REG - Legal & General Grp - L&G Half-year Report 2017 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 7
09/08/2017 07:07
- Part 7: For the preceding part double click ID:nRSI4600Nf
1. Private equity investments are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. Reasonably possible alternative valuations have been determined using alternative price earnings multiples.
2. Unquoted investments in property vehicles and direct holdings in investment property are valued using valuations provided by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors. Reasonably possible alternative valuations have been determined using alternative yields.
3. No reasonably possible increases or decreases in fair values have been given for securities where the broker valuation methodology is unknown.
IFRS and Release from Operations
Page 53
2.13 Financial investments and investment property (continued)
(c) Effect of changes in significant unobservable inputs to reasonably possible alternative assumptions on level 3 assets
(continued)
Reasonably possible
alternative assumptions
Current Increase Decrease
fair in fair in fair
For the year ended 31 December 2016 Main value value value
Financial instruments and investment property assumptions £m £m £m
Assets
Shareholder
Unquoted investments in property vehicles1 Property yield 292 19 (19)
Untraded and other debt securities2 Cash flows; expected defaults 474 12 (12)
Unquoted and other securities2 Cash flows; expected defaults 72 2 (3)
Investment property1 Property yield 162 8 (9)
Non profit non-linked
Lifetime mortgage loans Market spreads; LTVs 852 10 (18)
Untraded and other debt securities2 Cash flows; expected defaults 1,270 2 (2)
Commercial real estate loans Cash flows; expected defaults 1,776 11 (16)
Investment property1 Property yield 2,442 127 (127)
Other Cash flows 92 - -
With-profits
Private equity investment vehicles Price earnings multiple 8 - -
Unquoted investments in property vehicles1 Property yield 200 12 (12)
Untraded and other debt securities2 Cash flows; expected defaults 10 - -
Investment property1 Property yield 738 38 (38)
Unit linked
Unquoted investments in property vehicles1 Property yield 87 5 (5)
Untraded and other debt securities2 Cash flows; expected defaults 23 - -
Unquoted and other securities2 Cash flows; expected defaults 335 17 (17)
Investment property1 Property yield 4,808 235 (235)
Total 13,641 498 (513)
1. Unquoted investments in property vehicles and direct holdings in investment property are valued using valuations provided by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors. Reasonably possible alternative valuations have been determined using alternative yields.
2. No reasonably possible increases or decreases in fair values have been given for securities where the broker valuation methodology is unknown.
IFRS and Release from Operations
Page 54
2.14 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:
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Profit before tax attributable to equity holders 1,163 826 1,582
Tax calculated at 19.25% (H1 16: 20.00%; FY 16: 20.00%) 224 165 316
Adjusted for the effects of:
Recurring reconciling items:
Income not subject to tax (6) (4) (12)
Higher/(lower) rate of tax on profits taxed overseas 3 4 7
Non-deductible expenses - 2 4
Differences between taxable and accounting investment gains (4) (2) (11)
Non-recurring reconciling items:
Income not subject to tax1 (4) (1) (1)
Non-deductible expenses 1 - 17
Differences between taxable and accounting investment gains - (3) (14)
Adjustments in respect of prior years (3) - 13
Impact of reduction in UK corporate tax rate to 17% from 2020 on deferred tax balances - (2) (2)
Tax attributable to equity holders 211 159 317
Equity holders' effective tax rate2 18.1% 19.2% 20.0%
1. Includes gains relating to M&A activity which are non taxable.
2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders. Refer to note 2.08 for detail on the methodology of the split of policyholder and equity holders' tax.
IFRS and Release from Operations
Page 55
2.14 Tax (continued)
(b) Deferred tax
30.06.17 30.06.16 31.12.16
Deferred tax (liabilities)/assets £m £m £m
Deferred acquisition expenses (414) (392) (429)
- UK (43) (48) (45)
- Overseas (371) (344) (384)
Difference between the tax and accounting value of insurance contracts (288) (305) (286)
- UK (134) (125) (123)
- Overseas (154) (180) (163)
Realised and unrealised gains on investments (275) (210) (255)
Excess of depreciation over capital allowances 16 16 15
Excess expenses1 40 62 49
Accounting provisions and other (51) (29) (51)
Trading losses2 63 88 80
Pension fund deficit 77 71 82
Purchased interest in long-term business (3) (25) (13)
Net deferred tax liabilities (835) (724) (808)
Analysed by:
- UK deferred tax asset
2 5 5
- Overseas deferred tax asset 3 - -
- UK deferred tax liability (316) (206) (291)
- Overseas deferred tax liability (524) (523) (522)
Net deferred tax liabilities3 (835) (724) (808)
1. The reduction in the UK deferred tax asset on excess expenses reflects the unwind of the spread acquisition expenses.
2. Trading losses include UK trade and US operating losses of £8m (H1 16: £7m; FY 16: £5m) and £55m (H1 16: £81m; FY 16: £75m) respectively. The reduction in the deferred tax asset primarily reflects utilisation of brought forward US operating losses against US profits.
3. On the Consolidated Balance Sheet, the net deferred tax liability has been split between an asset of £5m and a liability of £840m where the relevant items cannot be offset.
IFRS and Release from Operations
Page 56
2.15 Payables and other financial liabilities
Full year
30.06.17 30.06.16 31.12.16
£m £m £m
Derivative liabilities 7,376 15,473 9,014
Repurchase agreements1 28,076 17,295 23,163
Other 8,257 3,988 5,170
Payables and other financial liabilities 43,709 36,756 37,347
1. The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements.
Fair value hierarchy
Amortised
Total Level 1 Level 2 Level 3 cost
As at 30 June 2017 £m £m £m £m £m
Derivative liabilities 7,376 482 6,894 - -
Repurchase agreements 28,076 - - - 28,076
Other 8,257 2,550 15 179 5,513
Payables and other financial liabilities 43,709 3,032 6,909 179 33,589
Amortised
Total Level 1 Level 2 Level 3 cost
As at 30 June 2016 £m £m £m £m £m
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