REG - Legal & General Grp - L&G FY 2014 results part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 1

Legal & GeneralAnnouncement

04/03/2015 07:12

RNS Number : 4568G
Legal & General Group Plc
04 March 2015
IFRS and Cash 29
Operating profit
For the year ended 31 December 2014

 


 
2014
20131

Notes 
m 
m 

 


 

From continuing operations 

 

Legal & General Assurance Society (LGAS) 

2.02 
460
444 
Legal & General Retirement (LGR) 

2.02 
428
310 
Legal & General Investment Management (LGIM) 

2.04 
336
304 
Legal & General Capital (LGC) 

2.05 
203
179 
Legal & General America (LGA) 

 
56
92 

 


 

Operating profit from divisions

 
1,483
1,329 
Group debt costs2

 
(142)
(127) 
Group investment projects and expenses3

2.06 
(66)
(44) 

 


 

Operating profit 

 
1,275
1,158 
Investment and other variances 

2.07 
(44)
(27) 
Gains on non-controlling interests 

 
7
13 

 


 

Profit before tax attributable to equity holders 

 
1,238
1,144 
Tax expense attributable to equity holders of the Company 

2.22 
(246)
(238) 

 


 

Profit for the year 

 
992
906 

 


 




Profit attributable to equity holders of the Company


985
893 














p
p 






Earnings per share 



Based on profit attributable to equity holders of the Company 

2.08
16.70
15.20 



Diluted earnings per share 



Based on profit attributable to equity holders of the Company 

2.08
16.54
15.00 






1. Gains on non-controlling interests have been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. The impact is to increase gains on non-controlling interests and profit for the year by 10m for 2013. The profit attributable to equity holders remains unaffected. Further details are contained in Note 2.24.
2. Group debt costs exclude interest on non recourse financing. 
3. Group investment projects and expenses in 2014 include restructuring costs of 31m.
This supplementary operating profit information (one of the Group's key performance indicators) provides further analysis of the results reported under IFRS and the Group believes gives shareholders a better understanding of the underlying performance of the business in the year.
During the year the Group redefined its operating profit definition, and applied this prospectively. Under the new definition, restructuring costs, while varying from year to year, are considered to be part of ongoing business activities and as such, are included within operating profit.
Operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and exceptional items. Operating profit therefore reflects longer-term economic assumptions for the Group's insurance businesses and shareholder funds, except for LGA which excludes unrealised investment returns to align with the liability measurement under US GAAP. Variances between actual and smoothed assumptions are reported below operating profit. Exceptional income and expenses which arise outside the normal course of business in the year, such as merger and acquisition, start-up and closure costs, are excluded from operating profit.
LGAS represents Insurance business (retail protection, group protection and general insurance) and Savings business (platforms, workplace, SIPPs, mature savings and with-profits). The LGAS segment also includes Legal & General France (LGF), Legal & General Netherlands (LGN) and emerging markets.
LGR represents Annuities (both individual and bulk purchase) and longevity insurance.
The LGIM segment represents institutional and retail investment management businesses.
LGC represents the medium term investment return (less expenses) on Group invested assets, using assumptions applied to the average balance of Group invested assets (including interest bearing intra-group balances) calculated on a monthly basis.
The LGA segment comprises protection business written in the USA.
IFRS and Cash 30
2.01 Reconciliation of operational cash to operating profit before tax








The table below provides an analysis of the operational cash generation by each of the Group's business segments, together with a reconciliation to operating profit before tax. 








Opera- 



Changes



Operating
tional 

Net

in 

Operating

profit/
cash 
New
cash
Exper-
valuation
Non-cash
Inter- 
profit/
Tax
(loss)
gene- 
business
gene-
ience
assump-
items and
national 
(loss)
expense/
before
For the year ended 
ration1
strain
ration
variances
tions
other
and other2
after tax
(credit)
tax
31 December 2014 
m 
m
m
m
m
m
m 
m
m
m
















LGAS
472 
(48)
424
(18)
32
(70)
(7) 
361
99
460
 - Insurance 
332 
(5)
327
(8)
24
(50)
(6) 
287
83
370
 - Savings 
140 
(43)
97
(10)
8
(20)
(1) 
74
16
90
LGR
292 
51
343
(13)
48
(32)
- 
346
82
428
LGIM
262 
-
262
-
-
-
- 
262
74
336
LGC
162 
-
162
-
-
-
- 
162
41
203
LGA
46 
-
46
-
-
-
(14) 
32
24
56
















Total from divisions 
1,234 
3
1,237
(31)
80
(102)
(21) 
1,163
320
1,483
















Group debt costs 
(112) 
-
(112)
-
-
-
- 
(112)
(30)
(142)
Group investment projects 








and expenses 
(21) 
-
(21)
-
-
-
(32) 
(53)
(13)
(66)
















Total 
1,101 
3
1,104
(31)
80
(102)
(53) 
998
277
1,275
















1. Operational cash generation includes dividends remitted from LGF of 2m (2013: 2m) and LGN of 29m (2013: 14m) within the Protection line and LGA of 46m (2013: 44m).
2. International and other includes 25m of restructuring costs (31m before tax) (2013: nil) within the Group investment projects and expenses line.

Operational cash generation for LGAS and LGR represents the expected surplus generated in the year from the in-force non profit Protection, Savings and Annuities businesses using best estimate assumptions. The LGAS operational cash generation also includes the shareholders' share of bonuses on with-profits business, dividends remitted from LGF and LGN and operating profit after tax from General Insurance and the remaining Savings businesses. 








New business strain for LGAS and LGR represents the cost of acquiring new business and setting up regulatory reserves in respect of the new business for UK non profit Protection, Savings and Annuities, net of tax. The new business strain and operational cash generation for both LGAS and LGR exclude required solvency margin from the liability calculation.








Net cash generation for LGAS and LGR is defined as operational cash generation less new business strain. 








Operational cash generation and net cash for LGIM and LGC represents the operating profit (net of tax).








The operational cash generation for LGA represents the dividends received.








See Note 2.02 for more detail on experience variances, assumption changes and non-cash items.
IFRS and Cash 31
2.01 Reconciliation of operational cash to operating profit before tax (continued)
















Opera- 



Changes



Operating
tional 

Net

in 

Operating

profit/
cash 
New
cash
Exper-
valuation
Non-cash
Inter- 
profit/
Tax
(loss)
gene- 
business
gene-
ience
assump-
items and
national 
(loss)
expense/
before
For the year ended 
ration1
strain
ration
variances
tions
other
and other 
after tax
(credit)
tax
31 December 2013 
m 
m
m
m
m
m
m 
m
m
m
















LGAS
474 
(73)
401
(34)
31
(69)
10 
339
105
444
 - Insurance 
310 
(15)
295
(7)
20
(47)
10 
271
84
355
 - Savings 
164 
(58)
106
(27)
11
(22)
- 
68
21
89
LGR
260 
33
293
9
(13)
(48)
- 
241
69
310
LGIM
239 
-
239
-
-
-
- 
239
65
304
LGC
137 
-
137
-
-
-
- 
137
42
179
LGA
44 
-
44
-
-
-
14 
58
34
92
















Total from divisions 
1,154 
(40)
1,114
(25)
18
(117)
24 
1,014
315
1,329
















Group debt costs 
(97) 
-
(97)
-
-
-
- 
(97)
(30)
(127)
Group investment projects 








and expenses 
(15) 
-
(15)
-
-
-
(19) 
(34)
(10)
(44)
















Total 
1,042 
(40)
1,002
(25)
18
(117)
5 
883
275
1,158
















1. Operational cash generation includes dividends remitted from LGF of 2m and LGN of 14m within the Protection line and LGA of 44m. 
IFRS and Cash 32
2.02 Analysis of LGAS and LGR operating profit














LGAS
LGR
LGAS
LGR





2014
2014
2013
2013





m
m
m
m


















Net cash generation





424
343
401
293


















Experience variances









 Persistency 





-
(3)
5
1
 Mortality/Morbidity1





(5)
13
-
14
 Expenses 





(4)
(3)
(3)
-
 BPA Loading 





-
6
-
4
 Project and development costs 


(12)
(19)
(23)
(11)
 Other





3
(7)
(13)
1


















Total experience variances


(18)
(13)
(34)
9


















Changes to valuation assumptions






 Persistency2





42
-
7
-
 Mortality/Morbidity3





37
61
9
(13)
 Expenses 





15
(5)
8
-
 Other4





(62)
(8)
7
-


















Total valuation assumption changes


32
48
31
(13)


















Movement in non-cash items









 Deferred tax 





6
(11)
5
-
 Utilisation of brought forward trading losses


(9)
(62)
(4)
(70)
 Acquisition expense tax relief 


(42)
-
(51)
-
 Deferred Acquisition Costs (DAC)5


(71)
-
(63)
-
 Deferred Income Liabilities (DIL)5


46
-
47
-
 Other6





-
41
(3)
22


















Total non-cash movement items


(70)
(32)
(69)
(48)


















Other 





(7)
-
10
-


















Operating profit after tax





361
346
339
241


















Tax gross up





99
82
105
69


















Operating profit before tax





460
428
444
310


















1. The mortality/morbidity experience variances in LGAS in 2014 primarily relates to adverse morbidity on one of our group protection products.
2. The persistency valuation assumption change in LGAS primarily relates to an improvement in the experience and modelling for persistency on some of our long term products.
3. The mortality/morbidity valuation assumption change in LGAS primarily relates to an improvement in the modelling for certain morbidity features on our retail protection products. The LGR mortality valuation assumption change primarily relates to the adoption of the recent CMI projection table (CMI2013) with an allowance for anticipated modelling changes that have been incorporated into the CMI2014 model. 
4. The other valuation assumption change in LGAS primarily relates to a refinement in the modelling for reinsurance on certain long term policies.
5. The DAC in LGAS represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.
6. The other non-cash items in LGR primarily relates to the elimination of intra-group future profits arising from the provision of investment management services at market referenced rates.
IFRS and Cash 33
2.03 General insurance operating profit and combined operating ratio






2014
2013






m
m
















General insurance operating profit1



59
69
















General insurance combined operating ratio (%)2



87
84
















1. The general insurance operating profit includes the underwriting result and investment return.
2. The calculation of the general insurance combined operating ratio incorporates commission and expenses as a percentage of net earned premiums.
2.04 LGIM






2014
2013






m
m
















Revenue





645
594
Expenses





(309)
(290)
















Total LGIM operating profit




336
304
















2.05 LGC






2014
2013






m
m
















Investment return 






219
185
Expenses1






(16)
(6)
















Total LGC operating profit


203
179
















1. LGC expenses in 2014 include 10m of management expenses previously borne by the Group and allocated as Group expenses.
2.06 Group investment projects and expenses







