REG - Legal & General Grp - L&G H1 2014 Results Part 3 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 5
29/10/2014 10:33
- Part 5: For the preceding part double click ID:nRSF3773Od
190 455 157 612
Intra-group distributions5 3 - 3 - 3
Transfer to non-covered business6 (15) - (15) - (15)
Other reserve movements including pension deficit7 (44) - (44) 56 12
Embedded value at 30 June 2014 1,368 2,584 3,952 5,095 9,047
1. Opening balances at 1 January 2014 include LGF and LGN.
2. The UK free surplus reduction of £195m to finance new business includes £11m new business strain and £184m additional required capital.
3. The increase in UK free surplus of £457m from the expected transfer from the in-force non profit business includes £344m of operational cash generation and a £113m reduction in required capital.The £383m operational cash generation from LGAS and LGR per Note 2.01 also includes £14m dividend from LGN, £1m dividend from LGF and £24m primarily reflecting profit from non-covered business.
4. Reflects the impact of change in treatment in deferred tax to align with IFRS by removing the effect of discounting.
5. Intra-group distributions primarily reflect £4m dividend from the non-covered subsidiary, Nationwide Life, to Society.
6. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by LGIM to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.
7. The other reserve movements reflects the pension deficit movement and the effect of reinsurance arrangement transactions between UK and US covered business.
The value of in-force business of £5,095m is comprised of £4,676m of non profit business and £419m of with-profits business.
European Embedded Value
93
5.01 LGAS and LGR embedded value reconciliation (continued)
Shareholder net worth Total
Free Required Value of embedded
surplus capital Total in-force value
For the six months ended 30 June 20131 £m £m £m £m £m
At 1 January 2013 1,259 2,215 3,474 4,548 8,022
Exchange movement 9 6 15 8 23
Operating profit/(loss) after tax - UK business:
- New business contribution2 (132) 95 (37) 205 168
- Expected return on VIF - - - 132 132
- Expected transfer from VIF to SNW3 429 (89) 340 (340) -
- Expected return on SNW 22 36 58 - 58
Generation of embedded value 319 42 361 (3) 358
- Experience variances (2) 3 1 35 36
- Operating assumption changes 21 - 21 (9) 12
- Development costs (14) - (14) - (14)
Variances 5 3 8 26 34
Operating profit/(loss) after tax - LGAS overseas 6 2 8 (4) 4
Operating profit after tax - LGAS & LGR 330 47 377 19 396
Non-operating profit/(loss) after tax - UK business:
- Economic variances 166 (34) 132 109 241
- Effect of tax rate changes and other taxation impacts4 - - - 41 41
Non-operating profit/(loss) after tax - LGAS overseas 8 (2) 6 28 34
Non-operating profit/(loss) after tax - LGAS & LGR 174 (36) 138 178 316
Profit for the period - LGAS & LGR 504 11 515 197 712
Intra-group distributions5 9 - 9 - 9
Transfer to non-covered business6 (12) - (12) - (12)
Other reserve movements including pension deficit7 (39) - (39) (5) (44)
Embedded value at 30 June 2013 1,730 2,232 3,962 4,748 8,710
1. Opening balances at 1 January 2013 include LGF and LGN.
2. The free surplus reduction of £132m to finance new business includes £37m new business strain and £95m additional required capital.
3. The increase in free surplus of £429m from the expected transfer from the in-force covered business includes £340m of operational cash generation and a £89m reduction in required capital. The £361m operational cash generation from LGAS and LGR per Note 2.01 also includes £1m dividend from LGF and £20m primarily reflecting IFRS profit from non covered business.
4. Reflects the implementation of the UK planned future reductions in corporation tax to 20% on 1 April 2015.
5. UK intra-group dividends reflect dividends of £10m paid to Society from subsidiaries (primarily Nationwide Life) and E1m from LGF paid to Group.
6. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.
7. The other reserve movements reflects the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.
The UK value of in-force business of £4,748m is comprised of £4,330m of non profit business and £418m of with-profits business.
European Embedded Value
94
5.01 LGAS and LGR embedded value reconciliation (continued)
Shareholder net worth Total
Free Required Value of embedded
surplus capital Total in-force value
For the year ended 31 December 2013 £m £m £m £m £m
At 1 January 20131 1,259 2,215 3,474 4,548 8,022
Exchange movement 3 3 6 3 9
Operating profit/(loss) after tax - UK business:
- New business contribution2 (324) 284 (40) 484 444
- Expected return on VIF - - - 266 266
- Expected transfer from VIF to SNW3 869 (181) 688 (688) -
- Expected return on SNW 40 76 116 - 116
Generation of embedded value 585 179 764 62 826
- Experience variances 5 (9) (4) 14 10
- Operating assumption changes (24) 2 (22) 21 (1)
- Development costs (31) - (31) - (31)
Variances (50) (7) (57) 35 (22)
Operating profit after tax - LGAS overseas 7 1 8 8 16
Operating profit after tax - LGAS & LGR 542 173 715 105 820
Non-operating profit/(loss) after tax - UK business:
- Economic variances 109 (8) 101 80 181
- Effect of tax rate changes and other taxation impacts4 - - - 41 41
Non-operating profit after tax - LGAS overseas 20 - 20 40 60
Non-operating profit/(loss) after tax - LGAS & LGR 129 (8) 121 161 282
Profit for the year - LGAS & LGR 671 165 836 266 1,102
Intra-group distributions5 (617) - (617) - (617)
Transfer to non-covered business6 (27) - (27) - (27)
Other reserve movements including pension deficit7 (115) 7 (108) 73 (35)
Embedded value at 31 December 2013 1,174 2,390 3,564 4,890 8,454
1. Opening balances at 1 January 2013 include LGF and LGN.
2. The UK free surplus reduction of £324m to finance new business includes £40m new business strain and £284m additional required capital.
3. The increase in UK free surplus of £869m from the expected transfer from the in-force covered business includes £688m of operational cash generation and a £181m reduction in required capital. The £734m operational cash from LGAS and LGR per Note 2.01 also includes £2m and £14m remitted from LGF and LGN respectively, and £30m primarily reflecting IFRS profit from non covered business.
4. Reflects the implementation of the UK planned future reductions in corporation tax to 20% on 1 April 2015.
5. UK intra-group dividends reflect a £625m dividend paid from Society to Group and dividends of £10m paid to Society from subsidiaries (primarily Nationwide Life). Dividends of E16m from LGN were also paid to Society.
6. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by LGIM to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.
7. The other reserve movements reflects the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.
The value of in-force business of £4,890m is comprised of £4,454m of non profit business and £436m of with-profits business.
European Embedded Value
95
5.02 Analysis of shareholders' equity
LGC
LGAS and and group
LGR LGIM expenses LGA Total
As at 30 June 2014 £m £m £m £m £m
Analysed as:
IFRS basis shareholders' equity1 820 566 3,538 787 5,711
Additional retained profit/(loss) on an EEV basis 5,041 - (1,027) 118 4,132
Shareholders' equity on an EEV basis 5,861 566 2,511 905 9,843
Comprising:
Business reported on an IFRS basis 441 566 (1,116) - (109)
Business reported on an EEV basis:
Shareholder net worth
- Free surplus2 74 1,294 139 1,507
- Required capital to cover solvency margin 251 2,333
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