REG - Legal & General Grp - L&G Half-year Report 2017 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 2
09/08/2017 07:07
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recognises the value of
these future cash flows in the
same period as the underlying
expense as deferred tax amounts.
The reconciling amounts arising
from these items are included in
the table above. Following the
removal of new retail protection
business from the 'I-E' tax
regime, and the removal of
commission from new insured
savings business under the Retail
Distribution Review at the end of
2012, no material amount of
deferred tax assets arise on new
acquisition expenses and the value
of these future cash flows for
post-2013 acquisition expenses
have been reflected within net
release from operations. The
residual prior year acquisition
expenses will run off predictably
to 2018.
6. The DAC in Savings 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.
7. LGI Other in FY 16 reflects the
difference between the dividend
(release from operations) remitted
from LGN and LGI (US) of £70m and
£63m respectively and the LGN, LGI
(US) and India operating profit
after tax.
IFRS and Release from Operations
Page 31
2.03 LGIM operating profit
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Investment management revenue (excluding 3rd party market data)1 382 332 700
Investment management transactional revenue2 12 16 30
Investment management expenses (excluding 3rd party market data)1 (200) (174) (358)
Workplace Savings (admin only) operating loss3 - (3) (6)
Total LGIM operating profit 194 171 366
1. Investment management revenue and expenses excludes income and costs of £8m in relation to provision of 3rd party market data (H1 16: £5m each; FY 16: £14m each).
2. Transactional revenue includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees for property funds.
3. This represents Workplace Savings admin only and excludes fund management profits.
2.04 General Insurance operating profit and combined operating ratio
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
General Insurance operating profit1 15 31 52
General Insurance combined operating ratio (%)2 95 85 89
1. The General Insurance operating profit includes the underwriting result and smoothed investment return.
2. The calculation of the General Insurance combined operating ratio incorporates claims, commission and expenses as a percentage of net earned premiums.
2.05 LGC operating profit
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Direct investments 69 68 121
Traded portfolio including treasury operations 73 67 136
Total LGC operating profit 142 135 257
2.06 Group investment projects and central expenses
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Group investment projects and central expenses (28) (18) (48)
Restructuring costs1 (12) (16) (54)
Total group investment projects and expenses (40) (34) (102)
1. Restructuring costs exclude the Kingswood office closure costs which have been presented separately.
IFRS and Release from Operations
Page 32
2.07 Investment and other variances
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Investment variance1 198 58 147
M&A related2 6 (4) (102)
Other3 (35) (4) (32)
Total investment and other variances 169 50 13
1. H1 17 investment variance is positive, primarily driven by the outperformance of UK equity markets to expectations. The defined benefit pension scheme variance of £111m contained within this line (H1 16: £31m; FY 16: £29m) primarily reflects the impact of the acquisition of annuities as an asset of the scheme from LGR, and the interest rate difference between the IAS 19 and annuity discount rates. A segmental analysis of Investment and other variances can be found in note 2.09
(a).
2. M&A related includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. H1 17 includes the £17m net gain resulting from the disposal of Legal & General Netherlands. (H1 16: includes the £4m net gain resulting from the disposal of subsidiaries during the period; FY 16: includes the £60m net loss resulting from the classification of Cofunds as held for sale (£64m loss) and the disposal of Suffolk Life (£4m gain)).
3. Other includes new business start-up costs and other non-investment related variance items.
IFRS and Release from Operations
Page 33
Consolidated Income Statement
For the six months ended 30 June 2017
Full year
30.06.17 30.06.16 31.12.16
Notes £m £m £m
Income
Gross written premiums 4.02 3,716 5,492 10,325
Outward reinsurance premiums (866) (719) (1,573)
Net change in provision for unearned premiums (11) 6 4
Net premiums earned 2,839 4,779 8,756
Fees from fund management and investment contracts 481 523 1,068
Investment return 15,457 36,978 67,824
Operational income 141 243 321
Total income 2.09 18,918 42,523 77,969
Expenses
Claims and change in insurance liabilities 3,449 11,377 17,896
Reinsurance recoveries (494) (1,454) (2,745)
Net claims and change in insurance liabilities 2,955 9,923 15,151
Change in provisions for investment contract liabilities 13,618 30,569 58,578
Acquisition costs 377 375 793
Finance costs 106 98 198
Other expenses 468 748 1,569
Transfers to/(from) unallocated divisible surplus 84 (174) (187)
Total expenses 17,608 41,539 76,102
Profit before tax 1,310 984 1,867
Tax expense attributable to policyholder returns (147) (158) (285)
Profit before tax attributable to equity holders 1,163 826 1,582
Total tax expense (358) (317) (602)
Tax expense attributable to policyholder returns 147 158 285
Tax expense attributable to equity holders 2.14 (211) (159) (317)
Profit for the period 2.09 952 667 1,265
Attributable to:
Non-controlling interests 2.20 6 (1) 7
Equity holders of the company 946 668 1,258
Dividend distributions to equity holders of the company during the period 2.16 616 592 830
Dividend distributions to equity holders of the company proposed after the period end 2.16 256 238 616