2014
2013







m
m


















Group investment projects and central expenses




(35)
(44)
Restructuring costs




(31)
-


















Total Group investment projects and expenses

(66)
(44)


















2.07 Investment and other variances






2014
2013






m
m
















Investment variance1






(8)
29
M&A related2






(21)
(16)
Other3






(15)
(40)
















Total Investment and other variances






(44)
(27)
















1. Investment variance is negative, primarily due to lower equity returns from shareholder funds. This has been partially offset by an increase in exposure to Direct Investments in LGR, which has enhanced the risk adjusted return, and favourable default experience.
2. M&A related includes gains, expenses and intangible amortisation relating to acquisitions and disposals.
3. Other includes new business start-up costs, closure costs and other non-investment related variance items. In 2013, Other included 17m of restructuring costs.
IFRS and Cash 34
Consolidated Income Statement
For the year ended 31 December 2014












2014
20131


Notes
m
m 








Revenue



Gross written premiums


10,168
6,162 
Outward reinsurance premiums


(1,122)
(874) 
Net change in provision for unearned premiums


1
(18) 








Net premiums earned


9,047
5,270 
Fees from fund management and investment contracts


1,085
1,040 
Investment return


40,639
32,234 
Operational income


746
720 








Total revenue


51,517
39,264 








Expenses



Claims and change in insurance liabilities 


15,071
5,767 
Reinsurance recoveries


(975)
(1,113) 








Net claims and change in insurance liabilities


14,096
4,654 
Change in provisions for investment contract liabilities


33,385
30,458 
Acquisition costs


873
855 
Finance costs


183
166 
Other expenses


1,748
1,694 
Transfers (from)/to unallocated divisible surplus


(181)
112 








Total expenses


50,104
37,939 








Profit before tax 


1,413
1,325 
Tax expense attributable to policyholder returns


(175)
(181) 








Profit before tax attributable to equity holders


1,238
1,144 








Total tax expense


(421)
(419) 
Tax expense attributable to policyholder returns


175
181 








Tax expense attributable to equity holders

2.22
(246)
(238) 








Profit for the year


992
906 












Attributable to:



Non-controlling interests


7
13 
Equity holders of the Company


985
893 












Dividend distributions to equity holders of the Company during the year

2.12
580
479 
Dividend distributions to equity holders of the Company proposed after the year end

2.12
496
408 























p 
p 








Earnings per share



Based on profit attributable to equity holders of the Company

2.08
16.70
15.20 








Diluted earnings per share



Based on profit attributable to equity holders of the Company

2.08
16.54
15.00 








1.The Consolidated Income Statement has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the profit for the year by 10m for 2013.
IFRS and Cash 35
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014


2014
20131



m
m 








Profit for the year


992
906 




Items that will not be reclassified subsequently to profit or loss



Actuarial losses on defined benefit pension schemes


(94)
(145) 
Actuarial losses on defined benefit pension schemes transferred to unallocated divisible surplus

38
49 








Total items that will not be reclassified to profit or loss subsequently


(56)
(96) 








Items that may be reclassified subsequently to profit or loss



Exchange differences on translation of overseas operations


12
(16) 
Net change in financial investments designated as available-for-sale


26
(88) 








Total items that may be reclassified to profit or loss subsequently


38
(104) 








Other comprehensive expense after tax


(18)
(200)








Total comprehensive income for the year


974
706 








Total comprehensive income attributable to:



Non-controlling interests


7
13 
Equity holders of the Company


967
693 








1. The Consolidated Statement of Comprehensive Income has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total comprehensive income for the year by 10m for 2013.
IFRS and Cash 36
Consolidated Balance Sheet
As at 31 December 2014



2014
20131


Notes
m
m 








Assets 




Goodwill 



79
73 
Purchased interest in long term businesses and other intangible assets 



342
308 
Deferred acquisition costs 



1,936
1,880 
Investment in associates and joint ventures 



149
101 
Property, plant and equipment 



146
129 
Investment property 


2.11
8,152
6,377 
Financial investments 


2.11
360,614
334,540 
Reinsurers' share of contract liabilities 



2,906
2,897 
UK deferred tax asset 


2.22
54
82 
Current tax recoverable 



217
310 
Other assets 



2,249
2,121 
Cash and cash equivalents 



22,709
17,454 








Total assets 



399,553
366,272 












Equity 




Share capital 


2.13
149
148 
Share premium 


2.13
969
959 
Employee scheme treasury shares 



(37)
(39) 
Capital redemption and other reserves 



117
57 
Retained earnings 



4,830
4,517 








Shareholders' equity 



6,028
5,642 
Non-controlling interests 



275
265 








Total equity 



6,303
5,907 












Liabilities 




Participating insurance contracts 


2.17
6,579
6,972 
Participating investment contracts 


2.18
7,667
7,493 
Unallocated divisible surplus 



983
1,221 
Value of in-force non-participating contracts 



(208)
(248) 








Participating contract liabilities 



15,021
15,438 












Non-participating insurance contracts 


2.17
49,876
40,273 
Non-participating investment contracts 


2.18
288,558
278,754 








Non-participating contract liabilities 



338,434
319,027 












Core borrowings 


2.15
2,977
2,453 
Operational borrowings 


2.16
715
775 
Provisions 


2.21
1,247
1,128 
UK deferred tax liabilities 


2.22
180
- 
Overseas deferred tax liabilities 


2.22
434
362 
Current tax liabilities 



9
14 
Payables and other financial liabilities 



16,131
9,305 
Other liabilities 



963
1,045 
Net asset value attributable to unit holders 



17,139
10,818 








Total liabilities 



393,250
360,365 








Total equity and liabilities 



399,553
366,272 








1. The Consolidated Balance Sheet has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total equity by 207m for 2013.
IFRS and Cash 37
Consolidated Statement of Changes in Equity










Employee
Capital






scheme
redemption


Non-

Share
Share
treasury
and other
Retained 

controlling
Total
capital
premium
shares
reserves
earnings
Total
interests
equity
For the year ended 31 December 2014
m
m
m
m
m
m
m
m
















As at 1 January 2014
148
959
(39)
57
4,517
5,642
265
5,907
Profit for the year 
-
-
-
-
985
985
7
992
Exchange differences on translation of 








overseas operations 
-
-
-
12
-
12
-
12
Actuarial losses on defined benefit 








pension schemes 
-
-
-
-
(94)
(94)
-
(94)
Actuarial losses on defined benefit 








pension schemes transferred to 








unallocated divisible surplus 
-
-
-
-
38
38
-
38
Net change in financial investments 








designated as available-for-sale 
-
-
-
26
-
26
-
26
















Total comprehensive income








for the year 
-
-
-
38
929
967
7
974
Options exercised under








share option schemes:








- Executive share option schemes 
-
-
-
-
-
-
-
-
- Savings related share option scheme 
1
10
-
-
-
11
-
11
Shares purchased 
-
-
(7)
-
-
(7)
-
(7)
Shares vested 
-
-
9
(17)
-
(8)
-
(8)
Employee scheme treasury shares: 








- Value of employee services 
-
-
-
20
-
20
-
20
Share scheme transfers








to retained earnings
-
-
-
-
(17)
(17)
-
(17)
Dividends 
-
-
-
-
(580)
(580)
-
(580)
Movement in third party interests 
-
-
-
-
-
-
3
3
Currency translation differences 
-
-
-
19
(19)
-
-
-
















As at 31 December 2014
149
969
(37)
117
4,830
6,028
275
6,303
















IFRS and Cash 38
Consolidated Statement of Changes in Equity (continued)


Employee 
Capital




scheme 
redemption

Non- 

Share
Share
treasury 
and other
Retained 

controlling 
Total
capital
premium
shares 
reserves
earnings 
Total
interests 
equity
For the year ended 31 December 2013
m
m
m
m
m 
m
m1
m










As at 1 January 2013
148
956
(43) 
153
4,227 
5,441
178 
5,619
Profit for the year 
-
-
- 
-
893 
893
13 
906
Exchange differences on translation of 





overseas operations 
-
-
- 
(16)
- 
(16)
- 
(16)
Actuarial losses on defined benefit 





pension schemes 
-
-
- 
-
(145) 
(145)
- 
(145)
Actuarial losses on defined benefit 





pension schemes transferred to 





unallocated divisible surplus 
-
-
- 
-
49 
49
- 
49
Net change in financial investments 





designated as available-for-sale 
-
-
- 
(88)
- 
(88)
- 
(88)










Total comprehensive income/(expense)





for the year 
-
-
- 
(104)
797 
693
13 
706
Options exercised under





share option schemes:





- Executive share option schemes 
-
1
- 
-
- 
1
- 
1
- Savings related share option scheme 
-
2
- 
-
- 
2
- 
2
Shares purchased 
-
-
(12) 
-
- 
(12)
- 
(12)
Shares vested 
-
-
16 
(19)
- 
(3)
- 
(3)
Employee scheme treasury shares: 





- Value of employee services 
-
-
- 
28
- 
28
- 
28
Share scheme transfers 





to retained earnings 
-
-
- 
-
(29) 
(29)
- 
(29)
Dividends 
-
-
- 
-
(479) 
(479)
- 
(479)
Movement in third party interests 
-
-
- 
-
- 
-
74 
74
Currency translation differences 
-
-
- 
(1)
1 
-
- 
-










As at 31 December 2013 
148
959
(39) 
57
4,517 
5,642
265 
5,907










1. The Consolidated Statement of Changes in Equity has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase the total equity by 207m for 2013.
IFRS and Cash 39
Consolidated Cash Flow Statement
For the year ended 31 December 2014


2014
20131


m
m 






Cash flows from operating activities 



Profit for the year 


992
906 
Adjustments for non cash movements in net profit for the year 



Realised and unrealised gains on financial investments and investment properties 


(30,851)
(21,456) 
Investment income 


(9,205)
(9,504) 
Interest expense 


183
166 
Tax expense 


421
419 
Other adjustments 


87
98 
Net (increase)/decrease in operational assets 



Investments held for trading or designated as fair value through profit or loss 


5,931
1,952 
Investments designated as available-for-sale 


225
60 
Other assets 


(151)
547 
Net increase/(decrease) in operational liabilities 



Insurance contracts 


9,228
1,384 
Transfer (from)/to unallocated divisible surplus 


(222)
63 
Investment contracts 


10,156
13,835 
Value of in-force non-participating contracts 


40
(6) 
Other liabilities 


9,811
3,883 






Cash generated used in operations 


(3,355)
(7,653) 
Interest paid 


(203)
(169) 
Interest received 


4,857
4,981 
Tax paid2


(76)
(287) 
Dividends received 


4,264
4,497 






Net cash flows generated from operating activities 


5,487
1,369 






Cash flows from investing activities 



Net acquisition of plant, equipment and intangibles 


(80)
(48) 
Acquisitions (net of cash acquired)3


(38)
(97) 
Disposal of subsidiaries 


56
- 
Investment in joint ventures 


(77)
(68) 






Net cash flows from investing activities 


(139)
(213) 






Cash flows from financing activities 



Dividend distributions to ordinary equity holders of the Company during the year 


(580)
(479) 
Proceeds from issue of ordinary share capital 


11
3 
Purchase of employee scheme shares 


(2)
(4) 
Proceeds from borrowings 


674
1,231 
Repayment of borrowings 


(181)
(1,115) 






Net cash flows used in financing activities 


(78)
(364) 






Net increase in cash and cash equivalents 


5,270
792 
Exchange losses on cash and cash equivalents 


(15)
- 
Cash and cash equivalents at 1 January 


17,454
16,662 






Cash and cash equivalents at 31 December 


22,709
17,454 






1. The Consolidated Cash Flow Statement has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24.
2. Tax comprises UK corporation tax paid of 29m (2013: 133m), overseas corporate taxes of 24m (2013: 6m) and withholding tax of 23m (2013: 148m). 
3. Net cash flows from acquisitions includes cash paid of 38m (2013: 287m) less cash and cash equivalents acquired of nil (2013: 190m). 



