entity (including its US PRT business) now qualifies for
classification and measurement as a held for sale disposal group. It also
meets the definition of a discontinued operation, and its results will be
presented accordingly in subsequent reporting periods.
1. To be implemented by the Group disposing of all of the shares held in
Legal & General America Inc, the parent company of Banner Life and William
Penn, which write L&G's US protection and US PRT businesses.
OECD update on Pillar II rules
An update was issued by the OECD on 15 January 2025 to its guidance on the
Global Anti-base Erosion Model Rules, to clarify the application of the Pillar
II rules to certain deferred tax assets existing on transition to the new
rules. Please refer to Note 3.06 Tax for further details.
3.03 Disposals
Cala
On 18 September 2024 the Group announced the disposal of 100% of the share
capital of Cala to Ferguson Bidco Limited. The transaction completed on 31
October 2024.
Total consideration of £1,063m was agreed for the transaction, with proceeds
of £487m received in cash upon closing and settlement of the remaining £576m
deferred to pre-agreed tranches between 2025 and 2029. Based on a carrying
value upon disposal of £1,072m, the transaction generated a pre-tax loss of
£99m on completion, including transaction costs and the effect of discounting
the deferred consideration. The effect of the discounting will unwind back
into the Consolidated Income Statement over time.
The loss on disposal has been recognised in the results of the Group's
Corporate Investments segment, and, in line with the Group methodology for the
determination of operating profit, outside both adjusted operating profit and
core operating profit.
3.04 Dividends and appropriations
Dividend Per share(1) Dividend Per share(1)
2024 2024 2023 2023
£m p £m p
Ordinary dividends paid and charged to equity in the year:
- Final 2022 dividend paid in June 2023 - - 831 13.93
- Interim 2023 dividend paid in September 2023 - - 341 5.71
- Final 2023 dividend paid in June 2024(2) 874 14.63 - -
- Interim 2024 dividend paid in September 2024 356 6.00 - -
Total dividends 1,230 20.63 1,172 19.64
1. The dividend per share calculation is based on the number of equity
shares registered on the ex-dividend date.
2. The dividend proposed at 31 December 2023 was £871m based on the current
number of eligible equity shares at that date.
Subsequent to 31 December 2024, the directors declared a final dividend for
2024 of 15.36 pence per ordinary share. This dividend will be paid on 5 June
2025. It will be accounted for as an appropriation of retained earnings in the
year ended 31 December 2025 and is not included as a liability in the
Consolidated Balance Sheet as at 31 December 2024.
3.05 Financial investments and investment property
2024 2023
£m £m
Equities(1) 201,290 185,982
Debt securities(2,3) 235,583 233,980
Derivative assets(4) 51,192 41,140
Loans(5) 7,486 10,303
Financial investments 495,551 471,405
Investment property 9,822 8,893
Total financial investments and investment property 505,373 480,298
1. Equities include investments in unit trusts of £19,931m (31 December 2023:
£19,660m).
2. Debt securities include accrued interest of £1,997m (31 December 2023:
£1,852m) and include £8,965m (31 December 2023: £8,032m) of assets valued
at amortised cost.
3. A detailed analysis of debt securities to which shareholders are directly
exposed is disclosed in Note 6.03.
4. Derivatives are used for efficient portfolio management, particularly the
use of interest rate swaps, inflation swaps, currency swaps and foreign
exchange forward contracts for asset and liability management. Derivative
assets are shown gross of derivative liabilities of £57,873m (31 December
2023: £43,821m).
5. Loans include £84m (31 December 2023: £13m) of loans valued at amortised
cost.
3.06 Tax
(i) Tax expense/(credit) in the Consolidated Income Statement
The tax expense attributable to equity holders differs from the tax calculated
on profit before tax at the standard UK corporation tax rate as follows:
2024 2023
£m £m
Profit before tax attributable to equity holders 332 76
Tax calculated at 25% (2023: 23.5%) 83 18
Adjusted for the effects of:
Recurring reconciling items:
Different rate of tax on overseas profits and losses(1) (30) (68)
Income not subject to tax (3) (4)
Non-deductible expenses(2) 32 27
Differences between taxable and accounting investment gains(3) 32 (9)
Other taxes on property and foreign income 7 4
Unrecognised tax losses (1) 19
Double tax relief (1) (2)
Non-recurring reconciling items:
Differences between taxable and accounting investment gains(4) 19 -
Adjustments in respect of prior years (1) (11)
Impact of the revaluation of deferred tax balances - (1)
Impact of law changes on deferred tax balances(5) - (340)
Tax expense/(credit) attributable to equity holders 137 (367)
Equity holders' effective tax rate 41% (483)%
1. The lower rate of tax on overseas profits and losses is principally
driven by the 0% rate of tax applying in Bermuda on the profits of our
Bermudan reinsurance company, the impact of which is reduced by 15% UK top-up
tax on Bermuda profits, estimated to be £35m for 2024. This also includes the
impact of our US operations which are taxed at 21%.
2. Non-deductible expenses relate to costs which are not deductible for tax
purposes including expenses in respect of acquisitions and disposals as well
as certain restructuring costs.
3. Differences between taxable and accounting investment gains includes
adjustments to the carrying value of investments which are not taxable.
4. This is in respect of the disposal of the CALA group which is not taxable
due to substantial shareholding exemption. See Note 3.03 for further details.
5. The 2023 tax credit relates to the introduction of a new corporate income
tax regime in Bermuda, which was enacted in December 2023.
(ii) Implementation of the global minimum tax regime
The UK has enacted legislation with effect from 1 January 2024 to apply a
global minimum tax (Pillar II) in line with the Model Rules agreed by the
Organisation for Economic Co-operation and Development (OECD). The Group is
expected to be liable to UK top-up tax in 2024 at 15% in respect of profits
arising in our global reinsurance hub in Bermuda. From 2025, the Group's
Bermudan profits will be liable to local Bermudan corporate income tax (CIT)
at 15%.
In January 2025, the OECD issued new guidance relating to the Pillar II
treatment of certain deferred tax assets. This is expected to impact how the
£340m Bermuda deferred tax asset is included in Pillar II calculations after
1 January 2027 and we await further guidance. This does not of itself change
the recognition of the Bermuda deferred tax asset in 2024, although there are
some outcomes where there may be a change to the Bermuda deferred tax position
in future. The interaction with the Pillar II tax calculations may result in
additional top-up tax applying which in turn would increase the overall
effective tax rate in Bermuda for those years.
(iii) Deferred tax
2024 2023
Deferred tax assets/(liabilities) £m £m
Overseas deferred acquisition expenses(1) 136 121
Difference between the tax and accounting value of insurance contracts 617 736
- UK 1,258 1,149
- Bermuda(2) 340 340
- US (981) (753)
Realised and unrealised gains on investments (32) 72
Excess of depreciation over capital allowances (13) 17
Accounting provisions and other 11 52
Trading losses 825 609
- UK 170 76
- US(3) 655 533
Net deferred tax asset 1,544 1,607
Presented on the Consolidated Balance Sheet as:
- Deferred tax assets 1,741 1,714
- Deferred tax liabilities(4) (197) (107)
Net deferred tax asset 1,544 1,607
1. Deferred tax assets arising on deferred acquisition expenses relate
solely to US balances.
2. The Bermuda deferred tax asset relates to the introduction of a new
corporate income tax regime in Bermuda, which was enacted in December 2023.
3. This deferred tax asset relates to US operating losses. The losses are
not time restricted, and we expect to recover them over a period of 15 to 20
years, commensurate with the lifecycle of the underlying insurance contracts.
In reaching this conclusion, we have considered past results, the different
basis under which US companies are taxed, temporary differences that are
expected to generate future profits against which the deferred tax can be
offset, management actions, and future profit forecasts. The recoverability of
deferred tax assets is routinely reviewed by management.
4. The deferred tax liability is comprised of balances of £197m relating to
the US (2023: £107m) which is not capable of being offset against other
deferred tax assets.
3.07 Share capital and share premium
2024 2023
Number of 2024 Number of 2023
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 2024 5,979,578,280 149 1,030
Cancellation of shares under share buyback programme(1) (88,835,417) (2) -
Options exercised under share option schemes 2,436,776 - 6
As at 31 December 2024 5,893,179,639 147 1,036
Share Share
Number of capital premium
Issued share capital, fully paid shares £m £m
As at 1 January 2023 5,973,253,500 149 1,018
Options exercised under share option schemes 6,324,780 - 12
As at 31 December 2023 5,979,578,280 149 1,030
1. During the year, 88,835,417 shares were repurchased and cancelled under
the share buyback programme representing 1.5% of opening issued share capital
at a cost of £201m including stamp duty.
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.
3.08 Restricted Tier 1 convertible notes
On 24 June 2020, Legal & General Group Plc issued £500m of 5.625%
perpetual restricted Tier 1 contingent convertible notes. The notes are
callable at par between 24 March 2031 and 24 September 2031 (the First Reset
Date) inclusive and every 5 years after the First Reset Date. If not called,
the coupon from 24 September 2031 will be reset to the prevailing five year
benchmark gilt yield plus 5.378%.
The notes have no fixed maturity date. Optional cancellation of coupon
payments is at the discretion of the issuer and mandatory cancellation is upon
the occurrence of certain conditions. The Tier 1 notes are therefore treated
as equity and coupon payments are recognised directly in equity when paid.
During the year coupon payments of £28m were made (2023: £28m). The notes
rank junior to all other liabilities and senior to equity attributable to
owners of the parent. On the occurrence of certain conversion trigger events
the notes are convertible into ordinary shares of the issuer at the prevailing
conversion price.
The notes are treated as restricted Tier 1 own funds for Solvency II purposes.
3.09 Core borrowings
Carrying Coupon Carrying Coupon
amount rate Fair value amount rate Fair value
2024 2024 2024 2023 2023 2023
£m % £m £m % £m
Subordinated borrowings
5.5% Sterling subordinated notes 2064 (Tier 2) 590 5.50 565 590 5.50 600
5.375% Sterling subordinated notes 2045 (Tier 2) 605 5.38 606 605 5.38 603
5.25% US Dollar subordinated notes 2047 (Tier 2) 688 5.25 684 676 5.25 656
5.55% US Dollar subordinated notes 2052 (Tier 2) 403 5.55 408 396 5.55 382
5.125% Sterling subordinated notes 2048 (Tier 2) 401 5.13 398 401 5.13 395
3.75% Sterling subordinated notes 2049 (Tier 2) 600 3.75 555 599 3.75 545
4.5% Sterling subordinated notes 2050 (Tier 2) 501 4.50 473 501 4.50 467
Client fund holdings of Group debt (Tier 2)(1) (77) - (73) (80) - (77)
Total subordinated borrowings 3,711 - 3,616 3,688 - 3,571
Senior borrowings
Sterling medium term notes 2031-2041 609 5.87 633 609 5.87 666
Client fund holdings of Group debt(1) (12) - (12) (17) - (17)
Total senior borrowings 597 - 621 592 - 649
Total core borrowings 4,308 - 4,237 4,280 - 4,220
1. £89m (31 December 2023: £97m) of the Group's subordinated and senior
borrowings are held by L&G customers through unit linked products. These
borrowings are shown as a deduction from total core borrowings in the table
above.
The presented fair values of the Group's core borrowings primarily reflect
quoted prices in active markets and they have been classified as Level 1 in
the fair value hierarchy. The 5.55% US Dollar subordinated notes 2052 and
£49m of the senior borrowings are derived using prices from an external,
publicly available pricing model by a standard market pricing source and have
been classified as Level 2 in the fair value hierarchy. The inputs for this
model include a range of factors which are deemed to be observable, including
current market prices for comparative instruments, period to maturity and
yield curves.
(i) Subordinated borrowings
5.5% Sterling subordinated notes 2064
On 27 June 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. These notes mature on 27 June 2064.
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. These notes mature on 27 October 2045.
5.25% US Dollar subordinated notes 2047
On 21 March 2017, Legal & General Group Plc issued $850m of 5.25% dated
subordinated notes. The notes are callable at par on 21 March 2027 and every
five years thereafter. These notes mature on 21 March 2047.
5.55% US Dollar subordinated notes 2052
On 24 April 2017, Legal & General Group Plc issued $500m of 5.55% dated
subordinated notes. The notes are callable at par on 24 April 2032 and every
five years thereafter. These notes mature on 24 April 2052.
5.125% Sterling subordinated notes 2048
On 14 November 2018, Legal & General Group Plc issued £400m of 5.125%
dated subordinated notes. The notes are callable at par on 14 November 2028
and every five years thereafter. These notes mature on 14 November 2048.
3.75% Sterling subordinated notes 2049
On 26 November 2019, Legal & General Group Plc issued £600m of 3.75%
dated subordinated notes. The notes are callable at par on 26 November 2029
and every five years thereafter. These notes mature on 26 November 2049.
4.5% Sterling subordinated notes 2050
On 1 May 2020, Legal & General Group Plc issued £500m of 4.5% dated
subordinated notes. The notes are callable at par on 1 November 2030 and every
five years thereafter. These notes mature on 1 November 2050.
All of the above subordinated notes are treated as Tier 2 own funds for
Solvency II purposes unless stated otherwise.
(ii) Senior borrowings
Between 2000 and 2002 Legal & General Finance Plc issued £600m of senior
unsecured Sterling medium term notes 2031-2041 at coupons between 5.75% and
5.875%. These notes have various maturity dates between 2031 and 2041.
3.10 Operational borrowings
Carrying Interest Carrying Interest
amount rate Fair value amount rate Fair value
2024 2024 2024 2023 2023 2023
£m % £m £m % £m
Short-term operational borrowings
Euro Commercial Paper 50 5.26 50 49 4.73 49
Bank loans and overdrafts 9 - 9 12 - 12
Non-recourse borrowings
Cala revolving credit facility - - - 149 7.15 149
Class B Surplus Notes(1) 1,411 7.66 1,411 1,176 8.27 1,176
Affordable Homes revolving credit facilities 185 6.06 185 41 7.15 41
Homes Modular revolving credit facility 11 8.02 11 11 8.30 11
Suburban Build to Rent revolving credit facility 68 7.13 68 19 6.00 19
Total operational borrowings(2) 1,734 - 1,734 1,457 - 1,457
1. The Class B Surplus Notes have been issued by a US subsidiary of the
Group as part of a coinsurance structure for the purpose of US statutory
regulations. The notes were issued in exchange for bonds of the same value
from an unrelated party, included within financial investments on the Group's
Consolidated Balance Sheet.
2. Unit linked borrowings with a carrying value of £1,657m (31 December
2023: £383m) are excluded from the analysis above as the risk is retained by
policyholders. Operational borrowings including unit linked borrowings are
£3,391m (31 December 2023: £1,840m).