p p p
Earnings per share1 2.10 15.94 11.27 21.22
Diluted earnings per share1 2.10 15.88 11.23 21.13
1. All earnings per share calculations are based on profit attributable to equity holders of the company.
IFRS and Release from Operations
Page 34
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2017
30.06.17 30.06.16 31.12.16
£m £m £m
Profit for the period 952 667 1,265
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes (89) (62) (138)
Tax on actuarial losses on defined benefit pension schemes 16 12 17
Actuarial gains on defined benefit pension schemes transferred to unallocated divisible surplus 33 23 51
Tax on actuarial gains on defined benefit pension schemes transferred to unallocated divisible surplus (6) (4) (6)
Total items that will not be reclassified to profit or loss subsequently (46) (31) (76)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations (44) 116 190
Movement in cross-currency hedge 20 - -
Net change in financial investments designated as available-for-sale 28 66 (4)
Tax on net change in financial investments designated as available-for-sale (10) (23) 1
Total items that may be reclassified to profit or loss subsequently (6) 159 187
Other comprehensive (expense)/income after tax (52) 128 111
Total comprehensive income for the period 900 795 1,376
Total comprehensive income attributable to:
Non-controlling interests 6 (1) 7
Equity holders of the company 894 796 1,369
IFRS and Release from Operations
Page 35
Consolidated Balance Sheet
As at 30 June 2017
30.06.17 30.06.161 31.12.161
Notes £m £m £m
Assets
Goodwill 11 79 11
Purchased interest in long term businesses and other intangible assets 133 251 155
Deferred acquisition costs 2,032 2,007 2,105
Investment in associates and joint ventures 305 237 283
Property, plant and equipment 69 97 76
Investment property 2.13/3.04 8,714 8,227 8,150
Financial investments 2.13/3.04 435,861 403,237 428,544
Reinsurers' share of contract liabilities 5,300 4,955 5,593
Deferred tax asset 2.14 5 5 5
Current tax recoverable 358 271 297
Other assets 11,262 10,900 5,022
Assets of operations classified as held for sale 2.12 - - 2,265
Cash and cash equivalents 15,805 12,842 15,348
Total assets 479,855 443,108 467,854
Equity
Share capital 2.17 149 149 149
Share premium 985 978 981
Employee scheme treasury shares (40) (32) (30)
Capital redemption and other reserves 211 211 212
Retained earnings 5,910 5,285 5,633
Attributable to owners of the parent 7,215 6,591 6,945
Non-controlling interests 2.20 350 292 338
Total equity 7,565 6,883 7,283
Liabilities
Participating insurance contracts 5,579 5,864 5,794
Participating investment contracts 5,180 5,260 5,271
Unallocated divisible surplus 719 693 661
Value of in-force non-participating contracts (145) (135) (206)
Participating contract liabilities 11,333 11,682 11,520
Non-participating insurance contracts 61,097 58,437 60,779
Non-participating investment contracts 325,059 300,605 321,177
Non-participating contract liabilities 386,156 359,042 381,956
Core borrowings 2.18 3,499 3,064 3,071
Operational borrowings 2.19 553 411 430
Provisions 1,358 1,205 1,328
Deferred tax liabilities 2.14 840 729 813
Current tax liabilities 171 120 117
Payables and other financial liabilities 2.15 43,709 36,756 37,347
Other liabilities 509 617 594
Net asset value attributable to unit holders 24,162 22,599 21,573
Liabilities of operations classified as held for sale 2.12 - - 1,822
Total liabilities 472,290 436,225 460,571
Total equity and liabilities 479,855 443,108 467,854
1. H1 16 and FY 16 Cash Equivalents and Financial Investments values have been restated. Refer to footnote 1 in the Consolidated Cash Flow Statement.
IFRS and Release from Operations
Page 36
Condensed Consolidated Statement of Changes in Equity
Employee Capital Equity
scheme redemption attributable Non-
Share Share treasury and other Retained to owners controlling Total
capital premium shares reserves1 earnings of the parent interests equity
For the six months ended 30 June 2017 £m £m £m £m £m £m £m £m
As at 1 January 2017 149 981 (30) 212 5,633 6,945 338 7,283
Total comprehensive (expense)/income
for the period - - - (6) 900 894 6 900
Options exercised under share option
schemes - 4 - - - 4 - 4
Net movement in employee scheme
treasury shares - - (10) (3) 1 (12) - (12)
Dividends
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