The Group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including those relating to the UK long-term fund policyholders. 
IFRS and Cash 40
2.08 Earnings per share
(a) Earnings per share









Profit
Earnings 
Profit 
Earnings 




after tax
per share1
after tax 
per share1




2014
2014 
2013 
2013 




m
p 
m 
p 










Operating profit 




998
16.92 
883 
15.03 
Investment and other variances




(13)
(0.22) 
13 
0.22 
Impact of change in UK tax rates 




-
- 
(3) 
(0.05) 










Earnings per share based on profit





attributable to equity holders




985
16.70 
893 
15.20 










1. Earnings per share is calculated by dividing profit after tax derived from continuing operations by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares. 
(b) Diluted earnings per share







Profit
Number 
Earnings
Profit 
Number 
Earnings


after tax
of shares1
per share
after tax 
of shares1
per share


2014
2014 
2014
2013 
2013 
2013


m
m 
p
m 
m 
p










Profit attributable to equity holders of the Company
985
5,897 
16.70
893 
5,875 
15.20
Net shares under options allocable for no further consideration
-
59 
(0.16)
- 
79 
(0.20)










Diluted earnings per share


985
5,956 
16.54
893 
5,954 
15.00




















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.
IFRS and Cash 41
2.09 Acquisition
Global Index Advisors Inc.

















On 19 May 2014, the Group acquired the trade and assets of Global Index Advisors Inc., an asset management advisory based in 
Atlanta, US. The acquisition provides the Group with opportunities to accelerate growth into the US Defined Contribution market

















2014








m 


















Total cash and deferred contingent consideration for 100% acquisition



24














Recognised amounts of identifiable assets transferred and liabilities assumed at fair value



Intangibles







38
Deferred tax liabilities







(14)


















Net assets attributable to equity holders of the Company



24



























Deferred contingent consideration represents amounts payable for the trade and assets of Global Index Advisors Inc. contingent on meeting certain financial performance targets over a 1 to 2 year period. The range of undiscounted amounts the company could pay under the contingent consideration arrangements is between nil and 6.9m.
2.10 Disposals
On 28 May 2014, the Group sold Amber Taverns, the operator of 95 community pubs in the North of England to funds managed by MxP Partners LLP and their associates for 50m. The carrying value of the company was c37m, realising the profit on disposal of c13m reported in the operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.
On 31 October 2014, the Group sold its estate agency franchise business, Xperience, to the well established lettings franchise business, Martin & Co. for 6m. The carrying value of the business was 1m, realising the profit on disposal of 5m reported in operational income in the Consolidated Income Statement.
2.11 Financial investments and Investment property






2014
20131






m
m 














Equities 






162,177
166,663 
Unit trusts 






7,529
7,426 
Debt securities2






178,766
153,742 
Accrued interest 






1,604
1,633 
Derivative assets3






10,035
4,746 
Loans and receivables 






503
330 














Financial investments






360,614
334,540 














Investment property






8,152
6,377 














Total financial investments and investment property




368,766
340,917 














1. Financial investments and Investment property and fair value hierarchy have been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24.
2. Detailed analysis of debt securities which shareholders are directly exposed to are disclosed in Note 4.05.
3. Derivatives are used to ensure efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities and include 6,011m (2013: 2,391m) held on behalf of unit linked policyholders.
IFRS and Cash 42
2.12 Dividends





Per

Per 




Dividend
share1
Dividend
share1




2014
2014
2013
2013 




m
p
m
p 












Ordinary share dividends paid in the year


- Prior year final dividend 




408
6.90
337
5.69 
- Current year interim dividend 




172
2.90
142
2.40 
















580
9.80
479
8.09 












Ordinary share dividend proposed2




496
8.35
408
6.90 












1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date. 

2. The dividend proposed is not included as a liability on the Consolidated Balance Sheet.

2.13 Share capital and share premium




2014


2013





Number of
2014

Number of
2013
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 2014




5,917,066,636
148
959
Options exercised under share option schemes





- Executive share option scheme 





-
-
-
- Savings related share option scheme




25,003,593
1
10


















As at 31 December 2014




5,942,070,229
149
969

























Share
Share






Number of
capital
premium
Issued share capital, fully paid





shares
m
m


















As at 1 January 2013




5,912,782,826
148
956
Options exercised under share option schemes





- Executive share option scheme 





1,422,327
-
1
- Savings related share option scheme




2,861,483
-
2


















As at 31 December 2013




5,917,066,636
148
959


















There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.









The holders of the Company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the Company. 
IFRS and Cash 43
2.14 Segmental analysis of profit/(loss) for the year















Group 






expenses 






and debt 

LGAS
LGR
LGIM
LGC
LGA
costs 
Total
For the year ended 31 December 2014 
m
m
m
m
m
m 
m












Operating profit/(loss) 
460
428
336
203
56
(208) 
1,275
Investment and other variances1
(7)
67
(12)
(37)
(13)
(42) 
(44)
Gains attributable to non-controlling interests 
-
-
-
-
-
7 
7












Profit/(loss) before tax attributable to equity holders 
453
495
324
166
43
(243) 
1,238
Tax (expense)/credit attributable to equity holders 






of the Company2
(102)
(97)
(70)
(9)
(19)
51 
(246)












Profit/(loss) for the year 
351
398
254
157
24
(192) 
992





























Group 






expenses 






and debt 

LGAS
LGR
LGIM
LGC
LGA
costs 
Total
For the year ended 31 December 2013
m
m
m
m
m
m 
m












Operating profit/(loss) 
444
310
304
179
92
(171) 
1,158
Investment and other variances 
(73)
63
(6)
60
(13)
(58) 
(27)
Gains attributable to non-controlling interests3
-
-
-
-
-
13 
13












Profit/(loss) before tax attributable to equity holders 
371
373
298
239
79
(216) 
1,144
Tax (expense)/credit attributable to equity holders 






of the Company 
(83)
(83)
(65)
(27)
(43)
63 
(238)












Profit/(loss) for the year 
288
290
233
212
36
(153) 
906












1. Positive investment and other variances for LGR are primarily due to favourable default experience and an increase in exposure to Direct Investments which has enhanced the risk adjusted return. Negative investment and other variances for LGC reflect lower equity returns from shareholder funds.
2. The low tax charge for LGC primarily reflects the impact of non-taxable income and recognition of losses.
3. The segmental analysis of profit/(loss) for the year has been restated to reflect the adoption by the Group of IFRS 10 'Consolidated Financial Statements'. Further details are contained in Note 2.24. The impact is to increase profit for the year by 10m for 2013.
IFRS and Cash 44
2.15 Core Borrowings
















Carrying
Fair
Carrying
Fair 



amount
value
amount
value



2014
2014
2013
2013



m
m
m
m














Subordinated borrowings






6.385% Sterling perpetual capital securities (Tier 1) 


658
642
680
650
5.875% Sterling undated subordinated notes (Tier 2) 


416
431
418
438
4.0% Euro subordinated notes 2025 (Tier 2) 


472
482
498
531
10% Sterling subordinated notes 2041 (Tier 2) 


310
424
309
417
5.5% Sterling subordinated notes 2064 (Tier 2)


588
666
-
-
Client fund holdings of Group debt1


(28)
(31)
(13)
(13)














Total subordinated borrowings


2,416
2,614
1,892
2,023














Senior borrowings






Sterling medium term notes 2031-2041 


609
800
608
721
Client fund holdings of Group debt1


(48)
(62)
(47)
(55)














Total senior borrowings


561
738
561
666














Total core borrowings


2,977
3,352
2,453
2,689














1. 76m (2013: 60m) of the Group's subordinated and senior borrowings are currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.







All of the Group's core borrowings are measured using amortised cost. The presented fair values of the Group's core borrowings reflect quoted prices in active markets and they are classified as level 1 in the fair value hierarchy.
Subordinated borrowings
6.385% Sterling perpetual capital securities
In 2007, Legal & General Group Plc issued 600m of 6.385% Sterling perpetual capital securities. These securities are callable at par on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset to three month LIBOR plus 1.93% pa. For regulatory purposes these securities are treated as innovative tier 1 capital. 
5.875% Sterling undated subordinated notes
In 2004, Legal & General Group Plc issued 400m of 5.875% Sterling undated subordinated notes. These notes are callable at par on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019 will be reset to the prevailing five year benchmark gilt yield plus 2.33% pa. These notes are treated as tier 2 capital for regulatory purposes. 
4.0% Euro subordinated notes 2025
In 2005, Legal & General Group Plc issued 600m of 4.0% Euro dated subordinated notes. The proceeds were swapped into sterling. The notes are callable at par on 8 June 2015 and each year thereafter. If not called, the coupon from 8 June 2015 will reset to a floating rate of interest based on prevailing three month Euribor plus 1.7% pa. These notes mature on 8 June 2025 and are treated as tier 2 capital for regulatory purposes.
10% Sterling subordinated notes 2041
In 2009, Legal & General Group Plc issued 300m of 10% dated subordinated notes. The notes are callable at par on 23 July 2021 and every five years thereafter. If not called, the coupon from 23 July 2021 will be reset to the prevailing five year benchmark gilt yield plus 9.325% pa. These notes mature on 23 July 2041 and are treated as tier 2 capital for regulatory purposes.
5.5% Sterling subordinated notes 2064
On 19 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. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% pa. These notes mature on 27 June 2064 and are treated as tier 2 capital for regulatory purposes.
IFRS and Cash 45
2.16 Operational Borrowings