Syndicated credit facility
The Group has in place a £1.5bn syndicated committed revolving credit
facility provided by a number of its key relationship banks, maturing in
August 2029. No amounts were outstanding at 31 December 2024.
3.11 Payables and other financial liabilities
2024 2023
£m £m
Derivative liabilities 57,873 43,821
Repurchase agreements(1) 22,117 25,452
Other financial liabilities(2) 7,372 9,166
Total payables and other financial liabilities 87,362 78,439
Due within 12 months 28,124 38,175
Due after 12 months 59,238 40,264
1. Repurchase agreements are presented gross, however they and their related
assets (included within debt securities) are subject to master netting
arrangements. The significant majority of repurchase agreements are unit
linked.
2. Other financial liabilities includes trail commission, lease liabilities,
FX spots and the value of short positions taken out to cover reverse
repurchase agreements. The value of short positions as at 31 December 2024 was
£1,614m (31 December 2023: £2,647m).
(i) Fair value hierarchy
Amortised
Total Level 1 Level 2 Level 3 cost(1)
As at 31 December 2024 £m £m £m £m £m
Derivative liabilities 57,873 522 57,318 33 -
Repurchase agreements 22,117 - 22,117 - -
Other financial liabilities 7,372 2,797 53 - 4,522
Total payables and other financial liabilities 87,362 3,319 79,488 33 4,522
Amortised
Total Level 1 Level 2 Level 3 cost(1)
As at 31 December 2023 £m £m £m £m £m
Derivative liabilities 43,821 627 43,147 47 -
Repurchase agreements 25,452 - 25,452 - -
Other financial liabilities 9,166 3,103 59 - 6,004
Total payables and other financial liabilities 78,439 3,730 68,658 47 6,004
1. The carrying value of payables and other financial liabilities at
amortised cost approximates its fair value.
(ii) Significant transfers between levels
There have been no significant transfers of liabilities between Levels 1, 2
and 3 for the year ended 31 December 2024 (2023: no significant transfers).
3.12 Insurance contracts
(i) Insurance service result
For the year ended 31 December 2024 Annuities Protection Total
£m £m £m
Insurance revenue
Amounts relating to changes in liabilities for remaining coverage:
- CSM recognised for services provided 1,027 270 1,297
- Expected incurred claims and other insurance service expenses 5,838 2,826 8,664
- Change in the risk adjustment for non-financial risk for the risk expired 438 22 460
Recovery of insurance acquisition cash flows 25 142 167
Premium experience variance relating to past and current service - (14) (14)
Total insurance revenue 7,328 3,246 10,574
Total insurance service expenses (5,877) (3,214) (9,091)
Allocation of reinsurance premiums (3,221) (1,037) (4,258)
Amounts recoverable from reinsurers for incurred claims 2,813 1,286 4,099
Net (expense)/income from reinsurance contracts held (408) 249 (159)
Total insurance service result 1,043 281 1,324
For the year ended 31 December 2023 Annuities Protection Total
£m £m £m
Insurance revenue
Amounts relating to changes in liabilities for remaining coverage:
- CSM recognised for services provided 943 225 1,168
- Expected incurred claims and other insurance service expenses 5,278 2,597 7,875
- Change in the risk adjustment for non-financial risk for the risk expired 371 16 387
Recovery of insurance acquisition cash flows 19 132 151
Premium experience variance relating to past and current service 1 42 43
Total insurance revenue 6,612 3,012 9,624
Total insurance service expenses (5,244) (3,129) (8,373)
Allocation of reinsurance premiums (2,847) (1,044) (3,891)
Amounts recoverable from reinsurers for incurred claims 2,415 1,339 3,754
Net (expense)/income from reinsurance contracts held (432) 295 (137)
Total insurance service result 936 178 1,114
(ii) Insurance and reinsurance contracts
Assets Liabilities Assets Liabilities
2024 2024 2023 2023
£m £m £m £m
Insurance contracts issued
Annuities
Insurance contract balances - 91,075 - 86,706
Assets for insurance contract acquisition cash flows(1) - (14) - (18)
Protection
Insurance contract balances - 4,609 - 4,782
Assets for insurance contract acquisition cash flows(1) - (22) - (24)
Total insurance contracts issued(2) - 95,648 - 91,446
Assets Liabilities Assets Liabilities
2024 2024 2023 2023
£m £m £m £m
Reinsurance contracts held
Annuities
Reinsurance contract balances 6,651 2 4,758 -
Assets for reinsurance contract acquisition cash flows(1) 4 - 3 -
Protection
Reinsurance contract balances 2,510 168 2,545 220
Assets for reinsurance contract acquisition cash flows(1) - - - -
Total reinsurance contracts held(2) 9,165 170 7,306 220
1. Assets for insurance and reinsurance acquisition cash flows are presented
within the carrying amount of the related insurance and reinsurance contract
liabilities.
2. £6,798m (2023: £5,119m) of the net insurance balance of £86,653m
(2023: £84,360m) is expected to run off within 12 months.
3.13 Sensitivity analysis
Impact on
Impact on post-tax Impact on
post-tax Impact on Group profit Group equity
Group profit Group equity arising from arising from Net impact on
arising from arising from insurance insurance post-tax Net impact on
financial assets financial assets contracts contracts Group profit Group equity
2024 2024 2024 2024 2024 2024
Economic sensitivity £m £m £m £m £m £m
Long-term insurance, other Group assets and obligations
100bps increase in interest rates(1) (5,153) (5,400) 4,975 5,140 (178) (260)
100bps decrease in interest rates(1) 6,053 6,369 (5,910) (6,119) 143 250
50bps increase in future inflation expectations 1,630 1,680 (1,540) (1,508) 91 171
50bps decrease in future inflation expectations (1,496) (1,540) 1,499 1,469 3 (71)
Credit spreads widen by 100bps with no change in expected defaults (3,449) (3,475) 3,308 3,459 (141) (16)
25% rise in equity markets 323 323 - - 323 323
25% fall in equity markets (323) (323) - - (323) (323)
15% rise in property values 975 975 (19) (19) 956 956
15% fall in property values (1,078) (1,078) 95 95 (983) (983)
10bps increase in credit default assumptions - - (408) (426) (408) (426)
10bps decrease in credit default assumptions - - 373 388 373 388
Impact on
Impact on post-tax Impact on
post-tax Impact on Group profit Group equity
Group profit Group equity arising from arising from Net impact on
arising from arising from insurance insurance post-tax Net impact on
financial assets financial assets contracts contracts Group profit Group equity
2023 2023 2023 2023 2023 2023
Economic sensitivity £m £m £m £m £m £m
Long-term insurance, other Group assets and obligations
100bps increase in interest rates (5,909) (6,151) 5,713 5,892 (196) (259)
100bps decrease in interest rates 6,999 7,318 (6,919) (7,147) 80 171
50bps increase in future inflation expectations 1,778 1,814 (1,831) (1,801) (53) 13
50bps decrease in future inflation expectations (1,620) (1,652) 1,732 1,707 112 55
Credit spreads widen by 100bps with no change in expected defaults (4,193) (4,216) 4,041 4,206 (152) (10)
25% rise in equity markets 297 297 - - 297 297
25% fall in equity markets (297) (297) - - (297) (297)
15% rise in property values 1,155 1,155 (25) (25) 1,130 1,130
15% fall in property values (1,276) (1,276) 102 102 (1,174) (1,174)
10bps increase in credit default assumptions - - (494) (514) (494) (514)
10bps decrease in credit default assumptions - - 455 471 455 471
1. The Group undertook management actions in January and February 2025 that
reduced the Group's interest rate post-tax profit sensitivities. Post
management actions, the sensitivities for the net impact on post-tax Group
profit 2024 relating to +/-100bps interest rates are £(147)m and £108m.
Impact on
Impact on post-tax Impact on
CSM Group profit Group equity
2024 2024 2024
Non-economic sensitivity £m £m £m
Long-term insurance
1% increase in annuitant mortality, gross of reinsurance 370 (74) (74)
1% increase in annuitant mortality, net of reinsurance 184 (36) (36)
1% decrease in annuitant mortality, gross of reinsurance (374) 75 75
1% decrease in annuitant mortality, net of reinsurance (185) 37 37
5% increase in assurance mortality, gross of reinsurance (629) (400) (281)
5% increase in assurance mortality, net of reinsurance (346) (92) (65)
10% increase in maintenance expenses, gross of reinsurance (158) (7) -
10% increase in maintenance expenses, net of reinsurance (155) (6) 1
Impact on
Impact on post-tax Impact on
CSM Group profit Group equity
2023 2023 2023
Non-economic sensitivity £m £m £m
Long-term insurance
1% increase in annuitant mortality, gross of reinsurance 352 (52) (52)
1% increase in annuitant mortality, net of reinsurance 181 (26) (26)
1% decrease in annuitant mortality, gross of reinsurance (357) 52 52
1% decrease in annuitant mortality, net of reinsurance (183) 27 27
5% increase in assurance mortality, gross of reinsurance (591) (395) (308)
5% increase in assurance mortality, net of reinsurance (307) (95) (81)
10% increase in maintenance expenses, gross of reinsurance (140) (3) 1
10% increase in maintenance expenses, net of reinsurance (137) (4) 1
The economic sensitivity tables above show the impacts on Group post-tax
profit and equity, net of reinsurance, under each sensitivity scenario. The
impacts on Group post-tax profit and equity arising from financial assets and
insurance contracts are also shown separately in the tables. The economic
sensitivity impacts cover long-term insurance business and other Group assets
and obligations.
The non-economic sensitivity tables above show the impacts on CSM, Group
post-tax profit and equity, gross and net of reinsurance, under each
sensitivity scenario. The non-economic sensitivity impacts cover long-term
insurance business only.
The Group impacts may arise from asset and/or liability movements under the
sensitivities. The current disclosure reflects management's view of key risks
in current economic conditions.
The stresses are assumed to occur on the balance sheet date. Both CSM and
current year CSM release into profit are assumed to be affected when
non-financial assumptions are stressed.
In calculating the alternative values, all other assumptions are left
unchanged. In practice, impacts of the Group's experience may be correlated.
The sensitivity analyses do not take into account management actions that
could be taken to reduce the impacts. The Group seeks to actively manage its
asset and liability position. A change in market conditions may lead to
changes in the asset allocation or charging structure which may have a more,
or less, significant impact on the value of the liabilities. The analysis also
ignores any second order effects of the assumption change, including the
potential impact on the Group asset and liability position and any second
order tax effects.
The sensitivity of profit and equity to changes in assumptions may not be
linear. They should not be extrapolated to changes of a much larger order.
The change in interest rate stresses assume a 100 basis point
increase/decrease in the gross redemption yield on fixed interest securities
together with the same change in the real yields on variable securities.
Interest rates used to discount liabilities are assumed to move in line with
market yields, adjusted to remove risks in the asset reference portfolios that
are not present in the liabilities calculated in a manner consistent with the
base results.
The inflation stresses adopted are a 0.5% per annum (p.a.) increase/decrease
in inflation, resulting in a 0.5% p.a. reduction/rise in real yield and no
change to the nominal yield. In addition, the expense inflation rate is
increased/decreased by 0.5% p.a. The expense inflation assumptions are
non-financial and therefore recalibrate the CSM under the stresses. These
recalibrations are reflected in the impacts shown.
In the sensitivity for credit spreads, corporate bond yields have increased by
100bps, government bond yields unchanged, and there has been no adjustment to
the default assumptions. All lifetime mortgages are excluded, as their primary
exposure is to property risk, and therefore captured under the property
stress.
The equity stresses are a 25% rise and 25% fall in listed equity market
values.
The property stresses adopted are a 15% rise and 15% fall in property market
values including lifetime mortgages. Where property is being used to back
liabilities, interest rates used to discount liabilities move with property
yields, and so the value of the liabilities will also move.
The credit default assumption is set based on the credit rating of individual
bonds and Moody's historical transition matrices. The credit default stress
assumes a +/-10bps stress to the current credit default assumptions, which
will have an impact on the interest rates used to discount liabilities.
Default allowances for assets deemed credit risk free are unchanged. All
lifetime mortgages are excluded, as their primary exposure is to property
risk, and therefore captured under the property stress.
The annuitant mortality stresses are a 1% increase and 1% decrease in the
mortality rates for immediate and deferred annuitants with no change to the
mortality improvement rates.
The assurance mortality stress is a 5% increase in the mortality and morbidity
rates with no change to the mortality and morbidity improvement rates.
The maintenance expense stress is a 10% increase in all types of maintenance
expenses in future years.
3.14 Foreign exchange rates
The principal foreign exchange rates used for translation are:
Year end exchange rates 2024 2023
United States dollar 1.25 1.27
Euro 1.21 1.15
Average exchange rates 2024 2023
United States dollar 1.28 1.24
Euro 1.18 1.15
3.15 Provisions
(i) Analysis of provisions
2024 2023
Notes £m £m
Other provisions 3.15(ii) 149 244
Retirement benefit obligations 3.15(iii) 3 14
Total provisions 152 258
(ii) Other provisions
Other provisions include costs that the Asset Management division is committed
to incur on the extension of its existing partnership with State Street
announced in 2021, to increase the use of Charles River technology across the
front office and to deliver middle office services going forward. Costs
include the transfer of data and operations to State Street, as well as the
implementation of the new operating model. The amounts included in the
provision have been determined on a best estimate basis by reference to a
range of plausible scenarios, taking into account the multi-year
implementation period for the project. As at 31 December 2024, the outstanding
provision was £65m (31 December 2023: £108m).
(iii) Retirement benefit obligations
As at 31 December 2024, the Group operates the Legal & General America
Inc. Cash Balance Plan (US) defined benefit scheme.
The CALA Retirement and Death Benefits Scheme (UK), previously operated by the
Group, was derecognised from the Consolidated Balance Sheet on 31 October
2024, following the completion of the disposal of Cala.
In November 2023, the Trustees completed a buy-out of the Legal & General
Group UK Pension and Assurance Fund and the Legal & General Group UK
Senior Pension Scheme, and the existing annuity policies were exchanged for
individual policies between Legal and General Assurance Society Limited (LGAS)
and members. As a result, all the Group's obligations under the pension
schemes were fully extinguished, and the defined benefit obligation
derecognised. On the same date, the Group recognised the direct liability to
the members within insurance contract liabilities.
3.16 Contingent liabilities, guarantees and indemnities
Provision for the liabilities arising under contracts with policyholders is
based on certain assumptions. The variance between actual experience from that
assumed may result in those liabilities differing from the provisions made for
them. Liabilities may also arise in respect of claims relating to the
interpretation of policyholder contracts, or the circumstances in which
policyholders have entered into them. The extent of these liabilities is
influenced by a number of factors including the actions and requirements of
the PRA, FCA, ombudsman rulings, industry compensation schemes and court
judgments.