Carrying
Fair
Carrying 
Fair 




amount
value
amount 
value 




2014
2014
20131
20131




m
m
m 
m 












Short term operational borrowings




Euro Commercial paper



73
73
173 
173 
Bank loans/other



13
13
16 
16 












Total short term operational borrowings


86
86
189 
189 












Non recourse borrowings





US Dollar Triple X securitisation 2037 



286
240
268 
230 
Suffolk Life unit linked borrowings



120
120
116 
116 
LGV 6/LGV 7 Private Equity Fund Limited Partnership


136
136
131 
131 
Consolidated Property Limited Partnerships


148
148
129 
129 












Total non recourse borrowings


690
644
644 
606 












Group holding of operational borrowings2



(61)
(52)
(58) 
(49) 












Total operational borrowings


715
678
775 
746 












1. Operational Borrowings has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. Further details are contained in Note 2.24. 
2. Group investments in operational borrowings have been eliminated from the Group Consolidated Balance Sheet. 
The presented fair values of the Group's operational borrowings reflect observable market information and have been classified as level 2 in the fair value hierarchy.
Short term operational borrowings
Short term assets available at the holding company level exceeded the amount of short term operational borrowings of 86m (2013: 189m). Short term operational borrowings comprise Euro Commercial paper, bank loans and overdrafts.
Non recourse borrowings
US Dollar Triple X securitisation 2037
In 2006, a subsidiary of LGA issued US$450m of non recourse debt in the US capital markets to meet the Triple X reserve requirements of part of the US term insurance written after 2005 and 2006. It is secured on the cash flows related to that tranche of business.
Suffolk Life unit linked borrowings
All of these non recourse borrowings are in relation to commercial properties held within SIPP plans and the borrowings solely relate to client investments.
LGV 6/LGV 7 Private Equity Fund Limited Partnerships
These borrowings are non recourse bank borrowings.
Consolidated Property Limited Partnerships
These borrowings are non recourse bank borrowings.
Syndicated credit facility
As at 31 December 2014, the Group had in place a 1bn syndicated committed revolving credit facility provided by a number of its key relationship banks, 0.04bn matures in October 2017 and 0.96bn matures in October 2018. No amounts were outstanding at 31 December 2014.
IFRS and Cash 46
2.17 Insurance contract liabilities
(a) Analysis of insurance contract liabilities



 







 

Re-

Re-



 
Gross
insurance
Gross
insurance



 
2014
2014
2013
2013



Notes 
m
m
m
m



 







 




Participating insurance contracts 


2.17(b)
6,579
(1)
6,972
(1)
Non-participating insurance contracts 


2.17(c)
49,589
(2,587)
39,975
(2,596)
General insurance contracts 


2.17(d)
287
(8)
298
(5)



 







 




Insurance contract liabilities 


 
56,455
(2,596)
47,245
(2,602)



 







 




(b) Movement in participating insurance contract liabilities



 







 

Re-

Re-



 
Gross
insurance
Gross
insurance



 
2014
2014
2013
2013



 
m
m
m
m



 







 




As at 1 January 


6,972
(1)
8,116
(1)
New liabilities in the year


 
61
-
75
-
Liabilities discharged in the year 


 
(1,159)
-
(1,606)
-
Unwinding of discount rates 


 
54
-
79
-
Effect of change in non-economic assumptions 


 
(5)
-
4
-
Effect of change in economic assumptions 


 
561
-
291
-
Other


 
95
-
13
-



 







 




As at 31 December


 
6,579
(1)
6,972
(1)



 







 




IFRS and Cash 47
2.17 Insurance contract liabilities (continued)
(c) Movement in non-participating insurance contract liabilities



 







 

Re-

Re-



 
Gross
insurance
Gross
insurance



 
2014
2014
2013
2013



 
m
m
m
m



 







 




As at 1 January 


39,975
(2,596)
37,445
(2,277)
New liabilities in the year 


 
7,325
(446)
3,872
(334)
Liabilities discharged in the year 


 
(2,469)
259
(2,307)
167
Unwinding of discount rates 


 
1,493
(145)
1,308
(134)
Effect of change in non-economic assumptions 


 
(569)
362
77
(25)
Effect of change in economic assumptions 


 
3,844
(3)
(430)
-
Foreign exchange adjustments 


 
(10)
(18)
10
7



 







 




As at 31 December


 
49,589
(2,587)
39,975
(2,596)



 







 




(d) Analysis of General insurance contract liabilities










 

Re-

Re-



 
Gross
insurance
Gross
insurance



 
2014
2014
2013
2013



 
m
m
m
m



 







 




Outstanding claims 


 
61
(1)
66
-
Claims incurred but not reported 


 
30
-
37
-
Unearned premiums 


 
196
(7)
195
(5)



 







 




General insurance contract liabilities


 
287
(8)
298
(5)



 







 




(e) Movement in General insurance claim liabilities










 

Re-

Re-



 
Gross
insurance
Gross
insurance



 
2014
2014
2013
2013



 
m
m
m
m



 







 




As at 1 January 


 
103
-
104
-
Claims arising


 
182
(2)
175
-
Claims paid


 
(183)
1
(156)
-
Adjustments to prior year liabilities 


 
(11)
-
(20)
-



 







 




As at 31 December


 
91
(1)
103
-



 







 




IFRS and Cash 48
2.18 Investment contract liabilities
(a) Analysis of investment contract liabilities



 








 


Re-

Re-



 

Gross
insurance
Gross
insurance



 

2014
2014
2013
2013



Note 

m
m
m
m



 








 





Participating investment contracts

 

7,667
14
7,493
-
Non-participating investment contracts

 

288,558
(324)
278,754
(295)



 








 





Investment contract liabilities


2.18(b)

296,225
(310)
286,247
(295)



 








 





(b) Movement in investment contract liabilities













Re-

Re-




Gross
insurance
Gross
insurance




2014
2014
2013
2013




m
m
m
m
















As at 1 January 



286,247
(295)
272,361
(213)
Reserves in respect of new business 


30,645
(334)
30,816
(237)
Amounts paid on surrenders and maturities during the year 


(53,311)
60
(47,055)
66
Investment return and related benefits


33,126
259
30,369
89
Management charges



(309)
-
(295)
-
Foreign exchange adjustments


(177)
-
51
-
Other



4
-
-
-
















As at 31 December



296,225
(310)
286,247
(295)
















Change in provisions for investment contract liabilities represents the total gross and reinsurance investment return and related benefits of 33,385m (2013: 30,458m).








Fair value movements of 33,198m (2013: 30,095m) are included within the income statement arising from movements in investment contract liabilities designated as fair value through profit and loss.
IFRS and Cash 49
2.19 IFRS sensitivity analysis







Impact on








pre-tax
Impact on







Group profit
Group equity







net of re-
net of re-







insurance
insurance







2014
2014







m
m


















Economic sensitivity 








Long-term insurance








1% increase in interest rates






120
54
1% decrease in interest rates






(245)
(146)









1% increase in long term inflation expectations




(193)
(152)









Credit spread widens by 100bps with no change in expected defaults

(177)
(212)
10% decrease in listed equities






(155)
(126)
10% fall in property values






(130)
(102)









10bps increase in credit default assumption





(370)
(290)
10bps decrease in credit default assumption





344
270









Non-economic sensitivity








Long-term insurance








1% decrease in annuitant mortality






(170)
(133)
5% increase in assurance mortality






(56)
(44)
Default of largest external reinsurer






(657)
(516)









General Insurance








Single storm event with 1 in 200 year probability





(74)
(59)
Subsidence event - worst claims ratio in last 30 years





(54)
(43)
5% decrease in overall claims ratio






8
6
5% surplus over claims liabilities






5
4









The table shows the impacts on Group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario for the Group. The participating funds have been excluded in the above sensitivity analysis as the impact of the sensitivities on IFRS profit and equity is offset by the movement in the unallocated divisible surplus (UDS). The shareholders' share of with-profit bonus declared in the year is relatively insensitive to market movements due to the smoothing policies applied.
The above sensitivity analyses do not reflect management actions which 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 analyses also ignore 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. In calculating the alternative values, all other assumptions are left unchanged, though in practice, items of the Group's experience may be correlated. The sensitivity of the profit and equity to changes in assumptions may not be linear. These results should not be extrapolated to changes of a much larger order.
The interest rate sensitivity assumes a 100 basis point change in the gross redemption yield on fixed interest securities together with a 100 basis point change in the real yields on variable securities. For the UK long term funds, valuation interest rates are assumed to move in line with market yields adjusted to allow for the impact of PRA regulations. The interest rate sensitivities reflect the impact of the regulatory restrictions on the reinvestment rate used to value the liabilities of the long term business. Modelling improvements have been made in the year which more accurately isolate the impacts of discrete assumptions changes. This, coupled with the increase in the Group's annuity liabilities have led to an increase in the reported 2014 sensitivities for interest rates and inflation. No yield floors have been applied in the estimation of the stresses, despite the current low interest rate environment.
Interest rate and inflation expectation have historically shown positive correlation and have therefore been presented next to each other.
The inflation stress adopted is a 1% pa increase in inflation resulting in a 1% pa reduction in real yield and no change to the nominal yield. In addition the expense inflation rate is increased by 1% pa.
In the sensitivity for credit spreads, corporate bond yields have increased by 100bps, gilt and approved security yields are unchanged, and there has been no adjustment to the default assumptions.
The equity stress is a 10% fall in listed equity market values. The property stress adopted is a 10% fall in property market value. Rental income is assumed to be unchanged; however the vacant possession value is stressed down by 10% in line with the market value stress. Where property is being used to back liabilities, the valuation interest rate used to place a value on the liabilities moves with the implied change in property yields. 
The annuitant mortality stress is a 1% reduction in the mortality rates for immediate and deferred annuitants with no change to the mortality improvement rates. The assurance mortality stress represents an increase in mortality/morbidity rates for assurance contracts by 5%.
The credit default stress assumes a +/-10bps stress to the current credit default assumption for unapproved corporate bonds which will have an impact on the valuation interest rates used to discount liabilities. The credit default assumption is set based on the credit rating of the individual bonds in the asset portfolio and their outstanding term using Moody's global credit default rates.
For the sensitivity to the default of the Group's largest external reinsurer, the reinsurer stress shown is equal to the technical provisions ceded to the external reinsurer and represents the impact of the default of largest external reinsurer at an entity level.
IFRS and Cash 50
2.20 Foreign exchange rates
Principal rates of exchange used for translation are:















Year end exchange rates






At 31.12.14
At 31.12.13
















United States Dollar 






1.56
1.66
Euro 






1.29
1.20






























01.01.14 - 
01.01.13 - 
Average exchange rates






31.12.14
31.12.13
















United States Dollar 






1.65
1.57
Euro 






1.24
1.18
















2.21 Provisions
(a) Analysis of provisions














2014
2013







m
m


















Retirement benefit obligations






1,217
1,113
Other provisions






30
15

























1,247
1,128




































(b) Retirement benefit obligations











Fund and

Fund and






Scheme
Overseas
Scheme
Overseas





2014
2014
2013
2013





m
m
m
m


















Gross pension obligations included in provisions
(1,215)
(2)
(1,113)
-
Annuity obligations insured by Society

723
-
646
-


















Gross defined benefit pension deficit


(492)
(2)
(467)
-
Deferred tax on defined benefit pension deficit

98
-
93
-


















Net defined benefit pension deficit


(394)
(2)
(374)
-


















The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme are defined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributions to, such arrangements. At 31 December 2014, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at 394m (2013: 374m). These amounts have been recognised in the financial statements with 248m charged against shareholder equity (2013: 236m) and 146m against the unallocated divisible surplus (2013: 138m).
IFRS and Cash 51
2.22 Tax 
(a) Tax charge in the Consolidated Income Statement









The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows:














2014
2013






m
m
















Profit before tax attributable to equity holders



1,238
1,144
Tax calculated at 21.5% (2013: 23.25%) 






266
266
Effects of: 








Adjustments in respect of prior years

8
4
Income not subject to tax, such as dividends



(9)
(6)
Change in valuation of tax losses




(6)
(19)
Higher rate of tax on profits taxed overseas




8
23
Additional allowances/non-deductible expenses




(7)
(11)
Impact of reduction in UK corporate tax rate to 20% (2013: 20%/21%) on deferred tax balances

-
3
Differences between taxable and accounting investment gains e.g. RPI relief
(15)
(19)
Other




1
(3)
















Tax attributable to equity holders






246
238
















Equity holders' effective tax rate1






19.9%
20.8%
















1. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.
(b) Deferred Tax





















2014
2013
(i) UK deferred tax (liabilities)/ assets





m
m
















Realised and unrealised gains on investments 

(168)
(160)
Excess of depreciation over capital allowances 

19
24
Excess expenses1

105
192
Deferred acquisition expenses

(61)
(72)
Difference between the tax and accounting value of insurance contracts
(143)
(70)
Accounting provisions 

3
8
Trading losses2

45
93
Pension fund deficit


98
93
Purchased interest in long term business


(24)
(26)
















Net UK deferred tax (liabilities)/ assets3

(126)
82

















(ii) Overseas deferred tax (liabilities)/ assets



















Realised and unrealised gains on investments 

(53)
(33)
Deferred acquisition expenses

(295)
(241)
Difference between the tax and accounting value of insurance contracts
(242)
(229)
Accounting provisions

(20)
(17)
Trading losses
186
158
Purchased interest in long term business


(10)
-
















Net Overseas deferred tax liabilities
(434)
(362)
















1. The reduction in the deferred tax asset on excess expenses reflects the full utilisation of excess management expenses together with the unwind of the spread acquisition expenses relating to changes in the I-E legislation. 
2. The reduction in the deferred tax asset primarily reflects utilisation of brought forward trading losses against LGAS and LGR taxable profits (71m) partly offset by additional tax losses.
3. The move to a net deferred tax liability provision in the UK reflects the continued utilisation of tax losses and corresponding reduction in deferred tax asset while the deferred tax liability on actuarial reserves has increased. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of 54m and a liability of 180m where the relevant items cannot be offset.
IFRS and Cash 52
2.23 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.
In 1975, Legal and General Assurance Society Limited (the Society) was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee in respect of policies issued through the ILU's Policy Signing Office on behalf of NRG Victory Reinsurance Company Ltd (Victory), a company which was then a subsidiary of the Society. In 1990, Nederlandse Reassurantie Groep Holding NV (the assets and liabilities of which have since been assumed by Nederlandse Reassurantie Groep NV under a statutory merger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Society may have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would not apply to policies written or renewed after the acquisition. Nederlandse Reassurantie Groep NV is now owned by Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. Whether the Society has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability is uncertain. The Society has made no payment or provision in respect of this matter.
Group companies have given indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of Group companies in support of their business activities, including Pension Protection Fund compliant guarantees in respect of certain Group companies' liabilities under the Group pension fund and scheme.
IFRS and Cash 53
2.24 Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union, and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements also comply with IFRS and interpretations by the IFRS Interpretations Committee as issued by the IASB as adopted by the European Union. The Group financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.
The Group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The accounting policies have been consistently applied to all years presented, unless otherwise stated.
The Group presents its balance sheet in order of liquidity. This is considered to be more relevant than a before and after 12 months presentation, given the long term nature of the Group's core business. However, for each asset and liability line item which combines amounts expected to be recovered or settled before and after 12 months from the balance sheet date, disclosure of the split is made by way of a note. 
Financial assets and financial liabilities are disclosed gross in the balance sheet unless a legally enforceable right of offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the income statement unless required or permitted by any accounting standard or interpretations by the IFRS Interpretations Committee.
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the Group's foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the Group's foreign operations are translated into sterling, the Group's presentation currency, at the closing rate at the date of the balance sheet. The income and expenses for each income statement are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders' equity.
Use of estimates
The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the consolidated balance sheet and income statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current circumstances and future events and actions, actual results may differ from those estimates, possibly significantly. This is particularly relevant for the determination of fair values of investment property and unquoted and illiquid financial investments; the estimation of deferred acquisition costs; tax balances; and the estimation of insurance and investment contract liabilities. The basis of accounting for these areas, and the significant judgements used in determining them, are outlined in the respective notes to the financial statements.
Reportable segments
Under the requirements of IFRS 8, 'Operating segments', operating and reportable segments are presented in a manner consistent with the internal reporting provided to the chief operating decision maker, which has been identified as the Board of Legal & General Group Plc.
The Group has five reportable segments comprising Legal & General Assurance Society (LGAS), Legal & General Retirement (LGR), Legal & General Investment Management (LGIM), Legal & General America (LGA), and Legal & General Capital (LGC). 
LGAS represents Protection business (retail protection, group protection and general insurance) and Savings business (platforms, workplace, SIPPs, mature savings and with-profits). The LGAS segment also includes Legal & General France (LGF), Legal & General Netherlands (LGN) and emerging markets.
LGR represents Annuities (both individual and bulk purchase) and longevity insurance.
The LGIM segment represents institutional and retail investment management businesses.
The LGC segment includes shareholders' equity supporting the non-profit LGR and LGAS businesses held within Society and Legal & General Pensions Limited (LGPL) and capital held by the Group's treasury function.
The LGA segment comprises protection business written in the USA.
Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.
IFRS and Cash 54
2.24 Basis of preparation (continued)
Changes to accounting policy - IASB consolidation project  
On 1 January 2014 the application of IFRS 10, 'Consolidated Financial Statements', and IFRS 11, 'Joint Arrangements' became compulsory for entities reporting in the EU.  
 
IFRS 10, 'Consolidated Financial Statements' defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. This states that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The application of IFRS 10 has resulted in the Group consolidating a small number of investment vehicles which were not previously consolidated. There is no material impact on the profit reported for the year ended 31 December 2013 or 31 December 2014. The effect on profit, total equity and cash flow previously reported at 31 December 2013 is shown below. The prior year information in Notes 2.11 and 2.16 has been restated to reflect the adoption by the Group of IFRS 10, 'Consolidated Financial Statements'. 
 
IFRS 11, 'Joint Arrangements' defines and establishes accounting principles for joint arrangements. Based on how rights and obligations are shared by parties to the arrangements, it distinguishes between two such types: joint ventures and joint operations. As all of our joint arrangements are classified as joint ventures the adoption of this Standard has no impact upon the Group.
IFRS 12, 'Disclosures of Interests in Other Entities' requires an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows. The additional requirements of this standard are reflected within the Group's 2014 Annual Report and Accounts.




As 





previously
IFRS 10




reported
Impact
Restated



31.12.13
31.12.13
31.12.13
Consolidated Income Statement



m
m
m





















Investment return



32,221
13
32,234
Finance costs



(163)
(3)
(166)
Profit for the year



896
10
906








Attributable to: 






Non-controlling interests



3
10
13
Equity holders of the Company



893
-
893














Consolidated Balance Sheet























Assets






Investment property



6,060
317
6,377
Financial investments 



331,802
2,738
334,540
Other assets



2,115
6
2,121
Cash and cash equivalents



17,407
47
17,454
Shareholders' equity 






Non-controlling interests 



58
207
265
Liabilities 






Operational borrowings



704
71
775
Payables and other financial liabilities



8,931
374
9,305
Other liabilities



1,032
13
1,045
Net asset value attributable to unit holders 



8,375
2,443
10,818





Consolidated Cash Flow Statement






















Net cash flows from operating activities



1,332
37
1,369
Cash and cash equivalents at 1 January



16,652
10
16,662
Cash and cash equivalents at 31 December



17,407
47
17,454
Key technical terms and definitions
The report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive list of these definitions is contained within the glossary of the Group's 2014 Annual Report and Accounts.
Assets and premium flows 55
3.01 Legal & General investment management assets 








Active




Index
fixed
Solu- 

Active
Total 
Overlay 
Advisory 
Total
For the year ended

funds
income
tions1
Property
equities
AUM 
assets2
assets 
assets
31 December 2014

bn
bn
bn 
bn
bn
bn 
bn 
bn 
bn












As at 1 January 2014

269.8
89.4
70.4 
11.3
8.6
449.5 
162.1 
- 
611.6
Acquisition of GIA assets
-
-
- 
-
-
- 
- 
13.4 
13.4












External inflows 

22.8
5.5
7.6 
1.4
0.1
37.4 
37.4
External outflows 

(39.1)
(3.8)
(6.6) 
(0.5)
(0.1)
(50.1) 
(50.1)
Overlay / advisory net flows
-
-
- 
-
-
- 
18.8 
(0.2) 
18.6












External net flows3

(16.3)
1.7
1.0 
0.9
-
(12.7) 
18.8 
(0.2) 
5.9
Internal net flows 

0.3
(0.5)
1.3 
0.7
(0.1)
1.7 
- 
- 
1.7












Total net flows 

(16.0)
1.2
2.3 
1.6
(0.1)
(11.0) 
18.8 
(0.2) 
7.6
Cash management movements4

-
(1.6)
- 
-
-
(1.6) 
- 
- 
(1.6)
Market and other movements3

21.0
14.8
26.0 
0.7
(0.3)
62.2 
13.7 
1.6 
77.5












As at 31 December 2014

274.8
103.8
98.7 
13.6
8.2
499.1 
194.6 
14.8 
708.5












Assets attributable to:






External 

409.1 
194.6 
14.8 
618.5
Internal

90.0 
- 
- 
90.0












Assets attributable to:






UK

388.6 
191.1 
- 
579.7
International5

110.5 
3.5 
14.8 
128.8












1. Solutions includes liability driven investments and multi-asset funds. 
2. Overlay assets comprise derivative notionals associated with Solutions business. 
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree 
of variability. The total value of these assets at 31 December 2014 is 46.5bn and the movement in these assets is included in market and other movements for
overlay assets.
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
5. International assets include 37.5bn of assets transferred from our London office to our Chicago office.