Various Group companies receive claims and become involved in actual or
threatened litigation and regulatory issues from time to time. The relevant
members of the Group ensure that they make prudent provision as and when
circumstances calling for such provision become clear, and that each has
adequate capital and reserves to meet reasonably foreseeable eventualities.
The provisions made are regularly reviewed. It is not possible to predict,
with certainty, the extent and the timing of the financial impact of these
claims, litigation or issues.
Group companies have given warranties, indemnities and guarantees as a normal
part of their business and operating activities or in relation to capital
market transactions or corporate disposals. Legal & General Group Plc has
provided indemnities and guarantees in respect of the liabilities of Group
companies in support of their business activities. LGAS has provided
indemnities, a liquidity and expense risk agreement, a deed of support and a
cash and securities liquidity facility in respect of the liabilities of Group
companies to facilitate the Group's matching adjustment reorganisation
pursuant to Solvency II.
3.17 Related party transactions
(i) Key management personnel transactions and compensation
All transactions between the Group and its key management are on commercial
terms which are no more favourable than those available to employees in
general. There were no material transactions between key management and the
L&G group of companies during the year. Contributions to the
post-employment defined benefit plans were £7m (2023: £134m) for all
employees.
At 31 December 2024 and 31 December 2023 there were no loans outstanding to
officers of the Company.
The aggregate compensation for key management personnel, including executive
directors, non-executive directors and the members of the Group Management
Committee, is as follows:
2024 2023
£m £m
Salaries 14 12
Share-based incentive awards 10 8
Key management personnel compensation 24 20
The Group Management Committee was established on 1 January 2024. The
comparatives incorporate the members of the Group Executive Committee which
existed under the Group's previous governance framework.
(ii) Services provided to and by related parties
All transactions between the Group and associates, joint ventures and other
related parties during the year are on commercial terms which are no more
favourable than those available to companies in general.
Loans and commitments to related parties are made in the normal course of
business. As at 31 December 2024, the Group had:
• loans outstanding from related parties of £21m (2023: £49m), with a
further commitment of £8m (2023: £7m)
• total other commitments of £1,547m to related parties (2023:
£1,347m), of which £1,264m has been drawn (2023: £1,108m).
In 2023, a number of transactions occurred between the Group's UK defined
benefit pension schemes and LGAS. These include the surrender of Assured
Payment Policies (APPs) and their conversion into annuities, as well as a
buy-out of the schemes completed by the Trustees, where existing annuity
policies were exchanged for individual policies between LGAS and members.
Further details are provided in Note 3.15. Total payments by LGAS to the
pension schemes for insured pension benefits in 2023 were £55m.
Asset flows and new business
4.01 Asset Management total assets under management(1) (AUM)
Active Multi Private Total
Index strategies asset Solutions(2) markets(3) AUM
For the year ended 31 December 2024 £bn £bn £bn £bn £bn £bn
As at 1 January 2024 - excluding joint ventures, associates and other 481.7 168.9 84.3 388.8 35.5 1,159.2
External inflows(4) 75.0 19.8 18.0 15.8 1.1 129.7
External outflows(4) (105.7) (19.0) (13.8) (27.7) (1.8) (168.0)
Overlay net flows - - - (9.5) - (9.5)
External net flows(5) (30.7) 0.8 4.2 (21.4) (0.7) (47.8)
PRT transfers(6) (0.2) (1.2) - (1.4) - (2.8)
Insurance net flows(7) (0.1) (3.1) (0.1) 2.7 2.7 2.1
Total net flows (31.0) (3.5) 4.1 (20.1) 2.0 (48.5)
Market movements 66.2 1.9 5.2 (36.7) 0.5 37.1
Other movements(8) - (0.6) - (29.6) 0.1 (30.1)
As at 31 December 2024 - excluding joint ventures, associates and other 516.9 166.7 93.6 302.4 38.1 1,117.7
Joint ventures, associates and other(9) - - - - 17.1 17.1
Total Asset Management AUM as at 31 December 2024 516.9 166.7 93.6 302.4 55.2 1,134.8
Active Multi Private Total
Index strategies asset Solutions(2) markets(3) AUM
For the year ended 31 December 2023 £bn £bn £bn £bn £bn £bn
As at 1 January 2023 - excluding joint ventures and associates 444.7 156.8 73.9 485.9 34.4 1,195.7
External inflows(4) 69.4 17.4 12.4 25.5 1.5 126.2
External outflows(4) (84.9) (17.2) (7.4) (23.4) (2.6) (135.5)
Overlay net flows - - - (29.1) - (29.1)
External net flows(5) (15.5) 0.2 5.0 (27.0) (1.1) (38.4)
PRT transfers(6) (0.4) (1.5) - (13.1) (0.2) (15.2)
Insurance net flows(7) (0.8) - (0.2) 0.5 2.1 1.6
Total net flows (16.7) (1.3) 4.8 (39.6) 0.8 (52.0)
Market movements 55.3 10.4 5.6 (29.6) 0.3 42.0
Other movements(8) (1.6) 3.0 - (27.9) - (26.5)
As at 31 December 2023 - excluding joint ventures and associates 481.7 168.9 84.3 388.8 35.5 1,159.2
Joint ventures and associates(9) - - - - 12.7 12.7
Total Asset Management AUM as at 31 December 2023(10) 481.7 168.9 84.3 388.8 48.2 1,171.9
1. Assets under management (AUM) includes assets on our Investment Only
Platform that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £190.7bn (31 December
2023: £246.7bn) of derivative notionals associated with the Solutions
business.
3. Private markets AUM of £55.2bn (31 December 2023: £48.2bn) are shown on
the basis of client asset view and excludes assets from multi asset fund of
fund structures. Total managed Private markets AUM, including £1.5bn of AUM
from multi asset strategies, is £56.7bn (31 December 2023: £49.6bn).
4. External inflows and outflows include £4.7bn (31 December 2023: £5.3bn)
of external investments and £7.1bn (31 December 2023: £3.4bn) of redemptions
in the ETF business.
5. External net flows exclude movements in short-term Solutions assets, as
their maturity dates are determined by client agreements and are subject to a
higher degree of variability. The total value of these assets at 31 December
2024 was £51.8bn (31 December 2023: £66.9bn).
6. PRT transfers reflect UK defined benefit pension scheme buy-outs to
Institutional Retirement.
7. Insurance net flows includes legacy assets from the Mature Savings
business sold to ReAssure in 2020.
8. Other movements include movements of external holdings in money market
funds, other cash mandates and short-term Solutions assets.
9. Figures reflect 100% of the AUM associated with fund managers classified
as joint ventures and associates irrespective of the Group's holding in those
fund managers. The figures for the year ended 31 December 2024 include L&G
balance sheet assets managed by Asset Management.
10. Total Asset Management AUM as at 31 December 2023 has
been restated to include joint ventures and associates AUM.
4.02 Asset Management total assets under management(1) half-yearly progression
Active Multi Private Total
Index strategies asset Solutions(2) markets(3) AUM
For the year ended 31 December 2024 £bn £bn £bn £bn £bn £bn
As at 1 January 2024 - excluding joint ventures, associates and other 481.7 168.9 84.3 388.8 35.5 1,159.2
External inflows(4) 35.3 9.3 6.2 8.0 0.7 59.5
External outflows(4) (50.2) (11.3) (4.4) (14.3) (0.7) (80.9)
Overlay net flows - - - (7.1) - (7.1)
External net flows(5) (14.9) (2.0) 1.8 (13.4) - (28.5)
PRT transfers(6) - - - (0.5) - (0.5)
Insurance net flows(7) (0.2) (3.4) - (0.4) 1.7 (2.3)
Total net flows (15.1) (5.4) 1.8 (14.3) 1.7 (31.3)
Market movements 43.5 (2.5) 2.6 (22.9) (0.3) 20.4
Other movements(8) (3.3) 0.7 - (23.5) - (26.1)
As at 30 June 2024 - excluding joint ventures, associates and other 506.8 161.7 88.7 328.1 36.9 1,122.2
External inflows(4) 39.7 10.5 11.8 7.8 0.4 70.2
External outflows(4) (55.5) (7.7) (9.4) (13.4) (1.1) (87.1)
Overlay net flows - - - (2.4) - (2.4)
External net flows(5) (15.8) 2.8 2.4 (8.0) (0.7) (19.3)
PRT transfers(6) (0.2) (1.2) - (0.9) - (2.3)
Insurance net flows(7) 0.1 0.3 (0.1) 3.1 1.0 4.4
Total net flows (15.9) 1.9 2.3 (5.8) 0.3 (17.2)
Market movements 22.7 4.4 2.6 (13.8) 0.8 16.7
Other movements(8) 3.3 (1.3) - (6.1) 0.1 (4.0)
As at 31 December 2024 - excluding joint ventures, associates and other 516.9 166.7 93.6 302.4 38.1 1,117.7
Joint ventures, associates and other(9) - - - - 17.1 17.1
Total Asset Management AUM as at 31 December 2024 516.9 166.7 93.6 302.4 55.2 1,134.8
1. Assets under management (AUM) includes assets on our Investment Only
Platform, that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £190.7bn of derivative
notionals associated with the Solutions business.
3. Private markets AUM of £55.2bn are shown on the basis of client asset view
and excludes assets from multi asset fund of fund structures. Total managed
Private Markets AUM, including £1.5bn of AUM from multi asset strategies, is
£56.7bn.
4. External inflows and outflows include £4.7bn of external investments and
£7.1bn of redemptions in the ETF business.
5. External net flows exclude movements in short-term Solutions assets, as
their maturity dates are determined by client agreements and are subject to a
higher degree of variability. The total value of these assets at 31 December
2024 was £51.8bn.
6. PRT transfers reflect UK defined benefit pension scheme buy-outs to
Institutional Retirement.
7. Insurance net flows includes legacy assets from the Mature Savings business
sold to ReAssure in 2020.
8. Other movements include movements of external holdings in money market
funds, other cash mandates and short-term Solutions assets.
9. Figures reflect 100% of the AUM associated with fund managers classified as
joint ventures and associates irrespective of the Group's holding in those
fund managers and include L&G balance sheet assets managed by Asset
Management.
Active Multi Private Total
Index strategies asset Solutions(2) markets(3) AUM
For the year ended 31 December 2023 £bn £bn £bn £bn £bn £bn
As at 1 January 2023 - excluding joint ventures and associates 444.7 156.8 73.9 485.9 34.4 1,195.7
External inflows(4) 37.6 8.8 5.5 13.6 0.8 66.3
External outflows(4) (35.1) (9.2) (3.4) (10.6) (1.0) (59.3)
Overlay net flows - - - (19.3) - (19.3)
External net flows(5) 2.5 (0.4) 2.1 (16.3) (0.2) (12.3)
PRT transfers(6) (0.3) (0.3) - (4.5) - (5.1)
Insurance net flows(7) (0.5) (3.1) (0.1) 0.1 1.7 (1.9)
Total net flows 1.7 (3.8) 2.0 (20.7) 1.5 (19.3)
Market movements 24.4 2.6 1.1 (32.4) (0.3) (4.6)
Other movements(8) (0.8) (1.7) - (11.2) - (13.7)
As at 30 June 2023 - excluding joint ventures and associates 470.0 153.9 77.0 421.6 35.6 1,158.1
External inflows(4) 31.8 8.6 6.9 11.9 0.7 59.9
External outflows(4) (49.8) (8.0) (4.0) (12.8) (1.6) (76.2)
Overlay net flows - - - (9.8) - (9.8)
External net flows(5) (18.0) 0.6 2.9 (10.7) (0.9) (26.1)
PRT transfers(6) (0.1) (1.2) - (8.6) (0.2) (10.1)
Insurance net flows(7) (0.3) 3.1 (0.1) 0.4 0.4 3.5
Total net flows (18.4) 2.5 2.8 (18.9) (0.7) (32.7)
Market movements 30.9 7.8 4.5 2.8 0.6 46.6
Other movements(8) (0.8) 4.7 - (16.7) - (12.8)
As at 31 December 2023 - excluding joint ventures and associates 481.7 168.9 84.3 388.8 35.5 1,159.2
Joint ventures and associates(9) - - - - 12.7 12.7
Total Asset Management AUM as at 31 December 2023(10) 481.7 168.9 84.3 388.8 48.2 1,171.9
1. Assets under management (AUM) includes assets on our Investment Only
Platform, that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £246.7bn (31 December
2023) of derivative notionals associated with the Solutions business.
3. Private Markets AUM of £48.2bn (31 December 2023) are shown on the basis
of client asset view and excludes assets from multi asset fund of fund
structures. Total managed Private Markets AUM, including AUM from multi asset
strategies, is £49.6bn (31 December 2023).
4. External inflows and outflows include £5.3bn (31 December 2023) of
external investments and £3.4bn (31 December 2023) of redemptions in the ETF
business.
5. External net flows exclude movements in short-term Solutions assets, as
their maturity dates are determined by client agreements and are subject to a
higher degree of variability. The total value of these assets at 31 December
2023 was £66.9bn.
6. PRT transfers reflect UK defined benefit pension scheme buy-outs to
Institutional Retirement.
7. Internal net flows includes legacy assets from the Mature Savings business
sold to ReAssure in 2020.
8. Other movements include movements of external holdings in money market
funds, other cash mandates and short-term Solutions assets.
9. Figures reflect 100% of the AUM associated with fund managers classified as
joint ventures and associates irrespective of the Group's holding in those
fund managers.
10. Total Asset Management AUM as at 31 December 2023 has
been restated to include joint ventures and associates AUM.
4.03 Asset Management total assets under management (excluding joint ventures,
associates and other) and net flows
Assets under management (excluding joint ventures, associates and other) at Net flows for the six months ended(1)
31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun
2024 2024 2023 2023 2024 2024 2023 2023
£bn £bn £bn £bn £bn £bn £bn £bn
International(2) 386.9 371.6 377.7 371.8 (5.4) (11.1) (14.2) (2.7)
UK Institutional
- Defined contribution 182.8 176.0 163.0 146.1 (0.6) 1.7 6.9 5.5
- Defined benefit 374.4 409.0 453.4 489.6 (14.8) (18.6) (22.0) (17.3)
Wholesale(3) 66.4 62.7 56.6 51.2 1.7 1.7 2.2 1.3
ETF(4) 9.8 9.5 11.4 9.9 (0.2) (2.2) 1.0 0.9
External 1,020.3 1,028.8 1,062.1 1,068.6 (19.3) (28.5) (26.1) (12.3)
Insurance(5) 97.4 93.4 97.1 89.5 2.1 (2.8) (6.6) (7.0)
Total 1,117.7 1,122.2 1,159.2 1,158.1 (17.2) (31.3) (32.7) (19.3)
1. External net flows exclude movements in short-term Solutions assets, with
maturity as determined by client agreements and are subject to a higher degree
of variability.
2. International assets are shown on the basis of client domicile. Total
International AUM including assets managed internationally on behalf of UK
clients amounted to £488bn as at 31 December 2024 (31 December 2023:
£465bn).
3. Wholesale represents assets from the Wholesale Intermediary business and
legacy assets from Personal Investing customers that did not migrate to
Fidelity International Limited.
4. ETF reflects external AUM and Flows invested on the platform. Total AUM
managed on the platform is £12.2bn ($15.2bn) in 2024 (£13.5bn/$17.2bn in
2023) and flows are £(2.3)bn ($(2.9)bn) in 2024 (£2.2bn/$2.7bn in 2023)
which include internal investment from other Asset Management asset classes.
5. Insurance net flows include PRT transfers of £2.8bn (2023: £15.2bn). PRT
transfers reflect UK defined benefit pension scheme buy-outs to Institutional
Retirement.
4.04 Reconciliation of assets under management to Consolidated Balance Sheet
2024 2023
£bn £bn
Total assets under management(1) 1,135 1,172
Derivative notionals(2) (191) (247)
Third-party assets(3) (480) (471)
Other(4) 58 47
Total financial investments, investment property and cash and cash equivalents 522 501
1. These balances are unaudited.
2. Derivative notionals are included in the assets under management measure
but are not for IFRS reporting and are thus removed.
3. Third-party assets are those that the Asset Management division manage on
behalf of others which are not included on the Group's Consolidated Balance
Sheet.
4. Other includes assets that are managed by third parties on behalf of the
Group, other assets and liabilities related to financial investments,
derivative assets and pooled funds. It also includes measurement differences
between assets under management, which are on a market value basis, and total
investments on an IFRS basis.
4.05 Workplace assets under administration(1)
Restated(2)
2024 2023
£bn £bn
As at 1 January 80.1 66.7
Gross inflows 11.7 10.6
Gross outflows (5.7) (4.2)
Net flows 6.0 6.4
Market and other movements 7.7 7.0
As at 31 December 93.8 80.1
1. Workplace assets under administration includes Workplace and Retail savings
assets under administration and as at 31 December 2024 includes £93.7bn (31
December 2023: £80.0bn) of assets under management included in Note 4.01.
2. Assets under administration as at 31 December 2023 have been restated to
include Retail savings.
4.06 Workplace assets under administration1 half-yearly progression
Restated(2)
2024 2023
£bn £bn
As at 1 January 80.1 66.7
Gross inflows 6.0 5.0
Gross outflows (2.7) (2.0)
Net flows 3.3 3.0
Market and other movements 4.3 2.1
As at 30 June 87.7 71.8
Gross inflows 5.7 5.6
Gross outflows (3.0) (2.2)
Net flows 2.7 3.4
Market and other movements 3.4 4.9
As at 31 December 93.8 80.1
1. Workplace assets under administration includes Workplace and Retail savings
assets under administration.
2. Assets under administration as at 30 June and 31 December 2023 have been
restated to include Retail savings.
4.07 Institutional Retirement new business
6 months 6 months 6 months 6 months
Total 31 December 30 June Total 31 December 30 June
2024 2024 2024 2023 2023 2023
£m £m £m £m £m £m
UK(1) 8,412 7,286 1,126 12,048 7,182 4,866
US 1,684 1,267 417 1,463 1,337 126
Bermuda 566 566 - 208 208 -
Total Institutional Retirement new business 10,662 9,119 1,543 13,719 8,727 4,992
1. Full year ending 31 December 2023 includes a transaction with the Group's
UK defined benefit pension schemes as disclosed in Note 3.17 Related party
transactions.
4.08 Retail new business
6 months 6 months 6 months 6 months
Total 31 December 30 June Total 31 December 30 June
2024 2024 2024 2023 2023 2023
£m £m £m £m £m £m
Individual annuities 2,118 944 1,174 1,431 856 575
Lifetime mortgage loans and retirement interest only mortgages 270 130 140 299 136 163
Total Retail Retirement new business 2,388 1,074 1,314 1,730 992 738
UK Retail protection 153 78 75 150 74 76
UK Group protection 110 42 68 121 68 53
US protection(1) 159 78 81 141 71 70
Total Insurance new business 422 198 224 412 213 199
Total Retail new business 2,810 1,272 1,538 2,142 1,205 937
1. In local currency, US protection reflects new business of $203m for 2024
(H1 24: $103m; H2 24: $100m), and $175m for 2023 (H1 23: $87m; H2 23: $88m).
Capital
5.01 Group regulatory capital - Solvency II
The Group measures and monitors its capital resources in line with the UK
implementation of the Solvency II requirements as set out in the Prudential
Regulation Authority (PRA) Rulebook. The Solvency II regulations were amended
in the UK in December 2023 to introduce a change to the calculation of Risk
Margin, and in June 2024 to change the calculation of the Matching Adjustment
and Fundamental Spread. In December 2024, the final regulations were
implemented, and these introduce a number of changes to the Solvency II
calculations, the most significant being the Matching Adjustment Attestation
requirements, which increase the Fundamental Spread on assets where the Group
believes there to be risks which are not sufficiently captured in existing
deductions.
The Solvency II results are estimated and unaudited. Further explanation of
the underlying methodology and assumptions are set out in the sections below.
The Group calculates its Solvency II capital requirements using a Partial
Internal Model. The majority of the risk to which the Group is exposed is
assessed on the Internal Model basis approved by the PRA. Capital requirements
for a few smaller entities are assessed using the Standard Formula basis on
materiality grounds. The Group's US insurance businesses and Legal &
General Reinsurance Company No. 2 are valued on a local statutory basis,
following the PRA's approval to use Calculation Method 2 for including these
businesses in the Group Solvency II calculation.
The table below shows the Group Own Funds, Solvency Capital Requirement (SCR)
and Surplus Own Funds, based on the Partial Internal Model, Matching
Adjustment and Transitional Measures on Technical Provisions (TMTP) as at 31
December 2024.
(i) Capital position
As at 31 December 2024, and on the above basis, the Group had a surplus of
£9,012m (31 December 2023: £9,167m) over its Solvency Capital Requirement,
corresponding to a Solvency II capital coverage ratio of 232% (31 December
2023: 224%). The Solvency II capital position is as follows:
2024 2023
£m £m
Unrestricted Tier 1 Own Funds 11,988 12,845
Restricted Tier 1 Own Funds(1) 495 495
Tier 2 Subordinated liabilities 3,404 3,460
Eligibility restrictions (27) (244)
Solvency II Own Funds(2,3) 15,860 16,556
Solvency Capital Requirement (6,848) (7,389)
Solvency II surplus 9,012 9,167
SCR Coverage ratio 232% 224%
1. Restricted Tier 1 Own Funds represent Perpetual restricted Tier 1
contingent convertible notes.
2. Solvency II Own Funds do not include an accrual for the final dividend of
£902m (31 December 2023: final dividend of £871m) declared after the balance
sheet date.
3. Solvency II Own Funds allow for a Risk Margin of £1,041m (31 December
2023: £1,191m) and TMTP of £685m (31 December 2023: £970m).
(ii) Methodology
Own Funds comprise the excess of the value of assets over the liabilities, as
valued on a Solvency II basis. Subordinated debt issued by the Group is
considered to be part of available capital, rather than a liability, as it is
subordinate to policyholder claims. Own Funds include deductions in relation
to fungibility and transferability restrictions, to the extent that the
surplus Own Funds of a specific group entity cannot be freely transferred
around the Group due to local legal or regulatory constraints.
Assets are valued at fair value with adjustments to remove intangibles and
deferred acquisition costs, and to value reinsurers' share of technical
provisions on a basis consistent with the liabilities on the Solvency II
balance sheet.
Liabilities are valued on a best estimate market consistent basis, with the
application of a Solvency II Matching Adjustment for valuing annuity
liabilities. Own Funds incorporate changes to the Matching Adjustment during
2024 and the impacts of a recalculation of the TMTP as at end December 2024.
The liabilities include a Risk Margin of £1,041m (31 December 2023: £1,191m)
which represents an allowance for the cost of capital for a purchasing insurer
to take on the portfolio of liabilities and residual risks that are deemed to
be non-hedgeable under Solvency II. This is calculated using a cost of capital
of 4% and includes a tapering factor of 90% (31 December 2023: 4% cost of
capital, with 90% tapering factor).
The Solvency Capital Requirement is the amount of capital required to cover
the 1-in-200 worst projected future outcome in the year following the
valuation, allowing for realistic management and policyholder actions and the
impact of the stress on the tax position of the Group. This allows for
diversification between the different firms within the Group and between the
risks to which they are exposed.
All material UK insurance firms, including Legal and General Assurance Society
Limited (LGAS) and Legal and General Assurance (Pensions Management) Limited,
are incorporated into the Group's Solvency II Internal Model assessment of
required capital, assuming diversification of the risks between and within
those firms. These firms, as well as the non-UK insurance firm (Legal &
General Reinsurance Company Limited (L&G Re) based in Bermuda) contribute
over 90% of the Group's SCR.
Firms which are not regulated but which carry material risks to the Group's
solvency are also modelled in the Internal Model, with an appropriate stress
being applied to their net asset value. There are a small number of insurance
firms for which the capital requirements are valued on a Solvency II Standard
Formula basis.
Legal & General America's insurance entities (LGA) and Legal and General
Reinsurance Company No.2 Limited (L&G Re 2) are incorporated into the
calculation of Group solvency using Calculation Method 2. All risk exposure in
these firms is valued on local statutory bases.
For LGA (excluding Legal & General America Reinsurance Limited (LGAR)),
all risk exposure is valued on a US statutory basis, with capital requirements
set to a multiple of US statutory Risk Based Capital (RBC). The contribution
to Group SCR is 150% of the local Company Action Level RBC (CAL RBC). The
contribution to Group's Own Funds is the SCR together with any surplus capital
in excess of 250% of CAL RBC. The US regulatory regime is considered to be
equivalent to Solvency II by the European Commission.
For L&G Re 2 and LGAR, all risk exposure is valued on a Bermudan capital
basis, with capital requirements set equal to the Bermudan capital
requirements. The Own Funds contribution is restricted by 20% of the capital.
The Bermuda regulatory regime is also considered to be equivalent to Solvency
II by the European Commission.
All non-insurance regulated firms are included using their current regulatory
surplus.
(iii) Assumptions
The calculation of the Solvency II balance sheet and associated capital
requirements requires a number of assumptions, including:
i. Demographic assumptions: these are required to project best
estimate liability cash flows and are mostly consistent with those underlying
the Group's IFRS disclosures where relevant, subject to minor exceptions.
ii. Future investment returns and discount rates used to derive the
present value of best estimate liability cash flows as defined by the PRA. The
risk-free rates used to discount UK Sterling and US Dollar cashflows are
SONIA- and SOFR-based market swap rates. For other liabilities, the risk-free
rates used to discount cash flows include a credit risk adjustment that varies
by currency.
iii. For annuities that are eligible, the liability discount rate
includes a Matching Adjustment. This Matching Adjustment varies between LGAS
and L&G Re and by the currency of the relevant liabilities. At 31 December
2024 the Matching Adjustment for UK Sterling was 127 basis points (31 December
2023: 122 basis points) after deducting an allowance for the Fundamental
Spread equivalent to 45 basis points (31 December 2023: 53 basis points). The
Matching Adjustment and Fundamental Spread have been calculated in line with
the UK implementation of the Solvency II regulations, and include the impact
from the Matching Adjustment Attestation.
iv. Assumptions regarding management actions and policyholder behaviour
across the full range of scenarios: the only management actions allowed for
are those that have been approved by the Board and are in place at the balance
sheet date.
v. Assumptions regarding the volatility of the risks to which the
Group is exposed: assumptions have been set using a combination of historic
market, demographic and operating experience data. In areas where data is not
considered robust, expert judgement has been used.
vi. Assumptions on the dependencies between risks, which are calibrated
using a combination of historic data and expert judgement.
(iv) Analysis of change
Operational Surplus Generation (OSG) is the expected surplus generated from
the assets and liabilities in-force at the start of the year. It is based on
assumed real world returns and best estimate non-market assumptions. It
includes the impact of management actions to the extent that, at the start of
the year, these were reasonably expected to be implemented over the year.
New business strain is the cost of acquiring business and setting up Technical
Provisions and SCR (net of any premium income), on actual new business written
over the year. It is based on economic conditions at the point of sale.
The table below shows the movement (net of tax) during the year ended 31
December 2024 in the Group's Solvency II surplus.
2024 2024 2024
Own Funds SCR Surplus
£m £m £m
Opening Position 16,556 (7,389) 9,167
Operational Surplus Generation(1) 1,786 (35) 1,751
New business strain 185 (594) (409)
Net surplus generation 1,971 (629) 1,342
Operating variances(2) 156
Mergers, acquisitions and disposals(3) 9
Market movements(4) (231)
Share buyback (201)
Dividends paid(5) (1,230)
Total surplus movement (after dividends paid in the year) (696) 541 (155)
Closing Position 15,860 (6,848) 9,012
1. Operational Surplus Generation includes a £45m release of Risk Margin and
£(83)m amortisation of the TMTP.
2. Operating variances include the impact of experience variances, changes to
valuation assumptions, methodology changes and other management actions
including changes in asset mix.
3. Mergers, acquisitions and disposals for the year ended 31 December 2024
includes the sale of Cala.
4. Market movements represent the impact of changes in investment market
conditions during the year and changes to future economic assumptions.
5. Dividends paid are the amounts from the 2023 final dividend and 2024
interim dividend.
The table below shows the movement (net of tax) during the year ended 31
December 2023 in the Group's Solvency II surplus.
2023 2023 2023
Own Funds SCR Surplus
£m £m £m
Opening Position 17,226 (7,311) 9,915
Operational Surplus Generation(1) 1,596 225 1,821
New business strain 551 (989) (438)
Net surplus generation 2,147 (764) 1,383
Operating variances(2) (307)
Mergers, acquisitions and disposals(3) (140)
Market movements(4) (512)
Dividends paid(5) (1,172)
Total surplus movement (after dividends paid in the year) (670) (78) (748)
Closing Position 16,556 (7,389) 9,167
1. Operational Surplus Generation includes a £208m release of Risk Margin
and £(206)m amortisation of the TMTP.