Active





Index
fixed
Solu- 

Active
Total 
Overlay 

Total
For the year ended

funds
income
tions1
Property
equities
AUM 
assets2

assets
31 December 2013

bn
bn
bn 
bn
bn
bn 
bn 

bn














As at 1 January 2013

243.2
82.2
64.0 
8.9
7.7
406.0 
136.7 

542.7
External inflows 

31.3
8.7
8.6 
1.0
0.1
49.7 

49.7
External outflows 

(31.8)
(2.7)
(5.2) 
(0.3)
(0.4)
(40.4) 

(40.4)
Overlay net flows 

-
-
- 
-
-
- 
11.2 

11.2














External net flows3

(0.5)
6.0
3.4 
0.7
(0.3)
9.3 
11.2 

20.5
Internal net flows 

0.7
(1.7)
0.8 
0.2
(0.2)
(0.2) 
- 

(0.2)














Total net flows 

0.2
4.3
4.2 
0.9
(0.5)
9.1 
11.2 

20.3
Cash management movements4

-
-
- 
-
-
- 
- 

-
Market and other movements3

26.4
2.9
2.2 
1.5
1.4
34.4 
14.2 

48.6














As at 31 December 2013

269.8
89.4
70.4 
11.3
8.6
449.5 
162.1 

611.6














Assets attributable to:







External

370.2 
162.1 

532.3
Internal

79.3 
- 

79.3














Assets attributable to:







UK

390.3 
160.1 

550.4
International

59.2 
2.0 

61.2














1. Solutions includes liability driven investments and multi-asset funds. 


2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree 
of variability. The total value of these assets at 31 December 2013 is 32.8bn and the movement in these assets is included in market and other movements for
overlay assets.
4.Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Assets and premium flows 56
3.01 Legal & General investment management assets (continued)













12
12





months
months





to 
to 





31.12.14
31.12.13





bn
bn














LGIM total assets net flows 





7.6
20.3
Attributable to: 







International1





8.5
15.8
UK Institutional 





(1.5)
5.8
UK Retail2





0.8
0.4
Annuities3





2.5
1.4
Mature Businesses 





(2.7)
(3.1)














1. 2013 International net flows includes 2.9bn of Legal & General France assets.
2. 2014 UK Retail net flows include 0.7bn of assets previously managed externally.
3. Pension funds already managed by LGIM that switch into LGR annuities are excluded.
Assets and premium flows 57
3.02 Legal & General investment management assets quarterly progression








Active




Index
fixed
Solu- 

Active
Total 
Overlay 
Advisory 
Total
For the year ended

funds
income
tions1
Property
equities
AUM 
assets2
assets 
assets
31 December 2014

bn
bn
bn 
bn
bn
bn 
bn 
bn 
bn












At 1 January 2014

269.8
89.4
70.4 
11.3
8.6
449.5 
162.1 
- 
611.6
External inflows 

4.7
1.4
2.1 
0.3
-
8.5 
8.5
External outflows 

(5.7)
(0.5)
(1.2) 
(0.1)
-
(7.5) 
(7.5)
Overlay net flows 

-
-
- 
-
-
- 
5.2 
- 
5.2












External net flows3

(1.0)
0.9
0.9 
0.2
-
1.0 
5.2 
- 
6.2
Internal net flows 

0.1
2.0
0.3 
0.5
(0.1)
2.8 
- 
- 
2.8












Total net flows 

(0.9)
2.9
1.2 
0.7
(0.1)
3.8 
5.2 
- 
9.0
Cash management movements4

-
-
- 
-
-
- 
- 
- 
-
Market and other movements3

1.5
2.9
4.9 
(0.1)
0.1
9.3 
1.0 
- 
10.3












At 31 March 2014

270.4
95.2
76.5 
11.9
8.6
462.6 
168.3 
- 
630.9












External inflows 

5.8
1.5
2.6 
0.3
0.1
10.3 
10.3
External outflows 

(13.4)
(1.4)
(0.9) 
(0.1)
(0.1)
(15.9) 
(15.9)
Overlay / advisory net flows
-
-
- 
-
-
- 
7.1 
0.1 
7.2












External net flows3

(7.6)
0.1
1.7 
0.2
-
(5.6) 
7.1 
0.1 
1.6
Internal net flows 

0.1
(1.3)
0.7 
0.2
(0.1)
(0.4) 
- 
- 
(0.4)












Total net flows 

(7.5)
(1.2)
2.4 
0.4
(0.1)
(6.0) 
7.1 
0.1 
1.2
Acquisition of GIA assets 

-
-
- 
-
-
- 
- 
13.4 
13.4












Cash management movements4

-
0.2
- 
-
-
0.2 
- 
- 
0.2
Market and other movements3

5.8
3.0
(0.7) 
0.5
(0.3)
8.3 
(0.5) 
0.2 
8.0












At 30 June 2014

268.7
97.2
78.2 
12.8
8.2
465.1 
174.9 
13.7 
653.7












External inflows 

5.4
1.0
1.3 
0.3
-
8.0 
8.0
External outflows 

(8.6)
(0.8)
(1.4) 
(0.2)
-
(11.0) 
(11.0)
Overlay / advisory net flows
-
-
- 
-
-
- 
2.5 
- 
2.5












External net flows3

(3.2)
0.2
(0.1) 
0.1
-
(3.0) 
2.5 
- 
(0.5)
Internal net flows 

(0.2)
(0.9)
0.1 
(0.1)
(0.1)
(1.2) 
- 
- 
(1.2)












Total net flows 

(3.4)
(0.7)
- 
-
(0.1)
(4.2) 
2.5 
- 
(1.7)
Cash management movements4

-
(0.7)
- 
-
-
(0.7) 
- 
- 
(0.7)
Market and other movements3

5.2
1.7
9.5 
0.4
(0.2)
16.6 
7.9 
0.5 
25.0












At 30 September 2014

270.5
97.5
87.7 
13.2
7.9
476.8 
185.3 
14.2 
676.3












External inflows 

6.9
1.6
1.6 
0.5
-
10.6 
10.6
External outflows 

(11.4)
(1.1)
(3.1) 
(0.1)
-
(15.7) 
(15.7)
Overlay / advisory net flows
-
-
- 
-
-
- 
4.0 
(0.3) 
3.7












External net flows3

(4.5)
0.5
(1.5) 
0.4
-
(5.1) 
4.0 
(0.3) 
(1.4)
Internal net flows 

0.3
(0.3)
0.2 
0.1
0.2
0.5 
- 
- 
0.5












Total net flows 

(4.2)
0.2
(1.3) 
0.5
0.2
(4.6) 
4.0 
(0.3) 
(0.9)
Cash management movements4

-
(1.1)
- 
-
-
(1.1) 
- 
- 
(1.1)
Market and other movements3

8.5
7.2
12.3 
(0.1)
0.1
28.0 
5.3 
0.9 
34.2












At 31 December 2014

274.8
103.8
98.7 
13.6
8.2
499.1 
194.6 
14.8 
708.5












1. Solutions includes liability driven investments and multi-asset funds.

2. Overlay assets comprise derivative notionals associated with Solutions business. 
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree
of variability. The total value of these assets at 31 December 2014 is 46.5bn (Q1 2014: 33.8bn; Q2 2014: 33.3bn; Q3 2014: 41.2bn), and the
movement in these assets is included in market and other movements for overlay assets.
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Assets and premium flows 58
3.02 Legal & General investment management assets quarterly progression (continued)










Active





Index
fixed
Solu- 

Active
Total 
Overlay 
Total
For the year ended


funds
income
tions1
Property
equities
AUM 
assets2
assets
31 December 2013


bn
bn
bn 
bn
bn
bn 
bn 
bn














At 1 January 2013


243.2
82.2
64.0 
8.9
7.7
406.0 
136.7 
542.7
External inflows 


11.0
1.3
1.1 
0.1
-
13.5 
13.5
External outflows 


(7.1)
(0.5)
(1.1) 
-
(0.1)
(8.8) 
(8.8)
Overlay net flows 


-
-
- 
-
-
- 
2.5 
2.5














External net flows3


3.9
0.8
- 
0.1
(0.1)
4.7 
2.5 
7.2
Internal net flows 


0.1
(0.7)
0.1 
-
-
(0.5) 
- 
(0.5)














Total net flows 


4.0
0.1
0.1 
0.1
(0.1)
4.2 
2.5 
6.7
Cash management movements5


-
0.5
- 
-
-
0.5 
- 
0.5
Market and other movements3


20.1
2.0
7.3 
0.3
0.8
30.5 
3.8 
34.3














At 31 March 2013


267.3
84.8
71.4 
9.3
8.4
441.2 
143.0 
584.2














External inflows 


6.2
1.0
4.6 
0.2
-
12.0 
12.0
External outflows 


(7.9)
(0.7)
(0.7) 
(0.1)
(0.3)
(9.7) 
(9.7)
Overlay net flows 


-
-
- 
-
-
- 
3.2 
3.2














External net flows3


(1.7)
0.3
3.9 
0.1
(0.3)
2.3 
3.2 
5.5
Internal net flows 


0.4
(0.8)
0.6 
-
-
0.2 
- 
0.2














Total net flows 


(1.3)
(0.5)
4.5 
0.1
(0.3)
2.5 
3.2 
5.7
Cash management movements5


-
0.5
- 
-
-
0.5 
- 
0.5
Market and other movements3


(3.9)
(1.9)
(5.0) 
-
(0.4)
(11.2) 
(0.5) 
(11.7)