2. Operating variances include the impact of experience variances, changes to
valuation assumptions, methodology changes and other management actions
including changes in asset mix.
3. Mergers, acquisitions and disposals for the year ended 31 December 2023
includes costs incurred relating to the announced intent to cease production
within the Modular Homes business and impairment of the Group's investment in
Onto, along with the associated change in SCR.
4. Market movements represent the impact of changes in investment market
conditions over the year and changes to future economic assumptions.
5. Dividends paid are the amounts from the 2022 final dividend and the 2023
interim dividend.
(v) Future Solvency II surplus generation - UK annuities
The table below shows a projection of future OSG expected from the £82.7bn
(2023: £78.3bn) UK annuity portfolio as at 31 December 2024. The projection
excludes any allowance for future new business. The table shows the OSG from
our UK annuity businesses in the annuity back book OSG line, L&G Other
includes a contribution from Asset Management assets supporting the SCR and
asset management fees for managing assets of the UK annuity portfolio. The
impact of management actions is excluded; we expect management actions to
contribute up to £0.2bn in each year of the projection.
2024 2025 2026 2027 2028 2029-2033 2034-2043 Total
£bn £bn £bn £bn £bn £bn £bn £bn
UK annuity OSG from back book(1) 0.7 0.6 0.6 0.6 0.6 2.5 3.9 9.5
L&G Other 0.1 0.1 0.1 0.1 0.1 0.3 0.3 1.1
Total OSG for UK annuity back book 0.8 0.7 0.7 0.7 0.7 2.8 4.2 10.6
1. UK annuity back book OSG does not include new business.
(vi) Reconciliation of IFRS equity to Solvency II Own Funds
A reconciliation of the Group's IFRS equity to Solvency II Own Funds is given
below:
( ) ( ) ( ) 2024 2023
( ) ( ) ( ) £m £m
IFRS equity(1) 3,548 4,826
CSM net of tax(2) 10,287 10,048
IFRS equity plus CSM net of tax 13,835 14,874
Remove DAC, goodwill and other intangible assets and associated liabilities (473) (525)
Add IFRS carrying value of subordinated borrowings(3) 3,788 3,768
Insurance contract valuation differences (626) (622)
Financial investments valuation differences (1,118) (845)
Difference in value of net deferred tax liabilities(2) 491 203
Other (10) (53)
Eligibility restrictions (27) (244)
Solvency II Own Funds(4) 15,860 16,556
1. IFRS equity represents equity attributable to owners of the parent and
restricted Tier 1 convertible debt note as per the Consolidated Balance Sheet.
2. On 31 December 2023, CSM net of tax and Difference in value of net deferred
tax liabilities were restated to reflect the introduction of the new corporate
income tax regime in Bermuda, which was enacted in December 2023.
3. Treated as available capital on the Solvency II balance sheet as the
liabilities are subordinate to policyholder claims.
4. Solvency II Own Funds do not include an accrual for the final dividend of
£902m (31 December 2023: final dividend of £871m) declared after the balance
sheet date.
(vii) Sensitivity analysis
The following sensitivities are provided to give an indication of how the
Group's Solvency II surplus as at 31 December 2024 would have changed in a
variety of adverse events. These are all independent stresses to a single
risk. In practice, the balance sheet is impacted by combinations of stresses
and the combined impact can be larger than adding together the impacts of the
same stresses in isolation. It is expected that, particularly for market
risks, adverse stresses will happen together.
Impact on Impact on Impact on Impact on
net of tax net of tax net of tax net of tax
Solvency II Solvency II Solvency II Solvency II
capital coverage capital coverage
surplus ratio surplus ratio
2024 2024 2023 2023
£bn % £bn %
100bps increase in risk-free rates (0.0) 11 0.1 10
100bps decrease in risk-free rates(1) (0.2) (14) (0.2) (11)
Credit spreads widen by 100bps assuming an escalating addition to ratings(2,3) 0.2 9 0.4 14
Credit spreads widen by 100bps assuming a flat addition to ratings(2) 0.2 13 0.5 15
Credit spreads narrow by 100bps assuming a flat deduction from ratings(2,4) (0.6) (18) (0.7) (18)
Credit spreads of sub-investment grade assets widen by 100bps assuming a level (0.1) (3) (0.2) (7)
addition to ratings(2,5)
Credit migration(6) (0.5) (8) (0.7) (10)
25% fall in equity markets(7) (0.5) (5) (0.4) (3)
15% fall in property markets(8) (0.8) (10) (0.9) (10)
50bps increase in future inflation expectations 0.1 (1) (0.1) (3)
10% increase in maintenance expenses(9) (0.3) (5) (0.3) (4)
1. In the interest rate down stress negative rates are allowed, i.e. there
is no floor at zero rates.
2. The spread sensitivity applies to the Group's corporate bond (and similar)
holdings, with no change in long-term default expectations. Restructured
lifetime mortgages are excluded as the underlying exposure is mostly to
property.
3. The stress for AA bonds is twice that for AAA bonds, for A bonds it is
three times, for BBB four times and so on, such that the weighted average
spread stress for the portfolio is 100 basis points. To give a 100bps increase
on the total portfolio, the spread stress increases in steps of 32bps, i.e.
32bps for AAA, 64bps for AA etc.
4. The spread narrowing stress has changed from assuming an escalating
deduction from ratings to a flat deduction. The previous disclosed stress is
no longer suitable due to the low spread differentials between ratings under
the base economic conditions at 31 December 2024.
5. No stress for bonds rated BBB and above. For bonds rated BB and below the
stress is 100bps. The spread widening on the total portfolio is smaller than
1bps as the Group holds less than 1% in bonds rated BB and below. The impact
is primarily an increase in SCR arising from the modelled cost of trading
downgraded bonds back to a higher rating in the stress scenarios in the SCR
calculation.
6. Credit migration stress covers the cost of an immediate big letter
downgrade on 20% of all assets where the capital treatment depends on a credit
rating (including corporate bonds, and sale and leaseback rental strips;
lifetime mortgage senior notes are excluded). Downgraded assets in our
annuities portfolio are assumed to be traded to their original credit rating,
so the impact is primarily a reduction in Own Funds from the loss of value on
downgrade. The impact of the sensitivity will depend upon the market levels of
spreads at the balance sheet date.
7. This relates primarily to equity exposure held by the Group but will also
include equity-based mutual funds and other investments that receive an equity
stress (for example, certain investments in subsidiaries). Some assets have
factors that increase or decrease the stress relative to general equity levels
via a beta factor.
8. Assets stressed include residual values from sale and leaseback, the full
amount of lifetime mortgages and direct investments treated as property.
9. A 10% increase in the assumed unit costs and future costs of investment
management across all long-term insurance business lines.
The above sensitivity analysis does not reflect all management actions which
could be taken to reduce the impacts. In practice, the Group actively manages
its asset and liability positions to respond to market movements. Allowance is
made for the recalculation of the Loss Absorbing Capacity of Deferred Tax for
all stresses, assuming full capacity remains available post stress.
The impacts of these stresses are not linear therefore these results should
not be used to interpolate or extrapolate the impact of a smaller or larger
stress. The results of these tests are indicative of the market conditions
prevailing at the balance sheet date. The results would be different if
performed at an alternative reporting date.
(viii) Analysis of Group Solvency Capital Requirement
The table below shows a breakdown of the Group's SCR by risk type. The split
is shown before the effects of diversification and tax.
2024 2023
% %
Interest rate(1) 11 10
Equity ( ) 6 6
Property ( ) 11 12
Credit(2) 19 22
Currency ( ) 3 1
Inflation 4 4
Total Market risk(3) 54 55
Counterparty risk ( ) 1 2
Life mortality ( ) 3 3
Life longevity(4) 16 18
Life mass lapse ( ) 3 3
Life non-mass lapse 2 2
Life catastrophe ( ) 8 6
Expense ( ) 3 3
Total Insurance risk ( ) 35 35
Non-life underwriting - -
Operational risk ( ) 4 4
Miscellaneous(5) 6 4
Total SCR 100 100
1. Interest rate risk exposure is significantly smaller after allowing for
diversification with other risks.
2. Credit risk is one of the Group's most significant exposures, arising
predominantly from the portfolio of bonds and bond-like assets backing the
Group's annuity business.
3. In addition to credit risk the Group also has significant exposure to
other market risks, primarily due to the investment holdings within the
shareholder funds but also the risk to fee income from assets backing unit
linked business.
4. Longevity risk is the Group's most significant insurance risk exposure,
arising from the annuity book on which the majority of the longevity risk on
the back book is retained. However, we expect this to reduce over time as we
continue to reinsure the majority of the exposure on new business written post
the implementation of Solvency II.
5. Miscellaneous includes LGA and L&G Re 2, which are included in the
Group SCR using Calculation Method 2, and the sectoral capital requirements
for non-insurance regulated firms.
5.02 Estimated Solvency II new business contribution
(i) New business by product(1)
Management estimates of the present value of new business premium (PVNBP) and
the margin for selected lines of business are provided below:
Contribution Contribution
from new from new
PVNBP(2) business(3) Margin(4) PVNBP(2) business(3) Margin(4)
2024 2024 2024 2023 2023 2023
£m £m % £m £m %
Institutional Retirement - UK annuity business 7,855 420 5.3 8,859 654 7.4
Retail Retirement - UK annuity business 2,118 132 6.2 1,431 100 7.0
UK Protection 1,461 57 3.9 1,337 37 2.8
US Protection(5) 1,249 135 10.8 1,123 128 11.4
1. Selected lines of business only.
2. PVNBP excludes a quota share reinsurance single premium of £557m (31
December 2023: £3,189m) relating to Institutional Retirement new business.
3. The contribution from new business is defined as the present value at the
point of sale of expected future Solvency II surplus emerging from new
business written in the year using the risk discount rate applicable at the
end of the year.
4. Margin is based on unrounded inputs.
5. In local currency, US protection business reflects PVNBP of $1,596m (31
December 2023: $1,397m) and a contribution from new business of $173m (31
December 2023: $160m).
(ii) Assumptions
The key economic assumptions are as follows:
2024 2023
% %
Margin for Risk 3.7 4.2
Risk-free rate
- UK 4.1 3.3
- US 4.6 3.9
Risk discount rate (net of tax)
- UK 7.8 7.5
- US 8.3 8.1
Long-term rate of return on annuities 5.5 4.9
The future earnings are discounted using duration-based discount rates, which
is the sum of a duration-based risk-free rate and a flat margin for risk. The
risk-free rate shown above is a weighted average based on the projected cash
flows.
Economic and non-economic assumptions are set to best estimates of their
real-world outcomes, including a risk premium for asset returns where
appropriate. In particular:
• the assumed future pre-tax returns on fixed interest and RPI linked
securities are set by reference to yield on the relevant backing assets, net
of an allowance for default risk which takes into account the credit rating
and the outstanding term of the assets. The weighted average deduction for
business written in 2024 equates to a level rate deduction from the expected
returns of 15 basis points. The calculated return takes account of derivatives
and other credit instruments in the investment portfolio
• non-economic assumptions have been set at levels commensurate with
recent operating experience, including those for mortality, morbidity,
persistency and maintenance expenses (excluding development costs). An
allowance is made for future mortality improvement. For new business,
mortality assumptions may be modified to take certain scheme specific features
into account.
The profits on the new business are presented gross of tax.
(iii) Methodology
Basis of preparation
Solvency II new business contribution reflects the portion of Solvency II
value added by new business written in the year. It has been calculated in a
manner consistent with principles and methodologies which were adopted in the
Group's 2024 Annual report and accounts.
Solvency II new business contribution has been calculated for the Group's most
material insurance-related businesses, namely, Institutional Retirement,
Retail Retirement and Insurance.
Intra-group reinsurance arrangements are in place between US, UK and Bermudan
businesses and it is expected that these arrangements will be periodically
extended to cover recent new business. The US protection new business margin
assumes that the new business will continue to be reinsured and looks through
the intra-group arrangements.
Description of methodology
The objective of the Solvency II new business contribution is to provide
shareholders with information on the long-term contribution of new business
written in 2024.
The Solvency II new business contribution has been calculated as the present
value of future shareholder profits arising from business written in 2024.
Cash flow projections are determined using best estimate assumptions for each
component of cash flow and for each policy group. Best estimate assumptions
including mortality, morbidity, persistency and expenses reflect recent
operating experience.
The PVNBP is equivalent to total single premiums plus the discounted value of
annual premiums expected to be received over the term of the contracts using
the same economic and operating assumptions used for the calculation of the
new business contribution for the financial year. The new business margin is
defined as new business contribution divided by the PVNBP. The premium volumes
used to calculate the PVNBP are the same as those used to calculate new
business contribution.
LGA new business contribution is calculated on a US statutory basis.
Projection assumptions
Cash flow projections are determined using best estimate assumptions for each
component of cash flow for each line of business. Future economic and
investment return assumptions are based on conditions at the end of the
financial year.
Detailed projection assumptions including mortality, morbidity, persistency
and expenses reflect recent operating experience and are normally reviewed
annually. Allowance is made for future improvements in annuitant mortality
based on experience and externally published data. Favourable changes in
operating experience are not anticipated until the improvement in experience
has been observed.
All costs relating to new business, even if incurred elsewhere in the Group,
are allocated to the new business. The expense assumptions used for the cash
flow projections therefore include the full cost of servicing this business.
Risk discount rate
The risk discount rate (RDR) is duration-based and is a combination of the
risk-free curve and a flat Margin for Risk.
The GBP risk-free rates have been based on a SONIA-based swap curve with no
explicit Credit Risk Adjustment. The USD risk-free rates have been based on a
SOFR-based swap curve with no explicit Credit Risk Adjustment.
The Margin for Risk has been determined based on an assessment of the Group's
Weighted Average Cost of Capital (WACC). This assessment incorporates a beta
for the Group, which measures the correlation of movements in the Group's
share price to movements in a relevant index. Beta values therefore allow for
the market's assessment of the risks inherent in the business relative to
other companies in the chosen index.
The WACC is derived from the Group's cost of equity, cost of debt, and the
proportion of equity to debt in the Group's capital structure measured using
market values. Each of these three parameters is forward looking, although
informed by historic information and appropriate judgements where necessary.
The cost of equity is calculated as the risk-free rate plus the equity risk
premium for the chosen index multiplied by the Company's beta.
The cost of debt used in the WACC calculations takes account of the actual
locked-in rates for our senior and subordinated long-term debt. All debt
interest attracts tax relief at a time adjusted rate of 25% (31 December 2023:
25%).
Whilst the WACC approach is a relatively simple and transparent calculation to
apply, subjectivity remains within a number of the assumptions. Management
believes that the chosen Margin for Risk, together with the levels of required
capital and the inherent strength of the Group's regulatory reserves, is
appropriate to reflect the risks within the covered business.
(iv) Reconciliation of PVNBP to total Institutional Retirement and Retail new
business
2024 2023
Notes £bn £bn
PVNBP 5.02 (i) 12.7 12.7
Effect of capitalisation factor (1.8) (1.8)
New business premiums from selected lines 10.9 10.9
Other(1) 2.6 5.0
Total Institutional Retirement and Retail new business 4.07, 4.08 13.5 15.9
1. Other principally includes annuity sales in the US £1.7bn (31 December
2023: £1.5bn), lifetime mortgage loans and retirement interest only mortgages
£0.3bn (31 December 2023: £0.3bn), and quota share reinsurance premiums
£0.6bn (31 December 2023: £3.2bn).
Investments
6.01 Investment portfolio
Restated
2024 2023
£m £m
Worldwide total assets under management(1) 1,143,749 1,179,769
Client and policyholder assets (991,647) (1,044,213)
Investments to which shareholders are directly exposed (market value) 152,102 135,556
Adjustment from market value to IFRS carrying value(2) 1,118 848
Investments to which shareholders are directly exposed (IFRS carrying value) 153,220 136,404
1. Worldwide total assets under management include Asset Management AUM and
other Group assets not managed by Asset Management.
2. Adjustments reflect measurement differences for a portion of the Group's
financial investments designated as amortised cost.
Analysed by investment class:
Restated Restated
Annuity(1) Other Annuity(1) Other
investments investments Total investments investments Total
2024 2024 2024 2023 2023 2023
Notes £m £m £m £m £m £m
Equities 2,052 896 2,948 1,989 1,177 3,166
Bonds 6.03 83,020 4,152 87,172 77,571 3,759 81,330
Derivative assets(2) 49,039 156 49,195 37,894 125 38,019
Property 6.04 5,729 226 5,955 5,269 234 5,503
Loans(3) 2,542 172 2,714 1,382 230 1,612
Financial investments 142,382 5,602 147,984 124,105 5,525 129,630
Cash and cash equivalents 2,631 1,126 3,757 3,122 1,113 4,235
Other assets(4) 722 757 1,479 779 1,760 2,539
Total investments 145,735 7,485 153,220 128,006 8,398 136,404
1. Annuity investments includes products held within the Institutional
Retirement and Retail Retirement annuity portfolios and include lifetime
mortgage loans and retirement interest only mortgages.
2. Derivative assets are shown gross of derivative liabilities of £54.3bn
(31 December 2023: £40.5bn). Exposures arise from use of derivatives for
efficient portfolio management, particularly the use of interest rate swaps,
inflation swaps, currency swaps and foreign exchange forward contracts for
assets and liability management.
3. Loans include reverse repurchase agreements of £2,630m (31 December
2023: £1,599m).
4. Other assets include finance leases of £444m (31 December 2023: £451m),
associates and joint ventures of £795m (31 December 2023: £616m) and the
consolidated net asset value of the Group's investments in the housing
businesses, which in 2023 included Cala.
6.02 Direct investments
(i) Total investments analysed by asset class
Direct(1) Traded(2) Direct(1) Traded(2)
investments securities Total investments securities Total
2024 2024 2024 2023 2023 2023
£m £m £m £m £m £m
Equities 1,698 1,250 2,948 1,856 1,310 3,166
Bonds(3) 30,244 56,928 87,172 27,671 53,659 81,330
Derivative assets - 49,195 49,195 - 38,019 38,019
Property(4) 5,955 - 5,955 5,503 - 5,503
Loans 83 2,631 2,714 13 1,599 1,612
Financial investments 37,980 110,004 147,984 35,043 94,587 129,630
Cash and cash equivalents 169 3,588 3,757 163 4,072 4,235
Other assets 1,479 - 1,479 2,539 - 2,539
Total investments 39,628 113,592 153,220 37,745 98,659 136,404
1. Direct investments, which generally constitute an agreement with another
party, represent an exposure to untraded and often less volatile asset
classes. Direct investments also include physical assets, bilateral loans and
private equity, but excluded hedge funds.
2. Traded securities are defined by exclusion. If an instrument is not a
direct investment, then it is classed as a traded security.
3. Bonds include lifetime mortgage loans of £5,861m (31 December 2023:
£5,766m).
4. A further breakdown of property is provided in Note 6.04.
(ii) Direct investments analysed by asset portfolio
Annuity(1) Other Total
2024 2024 2024
£m £m £m
Equities 831 867 1,698
Bonds(2) 28,419 1,825 30,244
Property 5,729 226 5,955
Loans - 83 83
Financial investments 34,979 3,001 37,980
Other assets, cash and cash equivalents 765 883 1,648
Total direct investments 35,744 3,884 39,628
Annuity(1) Other Total
2023 2023 2023
£m £m £m
Equities 839 1,017 1,856
Bonds(2) 25,816 1,855 27,671
Property 5,269 234 5,503
Loans - 13 13
Financial investments 31,924 3,119 35,043
Other assets, cash and cash equivalents 842 1,860 2,702
Total direct investments (Restated) 32,766 4,979 37,745
1. Annuity includes products held within the Institutional Retirement and
Retail Retirement annuity portfolios.
2. Bonds include lifetime mortgage loans of £5,861m (31 December 2023:
£5,766m).
6.03 Bond portfolio summary
(i) Sectors analysed by credit rating
BB or
AAA AA A BBB below Other Total(2) Total(2)
As at 31 December 2024 £m £m £m £m £m £m £m %
Sovereigns, Supras and Sub-Sovereigns 518 15,907 1,036 201 19 1 17,682 20
Banks:
- Tier 1 - - - - - - - -
- Tier 2 and other subordinated - - 59 14 2 - 75 -
- Senior - 1,677 4,197 896 1 - 6,771 8
- Covered 212 - - - - - 212 -
Financial Services:
- Tier 2 and other subordinated - 104 23 15 8 8 158 -
- Senior 212 885 796 846 1 - 2,740 3
Insurance:
- Tier 1 - - - - - - - -
- Tier 2 and other subordinated 34 133 19 37 1 - 224 -
- Senior 21 173 411 351 - - 956 1
Consumer Services and Goods:
- Cyclical - 91 1,048 1,465 37 1 2,642 3
- Non-cyclical 279 694 2,726 2,588 60 - 6,347 7
- Healthcare - 602 1,011 604 6 - 2,223 3
Infrastructure:
- Social 99 863 4,564 1,285 64 - 6,875 8
- Economic - 431 1,258 4,280 37 23 6,029 7
Technology and Telecoms 100 403 1,056 2,525 18 1 4,103 5
Industrials - 201 384 958 33 - 1,576 2
Utilities 427 397 4,655 3,799 10 - 9,288 11
Energy - 28 543 1,457 35 - 2,063 2
Commodities - - 194 609 11 - 814 1
Oil and Gas - 625 427 428 14 3 1,497 2
Real estate - 34 1,850 2,530 82 1 4,497 5
Structured finance ABS / RMBS / CMBS / Other 1,084 981 1,541 791 68 22 4,487 5
Lifetime mortgage loans(1) - 4,916 483 402 - 60 5,861 7
CDOs - 41 - 11 - - 52 -
Total £m 2,986 29,186 28,281 26,092 507 120 87,172 100
Total % 3 34 32 30 1 - 100
1. The credit ratings attributed to lifetime mortgage loans are allocated in
accordance with the internal Matching Adjustment structuring.
2. The Group's bond portfolio is dominated by investments backing
Institutional Retirement's and Retail Retirement's annuity business. These
account for £83,020m, representing 95% of the total Group portfolio.
BB or
AAA AA A BBB below Other Total(2) Total(2)
As at 31 December 2023 £m £m £m £m £m £m £m %
Sovereigns, Supras and Sub-Sovereigns 399 10,342 1,023 102 1 2 11,869 15
Banks:
- Tier 1 - - - 20 - 1 21 -
- Tier 2 and other subordinated - - 77 47 1 - 125 -
- Senior - 1,656 4,270 824 1 - 6,751 8
- Covered 106 - - - - - 106 -
Financial Services:
- Tier 2 and other subordinated - 74 57 17 7 3 158 -
- Senior 238 361 828 716 - 3 2,146 3
Insurance:
- Tier 1 - - - 9 - - 9 -
- Tier 2 and other subordinated 31 131 32 44 - - 238 -
- Senior 10 188 411 379 - - 988 1
Consumer Services and Goods:
- Cyclical - 46 1,174 1,843 25 21 3,109 4
- Non-cyclical 314 840 3,176 2,917 65 1 7,313 9
- Healthcare 12 697 1,060 668 4 - 2,441 3
Infrastructure:
- Social 163 822 4,333 1,135 71 - 6,524 8
- Economic 253 157 1,096 4,031 60 13 5,610 7
Technology and Telecoms 97 301 1,611 2,802 12 6 4,829 6
Industrials - 58 593 651 25 1 1,328 2
Utilities 541 751 4,771 4,384 17 - 10,464 13
Energy - 26 504 1,033 34 - 1,597 2
Commodities - - 210 630 24 21 885 1
Oil and Gas - 501 618 326 13 59 1,517 2
Real estate - 32 2,197 2,200 22 - 4,451 5
Structured finance ABS / RMBS / CMBS / Other 656 1,042 697 566 55 15 3,031 4
Lifetime mortgage loans(1) - 4,835 504 402 - 25 5,766 7
CDOs - 43 - 11 - - 54 -
Total £m 2,820 22,903 29,242 25,757 437 171 81,330 100
Total % 3 28 36 32 1 - 100
1. The credit ratings attributed to lifetime mortgage loans are allocated in
accordance with the internal Matching Adjustment structuring.
2. The Group's bond portfolio is dominated by investments backing
Institutional Retirement's and Retail Retirement's annuity business. These
account for £77,571m, representing 95% of the total Group portfolio.
(ii) Sectors analysed by domicile
Rest of
UK US EU the World Total
As at 31 December 2024 £m £m £m £m £m
Sovereigns, Supras and Sub-Sovereigns 13,298 2,528 1,279 577 17,682
Banks 2,056 2,638 1,219 1,145 7,058
Financial Services 424 1,160 998 316 2,898
Insurance 47 991 68 74 1,180
Consumer Services and Goods:
- Cyclical 396 1,855 168 223 2,642
- Non-cyclical 1,292 4,146 552 357 6,347
- Healthcare 274 1,909 40 - 2,223
Infrastructure:
- Social 5,915 615 138 207 6,875
- Economic 3,955 895 267 912 6,029
Technology and Telecoms 345 2,730 465 563 4,103
Industrials 242 973 314 47 1,576
Utilities 3,513 3,502 1,787 486 9,288
Energy 606 1,135 22 300 2,063
Commodities 51 383 110 270 814
Oil and Gas 304 419 453 321 1,497
Real estate 1,724 1,796 704 273 4,497
Structured finance ABS / RMBS / CMBS / Other 1,191 2,672 201 423 4,487
Lifetime mortgage loans 5,359 - 502 - 5,861
CDOs - - - 52 52
Total 40,992 30,347 9,287 6,546 87,172
Rest of
UK US EU the World Total
As at 31 December 2023 £m £m £m £m £m
Sovereigns, Supras and Sub-Sovereigns 8,790 1,696 849 534 11,869
Banks 1,772 2,360 1,459 1,412 7,003
Financial Services 527 902 649 226 2,304
Insurance 64 1,015 75 81 1,235
Consumer Services and Goods:
- Cyclical 355 2,281 294 179 3,109
- Non-cyclical 1,891 4,697 379 346 7,313
- Healthcare 277 2,093 71 - 2,441
Infrastructure:
- Social 5,605 679 162 78 6,524
- Economic 3,968 909 267 466 5,610
Technology and Telecoms 448 3,226 566 589 4,829
Industrials 199 768 310 51 1,328
Utilities 4,654 3,334 1,951 525 10,464
Energy 335 887 23 352 1,597
Commodities 53 392 134 306 885
Oil and Gas 288 371 530 328 1,517
Real estate 1,955 1,658 539 299 4,451
Structured finance ABS / RMBS / CMBS / Other 768 1,744 62 457 3,031
Lifetime mortgage loans 5,324 - 442 - 5,766
CDOs - - - 54 54
Total 37,273 29,012 8,762 6,283 81,330
(iii) Bond portfolio analysed by credit rating
Externally Internally
rated rated(1) Total
As at 31 December 2024 £m £m £m
AAA 2,448 538 2,986
AA 22,344 6,842 29,186
A 17,563 10,718 28,281
BBB 17,295 8,797 26,092
BB or below 289 218 507
Other 24 96 120
Total 59,963 27,209 87,172
Externally Internally
rated rated(1) Total
As at 31 December 2023 £m £m £m
AAA 2,373 447 2,820
AA 16,323 6,580 22,903
A 18,365 10,877 29,242
BBB 18,458 7,299 25,757
BB or below 195 242 437
Other 20 151 171
Total 55,734 25,596 81,330
1. Where external ratings are not available an internal rating has been used
where practicable to do so.
(iv) Sectors analysed by Direct investments and traded securities
Direct
investments Traded Total
As at 31 December 2024 £m £m £m
Sovereigns, Supras and Sub-Sovereigns 1,507 16,175 17,682
Banks 1,467 5,591 7,058
Financial Services 1,608 1,290 2,898
Insurance 150 1,030 1,180
Consumer Services and Goods:
- Cyclical 470 2,172 2,642
- Non-cyclical 837 5,510 6,347
- Healthcare 511 1,712 2,223
Infrastructure:
- Social 4,398 2,477 6,875
- Economic 4,451 1,578 6,029
Technology and Telecoms 231 3,872 4,103
Industrials 267 1,309 1,576
Utilities 2,800 6,488 9,288
Energy 793 1,270 2,063
Commodities 149 665 814
Oil and Gas 93 1,404 1,497
Real estate 2,499 1,998 4,497
Structured finance ABS / RMBS / CMBS / Other 2,152 2,335 4,487
Lifetime mortgage loans 5,861 - 5,861
CDOs - 52 52
Total 30,244 56,928 87,172
Direct
investments Traded Total
As at 31 December 2023 £m £m £m
Sovereigns, Supras and Sub-Sovereigns 1,257 10,612 11,869
Banks 1,228 5,775 7,003
Financial Services 1,481 823 2,304
Insurance 160 1,075 1,235
Consumer Services and Goods:
- Cyclical 550 2,559 3,109
- Non-cyclical 1,017 6,296 7,313
- Healthcare 517 1,924 2,441
Infrastructure:
- Social 3,836 2,688 6,524
- Economic 4,231 1,379 5,610
Technology and Telecoms 307 4,522 4,829
Industrials 127 1,201 1,328
Utilities 2,370 8,094 10,464
Energy 521 1,076 1,597
Commodities 145 740 885
Oil and Gas 102 1,415 1,517
Real estate 2,763 1,688 4,451
Structured finance ABS / RMBS / CMBS / Other 1,293 1,738 3,031
Lifetime mortgage loans 5,766 - 5,766
CDOs - 54 54
Total 27,671 53,659 81,330
6.04 Property analysis
Property exposure within Direct investments by status
Annuity Other(1) Total
As at 31 December 2024 £m £m £m %
Let(2) 4,990 98 5,088 85
Development 739 94 833 14
Land - 34 34 1
Total 5,729 226 5,955 100
Restated Restated
Annuity Other(1) Total
As at 31 December 2023 £m £m £m %
Let(2) 4,809 96 4,905 89
Development 460 104 564 10
Land - 34 34 1
Total 5,269 234 5,503 100
1. The above analysis does not include assets related to the Group's
investments in housing businesses, which are accounted for as inventory within
Receivables and other assets on the Group's Consolidated Balance Sheet and are
measured at the lower of cost and net realisable value. At 31 December 2024,
the Group held a total £531m (31 December 2023: £1,932m) of such assets.