At 30 June 2013


262.1
82.9
70.9 
9.4
7.7
433.0 
145.7 
578.7














External inflows4


8.0
4.4
2.2 
0.4
0.1
15.1 
15.1
External outflows 


(8.3)
(0.6)
(1.7) 
(0.1)
-
(10.7) 
(10.7)
Overlay net flows 


-
-
- 
-
-
- 
3.3 
3.3














External net flows3


(0.3)
3.8
0.5 
0.3
0.1
4.4 
3.3 
7.7
Internal net flows 


-
0.6
- 
0.1
(0.1)
0.6 
- 
0.6














Total net flows 


(0.3)
4.4
0.5 
0.4
-
5.0 
3.3 
8.3
Cash management movements5


-
(1.0)
- 
-
-
(1.0) 
- 
(1.0)
Market and other movements3


3.2
1.4
0.1 
0.6
0.3
5.6 
2.4 
8.0














At 30 September 2013


265.0
87.7
71.5 
10.4
8.0
442.6 
151.4 
594.0














External inflows 


6.1
2.0
0.7 
0.3
-
9.1 
9.1
External outflows 


(8.5)
(0.9)
(1.7) 
(0.1)
-
(11.2) 
(11.2)
Overlay net flows 


-
-
- 
-
-
- 
2.2 
2.2














External net flows3


(2.4)
1.1
(1.0) 
0.2
-
(2.1) 
2.2 
0.1
Internal net flows 


0.2
(0.8)
0.1 
0.1
(0.1)
(0.5) 
- 
(0.5)














Total net flows 


(2.2)
0.3
(0.9) 
0.3
(0.1)
(2.6) 
2.2 
(0.4)
Cash management movements5


-
-
- 
-
-
- 
- 
-
Market and other movements3


7.0
1.4
(0.2) 
0.6
0.7
9.5 
8.5 
18.0














At 31 December 2013


269.8
89.4
70.4 
11.3
8.6
449.5 
162.1 
611.6














1. Solutions includes liability driven investments and multi-asset funds. 

2. Overlay assets comprise derivative notionals associated with Solutions business.
3. External net flows exclude movements in overlay assets which have a short maturity period as determined by client agreements and are subject to a higher degree 
of variability. The total value of these assets at 31 December 2013 is 32.8bn (Q1 2013: 22.4bn; Q2 2013: 21.9bn; Q3 2013: 24.3bn), and the
movement in these assets is included in market and other movements for overlay assets.
4. Includes 2.9bn of Legal & General France assets. 

5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Assets and premium flows 59
3.02 Legal & General investment management assets quarterly progression (continued)








3
3
3
3
3
3
3
3
months
months
months
months
months
months
months
months
to 
to 
to 
to 
to 
to 
to 
to 
31.12.14
30.09.14
30.06.14
31.03.14
31.12.13
30.09.13
30.06.13
31.03.13
bn
bn
bn
bn
bn
bn
bn
bn
















LGIM total assets net flows 
(0.9)
(1.7)
1.2
9.0
(0.4)
8.3
5.7
6.7
Attributable to: 








International1
1.3
1.3
2.5
3.4
1.8
6.4
0.6
7.0
UK Institutional 
(2.6)
(1.7)
(0.2)
3.0
(1.6)
1.1
5.6
0.7
UK Retail2
0.3
-
0.2
0.3
0.1
0.3
0.3
(0.3)
Annuities3
(0.3)
(0.1)
(0.3)
3.2
(0.1)
1.4
0.1
-
Mature Businesses 
0.4
(1.2)
(1.0)
(0.9)
(0.6)
(0.9)
(0.9)
(0.7)
















1. Q3 2013 International net flows include 2.9bn of Legal & General France assets.
2. Q2 2014 UK Retail net flows include 0.7bn of assets previously managed externally.
3. Pension funds already managed by LGIM that switch into LGR annuities are excluded. 
3.03 Assets under administration













Consol- 


Mature 


Overseas
idation 

Retail 

Retail 
Work-
Suffolk 
LGAS
adjust- 
Total
Invest- 

For the year ended
Platforms1
Savings2
place
Life
Savings
ment3
LGAS
ments4
Annuities
31 December 2014
bn 
bn 
bn
bn
bn
bn 
bn
bn 
bn










As at 1 January 2014
64.1 
36.3 
8.7
6.6
4.5
(6.8) 
113.4
20.5 
34.4
Gross inflows5
10.1 
1.4 
2.8
1.3
0.4
(0.5) 
15.5
4.4 
6.5
Gross outflows 
(4.7) 
(4.4) 
(0.6)
(0.5)
(0.4)
0.7 
(9.9)
(4.8) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(2.1)










Net flows
5.4 
(3.0) 
2.2
0.8
-
0.2 
5.6
(0.4) 
4.4
Market and other 





movements 
2.4 
2.7 
0.2
0.3
(0.1)
(0.3) 
5.2
1.2 
5.4










As at 31 December 2014
71.9 
36.0 
11.1
7.7
4.4
(6.9) 
124.2
21.3 
44.2


















Consol-


Mature


Overseas
idation

Retail

Retail 
Work-
Suffolk 
LGAS
adjust- 
Total
Invest- 

For the year ended
Platforms1
Savings2
place
Life
Savings
ment3
LGAS
ments4
Annuities
31 December 2013
bn 
bn 
bn
bn
bn
bn 
bn
bn 
bn










As at 1 January 2013
8.6 
36.2 
6.0
5.1
4.5
(1.4) 
59.0
18.6 
32.2
Gross inflows5
11.0 
1.4 
2.1
1.3
0.1
(0.3) 
15.6
3.6 
4.0
Gross outflows 
(3.1) 
(5.1) 
(0.6)
(0.4)
(0.1)
0.5 
(8.8)
(3.7) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(1.9)










Net flows
7.9 
(3.7) 
1.5
0.9
-
0.2 
6.8
(0.1) 
2.1
Cofunds acquisition 
45.7 
- 
-
-
-
(5.4) 
40.3
- 
-
Market and other 





movements 
1.9 
3.8 
1.2
0.6
-
(0.2) 
7.3
2.0 
0.1










As at 31 December 2013
64.1 
36.3 
8.7
6.6
4.5
(6.8) 
113.4
20.5 
34.4










1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.

2. Mature Retail Savings products include with-profits products, bonds and retail pensions.

3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column. 
4. Retail Investments include 1.7bn (2013: 1.5bn) of LGIM unit trust assets held on our Cofunds platform and 3.2bn (2013: 3.2bn) of LGIM unit trust assets held 
on our IPS platform.
5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise 38.3bn (2013: 36.3bn) of retail assets and 33.6bn (2013: 27.8bn). 
of assets held on behalf of institutional clients.
Assets and premium flows 60
3.04 Assets under administration quarterly progression








Consol-


Mature 


Overseas
idation 

Retail 

Retail 
Work-
Suffolk
LGAS
adjust- 
Total
Invest- 

For the year ended
Platforms1
Savings2
place
Life
Savings
ment3
LGAS
ments4
Annuities
31 December 2014
bn 
bn 
bn
bn
bn
bn 
bn
bn 
bn










At 1 January 2014
64.1 
36.3 
8.7
6.6
4.5
(6.8) 
113.4
20.5 
34.4
Gross inflows5
2.6 
0.4 
0.7
0.3
0.1
(0.1) 
4.0
1.0 
3.3
Gross outflows 
(1.1) 
(1.1) 
(0.2)
(0.1)
(0.1)
0.2 
(2.4)
(0.9) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
1.5 
(0.7) 
0.5
0.2
-
0.1 
1.6
0.1 
2.8
Market and other 





movements 
- 
0.5 
(0.1)
0.1
(0.1)
(0.1) 
0.3
0.2 
1.1










At 31 March 2014
65.6 
36.1 
9.1
6.9
4.4
(6.8) 
115.3
20.8 
38.3










Gross inflows5
2.2 
0.3 
0.6
0.3
0.1
(0.1) 
3.4
0.9 
0.2
Gross outflows 
(1.2) 
(1.1) 
(0.1)
(0.1)
(0.1)
0.2 
(2.4)
(1.5) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
1.0 
(0.8) 
0.5
0.2
-
0.1 
1.0
(0.6) 
(0.3)
Market and other 





movements 
0.8 
0.6 
(0.1)
0.1
0.1
- 
1.5
0.4 
0.5










At 30 June 2014
67.4 
35.9 
9.5
7.2
4.5
(6.7) 
117.8
20.6 
38.5










Gross inflows5
2.8 
0.4 
0.7
0.4
0.1
(0.2) 
4.2
1.2 
0.4
Gross outflows 
(1.3) 
(1.2) 
(0.2)
(0.2)
(0.1)
0.2 
(2.8)
(1.3) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.6)










Net flows
1.5 
(0.8) 
0.5
0.2
-
- 
1.4
(0.1) 
(0.2)
Market and other 





movements 
0.1 
0.4 
0.1
0.1
(0.1)
(0.1) 
0.5
0.2 
1.6










At 30 September 2014
69.0 
35.5 
10.1
7.5
4.4
(6.8) 
119.7
20.7 
39.9










Gross inflows5
2.5 
0.3 
0.8
0.3
0.1
(0.1) 
3.9
1.3 
2.6
Gross outflows 
(1.1) 
(1.0) 
(0.1)
(0.1)
(0.1)
0.1 
(2.3)
(1.1) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
1.4 
(0.7) 
0.7
0.2
-
- 
1.6
0.2 
2.1
Market and other 





movements 
1.5 
1.2 
0.3
-
-
(0.1) 
2.9
0.4 
2.2










At 31 December 2014
71.9 
36.0 
11.1
7.7
4.4
(6.9) 
124.2
21.3 
44.2










1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.

2. Mature Retail Savings products include with-profits products, bonds and retail pensions.

3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. 2014 Retail Investments include 1.7bn (Q1 2014: 1.6bn; Q2 2014: 1.5bn; Q3 2014: 1.6bn) of LGIM unit trust assets held on our Cofunds platform and 3.2bn 
(Q1 2014: 3.2bn; Q2 2014: 3.2bn; Q3 2014: 3.2bn) of LGIM unit trust assets held on our IPS platform.

5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise 38.3bn (Q1 2014: 36.6bn; Q2 2014: 37.3bn; Q3 2014: 37.4bn) of
retail assets and 33.6bn (Q1 2014: 29.0bn; Q2 2014: 30.1bn; Q3 2014: 31.6bn) of assets held on behalf of institutional clients.
Assets and premium flows 61
3.04 Assets under administration quarterly progression (continued)










Consol-


Mature 


Overseas
idation 

Retail 

Retail 
Work-
Suffolk
LGAS
adjust- 
Total
Invest- 

For the year ended
Platforms1
Savings2
place
Life
Savings
ment3
LGAS
ments4
Annuities
31 December 2013
bn 
bn 
bn
bn
bn
bn 
bn
bn 
bn










At 1 January 2013
8.6 
36.2 
6.0
5.1
4.5
(1.4) 
59.0
18.6 
32.2
Gross inflows 
0.2 
0.4 
0.5
0.2
0.1
- 
1.4
0.7 
0.8
Gross outflows 
(0.2) 
(1.2) 
(0.2)
(0.1)
(0.1)
0.1 
(1.7)
(1.1) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.4)










Net flows
- 
(0.8) 
0.3
0.1
-
0.1 
(0.3)
(0.4) 
0.4
Market and other 





movements 
0.5 
1.7 
0.6
0.3
-
(0.1) 
3.0
1.2 
0.7










At 31 March 2013
9.1 
37.1 
6.9
5.5
4.5
(1.4) 
61.7
19.4 
33.3










Gross inflows5
1.7 
0.4 
0.5
0.3
-
- 
2.9
1.1 
0.6
Gross outflows 
(0.7) 
(1.4) 
(0.1)
(0.1)
-
- 
(2.3)
(1.0) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
1.0 
(1.0) 
0.4
0.2
-
- 
0.6
0.1 
0.1
Cofunds acquisition 
45.7 
- 
-
-
-
(5.4) 
40.3
- 
-
Market and other 





movements 
(2.1) 
(0.4) 
-
-
-
0.3 
(2.2)
(0.4) 
(1.2)










At 30 June 2013
53.7 
35.7 
7.3
5.7
4.5
(6.5) 
100.4
19.1 
32.2










Gross inflows5
4.5 
0.3 
0.5
0.4
-
(0.1) 
5.6
1.0 
2.3
Gross outflows 
(1.2) 
(1.4) 
(0.1)
(0.1)
-
0.2 
(2.6)
(0.9) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
3.3 
(1.1) 
0.4
0.3
-
0.1 
3.0
0.1 
1.8
Market and other 





movements 
1.3 
1.4 
0.2
0.1
-
(0.2) 
2.8
0.6 
0.5










At 30 September 2013
58.3 
36.0 
7.9
6.1
4.5
(6.6) 
106.2
19.8 
34.5










Gross inflows5
4.6 
0.3 
0.6
0.4
-
(0.2) 
5.7
0.8 
0.3
Gross outflows 
(1.0) 
(1.1) 
(0.2)
(0.1)
-
0.2 
(2.2)
(0.7) 
-
Payments to pensioners 
- 
- 
-
-
-
- 
-
- 
(0.5)










Net flows
3.6 
(0.8) 
0.4
0.3
-
- 
3.5
0.1 
(0.2)
Market and other 





movements 
2.2 
1.1 
0.4
0.2
-
(0.2) 
3.7
0.6 
0.1










At 31 December 2013
64.1 
36.3 
8.7
6.6
4.5
(6.8) 
113.4
20.5 
34.4










1. Platforms include Investor Portfolio Services (IPS) and Cofunds since acquisition.

2. Mature Retail Savings products include with-profits products, bonds and retail pensions.

3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. 2013 Retail Investments include 1.5bn (Q1 2013: 1.3bn; Q2 2013: 1.3bn; Q3 2013: 1.4bn) of LGIM unit trust assets held on our Cofunds platform and 3.2bn (Q1 2013: 3.1bn; Q2 2013: 3.0bn; Q3 2013: 3.1bn) of LGIM unit trust assets held on our IPS platform.
5. Platforms gross inflows include Cofunds institutional net flows. Total Platforms comprise 36.3bn (Q1 2013: 9.1bn; Q2 2013: 34.2bn; Q3 2013: 35.1bn) of retail assets and 27.8bn (Q1 2013: nil; Q2 2013: 19.5bn; Q3 2013: 23.2bn) of assets held on behalf of institutional clients.

Assets and premium flows 62
3.05 Annuities single premiums quarterly progression 











3
3 
3
3
3
3
3
3
months
months 
months
months
months
months
months
months
to
to 
to
to
to
to
to
to
31.12.14
30.09.141
30.06.14
31.03.14
31.12.13
30.09.13
30.06.13
31.03.13
m
m 
m
m
m
m
m
m














Individual Annuities 
83
125 
139
244
200
323
348
406
Bulk Purchase Annuities 
2,619
233 
90
3,045
199
1,943
313
357














Total Annuities
2,702
358 
229
3,289
399
2,266
661
763














1. Excludes 1.9bn of annuity assets transferred from the with-profits fund.
3.06 Insurance new business




















Annual 
Annual 






premiums
premiums






2014
2013






m
m
















UK Retail Protection 






165
148
UK Group Protection 






65
70
France Protection 






33
21
Netherlands Protection 






3
7
US Protection 






91
99
Longevity Insurance 






-
270
















Total Insurance new business






357
615
















3.07 Insurance new business annual premiums quarterly progression








3
3
3
3
3
3
3
3
months
months
months
months
months
months
months
months
to
to
to
to
to
to
to
to
31.12.14
30.09.14
30.06.14
31.03.14
31.12.13
30.09.13
30.06.13
31.03.13
m
m
m
m
m
m
m
m
















UK Retail Protection 
41
41
41
42
43
40
38
27
UK Group Protection 
11
14
20
20
13
17
20
20
France Protection 
-
-
-
33
-
-
-
21
Netherlands Protection 
-
1
-
2
2
1
2
2
US Protection 
21
23
24
23
26
28
23
22
Longevity Insurance 
-
-
-
-
95
-
-
175
















Total Insurance new business
73
79
85
120
179
86
83
267
















Assets and premium flows 63
3.08 Gross written premiums on Insurance business

















12
12






months
months






to
to






31.12.14
31.12.13
 





m
m
















UK Retail Protection





1,056
990
UK Group Protection





351
336
General Insurance





377
375
France Protection





173
168
Netherlands Protection





51
54
US Protection





678
654
Longevity Insurance





333
212
















Total gross written premiums on Insurance business

3,019
2,789
















3.09 Gross written premiums on Insurance business quarterly progression










3
3
3
3
3
3
3
3

months
months
months
months
months
months
months
months

to
to
to
to
to
to
to
to

31.12.14
30.09.14
30.06.14
31.03.14
31.12.13
30.09.13
30.06.13
31.03.13
 
m
m
m
m
m
m
m
m


















UK Retail Protection
273
269
260
254
256
250
244
240
UK Group Protection
57
65
130
99
54
74
123
85
General Insurance
95
104
94
84
95
97
97
86
France Protection
41
41
45
46
41
41
43
43
Netherlands Protection
9
16
12
14
13
14
13
14
US Protection
184
162
170
162
172
156
172
154
Longevity Insurance
82
84
83
84
60
60
60
32


















Total gross written premiums on 








Insurance business
741
741
794
743
691
692
752
654


















3.10 Overseas new business in local currency 













Annual 
Single

Annual 
Single



premiums
premiums
APE
premiums
premiums
APE


31.12.14
31.12.14
31.12.14
31.12.13
31.12.13
31.12.13
















US (US$m) 


150
-
150
155
-
155








Netherlands (m) 


10
138
24
10
126
23








France (m) 


41
351
76
26
312
57








India (Rs m) - Group's 26% interest


408
4,003
808
491
4,264
917








Egypt (Pounds m) - Group's 55% interest


149
-
149
136
-
136








Gulf (US$m) - Group's 50% interest


3
5
4
3
4
3
















Assets and premium flows 64
3.11 Worldwide new business 
















Annual 
Single

Annual 
Single

APE

premiums
premiums
APE
premiums
premiums
APE
Increase/

2014
2014
2014
2013
2013
2013
(decrease)

m
m
m
m
m
m
%
















Individual Annuities 

-
591
59
-
1,277
128
(54)
Bulk Purchase Annuities 

-
5,987
599
-
2,812
281
113
















Total LGR1

-
6,578
658
-
4,089
409
61
















UK Retail Protection 

165
-
165
148
-
148
11
UK Group Protection 

65
-
65
70
-
70
(7)
France 

33
283
61
22
264
48
27
Netherlands 

8
111
19
8
107
19
-
Workplace Savings

592
1,061
698
660
747
735
(5)
Platforms (Cofunds & IPS)2

56
3,624
418
43
2,452
288
45
Suffolk Life
-
1,239
124
-
1,330
133
(7)
Mature Retail Savings3

10
791
89
11
790
90
(1)
With-profits 

53
75
61
53
80
61
-
















Total LGAS

982
7,184
1,700
1,015
5,770
1,592
7
















Retail Investments4

13
4,018
415
12
3,427
355
17
















US Protection

91
-
91
99
-
99
(8)
















India (26% share) 

4
40
8
5
46
10
(20)
Egypt (55% share) 

13
-
13
13
-
13
-
Gulf (50% share)

2
3
2
2
3
2
-
















Total Emerging Markets

19
43
23
20
49
25
(8)
















Total Worldwide new business

1,105
17,823
2,887
1,146
13,335
2,480
16
















1. Total LGR new business excludes nil (2013: 270m) of APE in relation to longevity insurance transactions. It is not included in the table due to the unpredictable
deal flow from this type of business.

2. Platforms APE includes retail business only.
3. Includes bonds and retail pensions.
4. Includes retail unit trusts and structured products only.
Assets and premium flows 65
3.12 Worldwide new business APE quarterly progression 












3
3
3
3
3
3
3
3
months
months
months
months
months
months
months
months
to
to
to
to
to
to
to
to
31.12.14
30.09.14
30.06.14
31.03.14
31.12.13
30.09.13
30.06.13
31.03.13
m
m
m
m
m
m
m
m
















Individual Annuities 
8
13
14
24
20
33
35
40
Bulk Purchase Annuities 
262
23
9
305
20
194
31
36
















Total LGR1
270
36
23
329
40
227
66
76
















UK Retail Protection 
41
41
41
42
43
40
38
27
UK Group Protection 
11
14
20
20
13
17
20
20
France 
7
7
7
40
4
7
6
31
Netherlands 
10
2
2
5
4
4
4
7
Workplace Savings 
168
169
183
178
240
166
127
202
Platforms (Cofunds & IPS)2
85
116
114
103
99
94
69
26
Suffolk Life 
30
29
30
35
44
39
31
19
Mature Retail Savings3
22
24
21
22
25
21
22
22
With-profits 
13
13
17
18
17
13
14
17
















Total LGAS
387
415
435
463
489
401
331
371
















Retail Investments4
113
111
91
100
83
94
104
74
















US Protection
21
23
24
23
26
28
23
22
















India (26% share)
2
1
2
3
1
2
1
6
Egypt (55% share) 
3
3
3
4
3
3
3
4
Gulf (50% share) 
1
-
-
1
-
1
-
1
















Total Emerging Markets
6
4
5
8
4
6
4
11
















Total Worldwide new business
797
589
578
923
642
756
528
554
















1. Total LGR new business excludes nil (2013: 270m) of APE in relation to longevity insurance transactions. It is not included in the table due to the unpredictable deal flow from this type of business.
2. Platforms APE includes retail business only.
3. Includes bonds and retail pensions.
4. Includes retail unit trusts and structured products only. 

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR VXLFBEXFZBBK