2. The majority of the balance are fully let to corporate or individual
clients. £4.0bn (31 December 2023: £4.2bn) of property were let to corporate
clients, out of which £3.7bn (31 December 2023: £3.7bn) were let to
investment grade tenants.
Alternative Performance Measures
An alternative performance measure (APM) 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. APMs
offer investors and stakeholders additional information on the Company's
performance and the financial effect of one-off events, and the Group uses a
range of these metrics to enhance understanding of the Group's performance.
However, APMs should be viewed as complementary to, rather than as a
substitute for, the figures determined according to other regulations. The
APMs used by the Group are listed in this Note, along with their
definition/explanation, their closest IFRS or Solvency II measure and, where
relevant, the reference to the reconciliations to those measures.
The APMs used by the Group may not be the same as, or comparable to, those
used by other companies, both in similar and different industries. The
calculation of APMs is consistent with previous periods, unless otherwise
stated.
APMs derived from IFRS measures
Adjusted operating profit
Adjusted operating profit is an APM that supports the internal performance
management and decision making of the Group's operating businesses, and
accordingly underpins the remuneration outcomes of the executive directors and
senior management. The Group considers this measure meaningful to stakeholders
as it enhances the understanding of the Group's operating performance over
time by separately identifying non-operating items.
Following the recent refresh of the Group's strategy and the segmentation
changes described in Note 1.01, the Group has updated the application of its
methodology for the determination of adjusted operating profit for assets
allocated to the Asset Management and Corporate Investments segments, in order
to simplify and harmonise the methodology across the segments. As part of the
update, in order to calculate operating profit for direct investments, a
long-term expected investment return is now applied to most private market and
non-traded assets. In previous periods, this approach only applied to assets
under construction contracted to be sold or for other commercial usage, and
early-stage ventures not yet at a steady-state level of earnings. The update
has not had a material impact on the comparative adjusted operating profit of
each segment, and therefore has not led to a restatement.
Adjusted operating profit measures the pre-tax result excluding the impact of
investment volatility, economic assumption changes caused by changes in market
conditions or expectations, and exceptional items. Adjusted operating profit
for insurance contracts primarily reflects the release of profit from the CSM
and RA in the period (adjusted for reinsurance mismatches), the unwind of the
discount rate used in the calculation of the insurance liabilities and
incurred expenses that are not directly attributable to the insurance
contracts.
Reinsurance mismatches can arise where the reinsurance offset rules in IFRS 17
do not reflect management's view of the net of reinsurance transaction. In
particular, during a year of reinsurance renegotiation, reinsurance gains
cannot be recognised to offset any inception losses on the underlying
contracts where they are recognised before the new reinsurance agreement is
signed. In these circumstances, the onerous contract losses are reduced to
reflect the net loss (if any) after reinsurance, and future CSM amortisation
is reduced over the duration of the contracts. Additionally, in some
circumstances, profitable reinsurance does not mitigate onerous losses on
gross contracts whilst the net position remains profitable. Where this is
the case, onerous contract profits or losses are also presented below
operating profit and the CSM amortisation is adjusted over the remaining
duration of the contracts.
To remove investment volatility, adjusted operating profit reflects long-term
expected investment returns on the substantial majority of investments held by
the Group, including both traded and private market investments. For the
remainder of the asset portfolio, including certain operational businesses in
the Asset Management division and, up to its disposal on 31 October 2024,
Cala, no adjustments are made to exclude investment volatility. The investment
margin for insurance business therefore reflects the expected investment
return above the unwind of the insurance liability discount rate.
The long-term expected investment return reflects the best estimate of the
long-term return at the start of the year, as follows:
· expected returns for traded equity, commercial property and
residential property (including lifetime mortgages) are based on market
consensus forecasts and long-term historic average returns expected to apply
through the cycle
· assumptions for fixed interest securities measured at FVTPL are
based on asset yields for the assets held, less an adjustment for credit risk
(assessed on a best estimate basis). Where securities are measured at
amortised cost or FVOCI, the expected investment return comprises interest
income on an effective interest rate basis
· for other private market and non-traded assets, the expected
return assumption is set in line with our investment objectives. Rates of
return specific to each asset are determined at the point of underwriting and
reviewed and updated annually. The expected investment return includes current
financial assumptions as well as sector specific assumptions, including retail
and commercial property yields and power prices where appropriate.
Variances between actual and long-term expected investment returns are
excluded from adjusted operating profit, as are economic assumption changes to
insurance contract liabilities caused by movements in market conditions or
expectations (e.g. credit default and inflation), and any difference between
the actual allocated asset mix and the target long-term asset mix on new
pension risk transfer business. Assets held for future new pension risk
transfer business are excluded from the asset portfolio used to determine the
discount rate for annuities on insurance contract liabilities. The impact of
investment management actions that optimise the yield of the assets backing
the back book of annuity contracts is included within adjusted operating
profit.
Exceptional income and expenses which arise outside the normal course of
business in the year, such as merger and acquisition and start-up costs, are
excluded from adjusted operating profit.
Note 1.02 Operating profit reconciles adjusted operating profit with its
closest IFRS measure, which is profit before tax attributable to equity
holders. Further details on reconciling items between adjusted operating
profit and profit before tax attributable to equity holders are presented in
Note 1.05 Investment and other variances.
Core operating profit
Core operating profit is an APM that measures the operating performance of the
Group's core business and is calculated as the Group's adjusted operating
profit excluding the operating profit of the Corporate Investments unit. This
measure is considered to be relevant for stakeholders in addition to adjusted
operating profit, as it focuses on appraising the performance of those areas
of the business that management considers to be key to achieving the Group's
strategy.
Note 1.02 Operating profit provides a breakdown of adjusted operating profit
and identifies what is represented by core operating profit in line with the
definition above.
Core operating earnings per share (Core operating EPS)
Core operating EPS is calculated as core operating profit less coupon payable
in respect of restricted Tier 1 convertible notes, all after allocated tax at
the standard UK corporate tax rate, divided by the weighted average number of
shares outstanding during the year. This APM is therefore a measure of the
performance of the Group, on an after allocated tax basis, excluding the
contribution of the Corporate Investments unit and the impact of investment
volatility, economic assumption changes caused by changes in market conditions
or expectations, and exceptional items. Note 1.07 reconciles core operating
EPS to basic EPS.
Return on Equity (ROE)
ROE measures the return earned by shareholders on shareholder capital retained
within the business. It is a measure of performance of the business, which
shows how efficiently we are using our financial resources to generate a
return for shareholders. ROE is calculated as IFRS profit after tax divided
by average IFRS shareholders' funds (by reference to opening and closing
equity attributable to the owners of the parent as provided in the IFRS
Consolidated statement of changes in equity for the year). In the current
year, ROE was quantified using profit attributable to equity holders of £191m
(31 December 2023: £457m) and average equity attributable to the owners of
the parent of £3,692m (31 December 2023: £4,699m), based on an opening
balance of £4,331m and a closing balance of £3,053m (31 December 2023: based
on an opening balance of £5,067m and a closing balance of £4,331m).
Operating Return on Equity (Operating ROE)
Operating ROE is calculated as the Group's adjusted operating profit after
allocated tax at the standard UK corporate tax rate divided by average IFRS
shareholders' funds (by reference to opening and closing equity attributable
to the owners of the parent as provided in the IFRS Consolidated statement of
changes in equity for the year). It therefore measures the after allocated tax
return for shareholders generated by the Group, excluding the impact of
investment volatility, economic assumption changes caused by changes in market
conditions or expectations, and exceptional items. In the current year,
operating ROE was quantified using adjusted operating profit after tax of
£1,283m (31 December 2023: £1,250m) and average equity attributable to the
owners of the parent of £3,692m (31 December 2023: £4,699m), based on an
opening balance of £4,331m and a closing balance of £3,053m (31 December
2023: based on an opening balance of £5,067m and a closing balance of
£4,331m).
Assets under Management (AUM)
Assets under management represent funds which are managed by our fund managers
on behalf of investors. It represents the total amount of money investors have
trusted with our fund managers to invest across our investment products. AUM
include assets which are reported in the Group Consolidated Balance Sheet as
well as third-party assets that Asset Management manage on behalf of others,
and assets managed by third parties on behalf of the Group.
Following the implementation of the new divisional organisation announced on
12 June 2024, and the creation of a single Asset Management division bringing
LGIM and LGC together, the determination of AUM has been updated to also
include external assets managed by fund managers classified as associates and
joint ventures in line with IAS 28, 'Investments in Associates and Joint
Ventures'.
Note 4.04 Reconciliation of assets under management to Consolidated Balance
Sheet reconciles Total AUM with Total financial investments, investment
property and cash and cash equivalents.
Adjusted profit before tax attributable to equity holders
Adjusted profit before tax attributable to equity holders is equal to profit
before tax attributable to equity holders plus the pre-tax results of
discontinued operations.
Note 1.02 Operating profit reconciles adjusted profit before tax attributable
to equity holders to profit for the year. In absence of discontinued
operations, adjusted profit before tax attributable to equity holders is equal
to profit before tax attributable to equity holders.
APMs derived from Solvency II measures
The Group is required to measure and monitor its capital resources on a
regulatory basis and to comply with the minimum capital requirements of
regulators in each territory in which it operates. At a Group level, L&G
complies with the UK implementation of Solvency II regulations, as implemented
by the PRA Rulebook.
Solvency II surplus
Solvency II surplus is the excess of Eligible Own Funds over the Solvency
Capital Requirements. It represents the amount of capital available to the
Group in excess of that required to sustain it in a 1-in-200 year risk event.
The Group's Solvency II surplus is based on approvals from the PRA to use a
Partial Internal Model, Matching Adjustment and Transitional Measures on
Technical Provisions (TMTP).
Differences between the Solvency II surplus and its related regulatory basis
include the impact of unaudited profits (or losses) of financial firms, which
are excluded from regulatory Own Funds. This view of Solvency II is considered
to be representative of the shareholder risk exposure and the Group's real
ability to cover the Solvency Capital Requirement (SCR) with Eligible Own
Funds.
Further details on Solvency II surplus and its calculation are included in
Note 5.01 Group regulatory capital - Solvency II. This note also includes a
reconciliation between IFRS equity and Solvency II Own Funds.
Solvency II capital coverage ratio
Solvency II capital coverage ratio is one of the indicators of the Group's
balance sheet strength. It is determined as Eligible Own Funds divided by the
SCR, and therefore represents the number of times the SCR is covered by
Eligible Own Funds. The Group's Solvency II capital coverage ratio is based on
the approvals from the PRA to use a Partial Internal Model, Matching
Adjustment and TMTP.
Differences between the Solvency II capital coverage ratio and its related
regulatory basis include the impact of unaudited profits (or losses) of
financial firms, which are excluded from regulatory Own Funds. This view of
Solvency II is considered to be representative of the shareholder risk
exposure and the Group's real ability to cover the SCR with Eligible Own
Funds.
Further details on Solvency II capital coverage ratio and its calculation are
included in Note 5.01 Group regulatory capital - Solvency II.
Solvency II operational surplus generation
Solvency II operational surplus generation is the expected surplus generated
from the assets and liabilities in-force at the start of the year. It is based
on assumed real world returns and best estimate non-market assumptions, and it
includes the impact of management actions to the extent that, at the start of
the year, these were reasonably expected to be implemented over the year.
It excludes operating variances, such as the impact of experience variances,
changes to valuation assumptions, methodology changes and other management
actions including changes in asset mix. It also excludes market movements,
which represent the impact of changes in investment market conditions during
the year and changes to future economic assumptions. The Group considers this
measure meaningful to stakeholders as it enhances the understanding of its
operating performance over time and serves as an indicator on the longer-term
components of the movements in the Group's Solvency II surplus.
Note 5.01 Group regulatory capital - Solvency II includes an analysis of
change for the Group's Solvency II surplus, showing the contribution of
Solvency II operational surplus generation as well as other items to the
Solvency II surplus during the reporting year.
Glossary
* These items represent an alternative performance measure (APM).
Adjusted operating profit*
Refer to the alternative performance measures section.
Adjusted profit before tax attributable to equity holders*
Refer to the alternative performance measures section.
Alternative performance measures (APMs)
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.
Annual premiums
Premiums that are paid regularly over the duration of the contract such as
protection policies.
Annualised net new revenue (ANNR)
ANNR provides an insight into the revenue growth of an asset manager,
excluding the impact of investment markets. It reflects the combined effect
of inflows and outflows to assets under management and the fee rates on those
flows. ANNR in respect of acquisitions and disposals will be considered on a
case by case basis.
ANNR is calculated as the annualised revenue on new monies invested by our
Asset Management clients in the year, minus the annualised revenue on existing
monies divested by our clients in the year, plus or minus the annualised
revenue on switches between asset classes/strategies by our clients in the
year. Annualised revenue is the amount of investment management fees we would
expect on the fund flow in one calendar year.
Annuity
Regular payments from an insurance company made for an agreed period of time
(usually up to the death of the recipient) in return for either a cash lump
sum or a series of premiums which the policyholder has paid to the insurance
company during their working lifetime.
Assets under administration (AUA)
Assets administered by L&G, which are beneficially owned by clients and
are therefore not reported on the Consolidated Balance Sheet. 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)*
Refer to the alternative performance measures section.
Assured Payment Policy (APP)
A long-term contract under which the policyholder (a registered UK pension
scheme) pays a day-one premium and in return receives a contractually fixed
and/or inflation-linked set of payments over time from the insurer.
Back book acquisition
New business transacted with an insurance company which allows the business to
continue to utilise Solvency II transitional measures associated with the
business.
CAGR
Compound annual growth rate.
Calculation Method 2
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 in the
US and Bermuda on this basis.
Common Contractual Fund (CCF)
An Irish regulated asset pooling fund structure. It enables institutional
investors to pool assets into a single fund vehicle with the aim of achieving
cost savings, enhanced returns and operational efficiency through economies of
scale. A CCF is an unincorporated body established under a deed where
investors are "co-owners" of underlying assets which are held pro rata with
their investment. The CCF is authorised and regulated by the Central Bank of
Ireland.
Contract boundaries
Cash flows are within the boundary of an insurance contract if they arise from
substantive rights and obligations that exist during the reporting period in
which the Group can compel the policyholder to pay the premiums or has a
substantive obligation to provide the policyholder with insurance contract
services.
Contractual Service Margin (CSM)
The CSM represents the unearned profit the Group will recognise for a group of
insurance contracts, as it provides services under the insurance contract. It
is a component of the asset or liability for the contracts and it results in
no income or expense arising from initial recognition of an insurance
contract. Therefore, together with the risk adjustment, the CSM provides a
view of both stored value of our in-force insurance business, and the growth
derived from new business in the current year. A CSM is not set up for groups
of contracts assessed as onerous.
The CSM is released as profit as the insurance services are provided.
Core operating earnings per share (Core operating EPS)*
Refer to the alternative performance measures section.
Core operating profit*
Refer to the alternative performance measures section.
Coverage Period
The period during which the Group provides insurance contract services. This
period includes the insurance contract services that relate to all premiums
within the boundary of the insurance contract.
Credit rating
A measure of the ability of an individual, organisation or country to repay
debt. The highest rating is usually AAA. Ratings are usually issued by a
credit rating agency (e.g. Moody's or Standard & Poor's) or a credit
bureau.
Defined benefit pension scheme (DB scheme)
A type of pension plan in which an employer/sponsor promises a specified
monthly benefit on retirement that is predetermined by a formula based on the
employee's earnings history, tenure of service and age, rather than depending
directly on individual investment returns.
Defined contribution pension scheme (DC scheme)
A type of pension plan where the pension benefits at retirement are determined
by agreed levels of contributions paid into the fund by the member and
employer. They provide benefits based upon the money held in each individual's
plan specifically on behalf of each member. The amount in each plan at
retirement will depend upon the investment returns achieved as well as the
member and employer contributions.
Derivatives
Contracts usually giving a commitment or right to buy or sell assets on
specified conditions, for example on a set date in the future and at a set
price. The value of a derivative contract can vary. Derivatives can generally
be used with the aim of enhancing the overall investment returns of a fund by
taking on an increased risk, or they can be used with the aim of reducing the
amount of risk to which a fund is exposed.
Direct investments
Direct investments, which generally constitute an agreement with another
party, 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)
A common financial metric which can be used to measure the profitability and
strength of a company over time. It is calculated as total shareholder profit
after tax divided by the weighted average number of shares outstanding during
the year.
Eligible Own Funds
The capital available to cover the Group's Solvency Capital Requirement.
Eligible Own Funds comprise the excess of the value of assets over
liabilities, as valued on a Solvency II basis, plus high quality hybrid
capital instruments, which are freely available (fungible and transferable) to
absorb losses wherever they occur across the Group.
Employee satisfaction index
The Employee satisfaction index measures the extent to which employees report
that they are happy working at L&G. It is measured as part of our Voice
surveys, which also include questions on commitment to the goals of L&G
and the overall success of the Group.
ETF
Our Asset Management division's European Exchange Traded Fund platform.
Euro Commercial Paper
Short-term borrowings with maturities of up to 1 year typically issued for
working capital purposes.
Expected credit losses (ECL)
For financial assets measured at amortised cost or FVOCI, a loss allowance
defined as the present value of the difference between all contractual cash
flows that are due and all cash flows expected to be received (i.e. the cash
shortfall), weighted based on their probability of occurrence.
Fair value through other comprehensive income (FVOCI)
A financial asset that is measured at fair value in the Consolidated Balance
Sheet and reports gains and losses arising from movements in fair value within
the Consolidated Statement of Comprehensive Income as part of the total
comprehensive income or expense for the year.
Fair value through profit or loss (FVTPL)
A financial asset or financial liability that is measured at fair value in the
Consolidated Balance Sheet and reports gains and losses arising from movements
in fair value within the Consolidated Income Statement as part of the profit
or loss for the year.
Fulfilment cash flows
Fulfilment cash flows comprise unbiased and probability-weighted estimates of
future cash flows, discounted to present value to reflect the time value of
money and financial risks, plus the risk adjustment for non-financial risk.
Full year dividend
Full year dividend is the total dividend per share declared for the year
(including interim dividend but excluding, where appropriate, any special
dividend).
Generally accepted accounting principles (GAAP)
A widely accepted collection of guidelines and principles, established by
accounting standard setters and used by the accounting community to report
financial information.
Institutional Retirement new business
Single premiums arising from pension risk transfers and the notional size of
longevity insurance transactions, based on the present value of the fixed leg
cash flows discounted at the SONIA curve.
Insurance new business
New business arising from new policies written on retail protection products
and new deals and incremental business on Group protection products.
Irish Collective Asset-Management Vehicle (ICAV)
A legal structure investment fund, based in Ireland and aimed at European
investment funds looking for a simple, tax-efficient investment vehicle.
Key performance indicators (KPIs)
These are measures by which the development, performance or position of the
business can be measured effectively. The Group Board reviews the KPIs
annually and updates them where appropriate.
LGA
Legal & General America.
LGAS
Legal and General Assurance Society Limited.
Liability driven investment (LDI)
A form of investing in which the main goal is to gain sufficient assets to
meet all liabilities, both current and future. This form of investing is most
prominent in final salary pension plans, whose liabilities can often reach
into billions of pounds for the largest of plans.
Lifetime mortgages
An equity release product aimed at people aged 55 years and over. It is a
mortgage loan secured against the customer's house. Customers do not make any
monthly payments and continue to own and live in their house until they move
into long-term care or on death. A no negative equity guarantee exists such
that if the house value on repayment is insufficient to cover the outstanding
loan, any shortfall is borne by the lender.
Longevity
Measure of how long policyholders will live, which affects the risk profile of
pension risk transfer, annuity and protection businesses.
Matching adjustment
An adjustment to the discount rate used for annuity liabilities in Solvency II
balance sheets. This adjustment reflects the fact that the profile of assets
held is sufficiently well-matched to the profile of the liabilities, that
those assets can be held to maturity, and that any excess return over
risk-free (that is not related to defaults or downgrades) can be earned
regardless of asset value fluctuations after purchase.
Morbidity rate
Rate of illness, influenced by age, gender and health, used in pricing and
calculating liabilities for policyholders of life products, which contain
morbidity risk.
Mortality rate
Rate of death, influenced by age, gender and health, used in pricing and
calculating liabilities for future policyholders of life and annuity products,
which contain mortality risks.
Net zero carbon
Achieving an overall balance between anthropogenic carbon emissions produced
and carbon emissions removed from the atmosphere.
Onerous contracts
An insurance contract is onerous at the date of initial recognition if the
fulfilment cash flows allocated to the contract, any previously recognised
acquisition cash flows and any cash flows arising from the contract at the
date of initial recognition, in total are a net outflow.
Open Ended Investment Company (OEIC)
A type of investment fund domiciled in the United Kingdom that is structured
to invest in stocks and other securities, authorised and regulated by the
Financial Conduct Authority (FCA).
Operating Return on Equity (Operating ROE)*
Refer to the alternative performance measures section.
Overlay assets
Derivative assets that are managed alongside the physical assets held by the
Group's Asset Management's division. These instruments include interest rate
swaps, inflation swaps, equity futures and options. These are typically used
to hedge risks associated with pension scheme assets during the derisking
stage of the pension life cycle.
Paris Agreement
An agreement within the United Nations Framework Convention on Climate Change
effective 4 November 2016. The Agreement aims to limit the increase in average
global temperatures to well below 2°C, preferably to 1.5°C, compared to
pre-industrial levels.
Pension risk transfer (PRT)
Bulk annuities bought by entities that run final salary pension schemes to
reduce their responsibilities by closing the schemes to new members and
passing the assets and obligations to insurance providers.
Persistency
For insurance, persistency is a measure of the rate at which policies are
retained over time and therefore continue to contribute premium income and
assets under management.
Platform
Online services used by intermediaries and consumers to view and administer
their investment portfolios. Platforms usually provide facilities for buying
and selling investments (including, in the UK products such as Individual
Savings Accounts (ISAs), Self-Invested Personal Pensions (SIPPs) and life
insurance) and for viewing an individual's entire portfolio to assess asset
allocation and risk exposure.
Present value of future new business premiums (PVNBP)
PVNBP is equivalent to total single premiums plus the discounted value of
annual premiums expected to be received over the term of the contracts using
the same economic and operating assumptions used for the new business value at
the end of the financial period. The discounted value of longevity insurance
regular premiums and quota share reinsurance single premiums are calculated on
a net of reinsurance basis to enable a more representative margin figure.
PVNBP therefore provides an estimate of the present value of the premiums
associated with new business written in the year.
Private Markets
Private Markets encompass a wide variety of tangible debt and equity
investments, primarily real estate, infrastructure and energy. They have the
ability to serve as stable sources of long-term income in weak markets, while
also providing capital appreciation opportunities in strong markets.
Proprietary assets
Total investments to which shareholders are directly exposed, minus derivative
assets, loans, and cash and cash equivalents.
Qualifying Investor Alternative Investment Fund (QIAIF)
An alternative investment fund regulated in Ireland targeted at sophisticated
and institutional investors, with minimum subscription and eligibility
requirements. Due to not being subject to many investment or borrowing
restrictions, QIAIFs present a high level of flexibility in their investment
strategy.
Retail Retirement new business
Single premiums arising from annuity sales and individual annuity back book
acquisitions and the volume of lifetime and retirement interest only mortgage
lending.
Retirement Interest Only Mortgage (RIO)
A standard retirement mortgage available for non-commercial borrowers above 55
years old. A RIO mortgage is very similar to a standard interest-only
mortgage, with two key differences:
- the loan is usually only paid off on death, move into long-term care or sale
of the house
- the borrowers only have to prove they can afford the monthly interest
repayments and not the capital remaining at the end of the mortgage term.
No repayment solution is required as repayment defaults to sale of property.
Return on Equity (ROE)*
Refer to the alternative performance measures section.
Risk adjustment (RA)
The risk adjustment reflects the compensation that the Group would require for
bearing uncertainty about the amount and timing of the cash flows that arises
from non-financial risk after diversification. We have calibrated the Group's
risk adjustment using a Value at Risk (VAR) methodology. In some cases, the
compensation for risk on reinsured business is linked directly to the price
paid for reinsurance. The risk adjustment is a component of the insurance
contract liability, and it is released as profit if experience plays out as
expected.
Risk appetite
The aggregate level and types of risk a company is willing to assume in its
exposures and business activities in order to achieve its business objectives.
Single premiums
Single premiums arise on the sale of new contracts where the terms of the
policy do not anticipate more than one premium being paid over its lifetime,
such as in individual and bulk annuity deals.
Société d'Investissement à Capital Variable (SICAV)
A publicly traded open-end investment fund structure offered in Europe and
regulated under European law.
Solvency II
The Group measures its capital resources in line with the UK implementation of
Solvency II regulations, as set out in the PRA Rulebook. The UK implementation
of the Solvency II regulations determines the amount of capital that UK
insurance companies must hold to ensure that they can withstand a 1-in-200
year level of risk. The regulations became effective from 31 December 2024.
The previous Solvency II regulations applied from 1 January 2016, as
implemented by EIOPA in the Solvency II Framework Directive, and adopted by
the UK.
Solvency II capital coverage ratio*
Refer to the alternative performance measures section.
Solvency II capital coverage ratio - regulatory basis
The Eligible Own Funds on a regulatory basis divided by the Group solvency
capital requirement. This represents the number of times the SCR is covered by
Eligible Own Funds.
Solvency II Fundamental Spread
An amount used in the derivation of the Matching Adjustment. It represents the
portion of the spread on a financial instrument that is attributable to the
risks of default and downgrade. Prescribed Fundamental Spreads varying by
credit rating and currency are provided by PRA. As part of the UK
implementation of Solvency II regulations, insurance groups and firms are
required to apply an additional Fundamental Spread where the regulatory
amounts are believed to be insufficient to reflect all risks in a financial
instrument.
Solvency II new business contribution
Reflects present value at the point of sale of expected future Solvency II
surplus emerging from new business written in the year using the risk discount
rate applicable at the end of the reporting year.
Solvency II Operational Surplus Generation*
Refer to the alternative performance measures section.
Solvency II risk margin
An additional liability required in the Solvency II balance sheet, to ensure
the total value of technical provisions is equal to the current amount a
(re)insurer would have to pay if it were to transfer its insurance and
reinsurance obligations immediately to another (re)insurer. The value of the
risk margin represents the cost of providing an amount of Eligible Own Funds
equal to the Solvency Capital Requirement (relating to non-market risks)
necessary to support the insurance and reinsurance obligations over the
lifetime thereof.
Solvency II surplus*
Refer to the alternative performance measures section.
Solvency II surplus - regulatory basis
The excess of Eligible Own Funds on a regulatory basis over the SCR. This
represents the amount of capital available to the Group in excess of that
required to sustain it in a 1-in-200 year risk event.
Solvency Capital Requirement (SCR)
The amount of Solvency II capital required to cover the losses occurring in a
1-in-200 year risk event.
Specialised Investment Fund (SIF)
An investment vehicle regulated in Luxembourg targeted to well-informed
investors, providing a great degree of flexibility in organisation, investment
policy and types of underlying assets in which it can invest.
Total shareholder return (TSR)
A measure used to compare the performance of different companies' stocks and
shares over time. It combines the share price appreciation and dividends paid
to show the total return to the shareholder.
Transitional Measures on Technical Provisions (TMTP)
An adjustment to Solvency II technical provisions, to smooth the transition
from the previous regulatory regime to the Solvency II regime over a period of
16 years from 1 January 2016. The TMTP continues to be applied after the
change to the UK implementation of Solvency II from 31 December 2024, with
some changes to the approach to simplify the ongoing calculation.
Yield
A measure of the income received from an investment compared to the price paid
for the investment. It is usually expressed as a percentage.
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