REG - Legal & General Grp - L&G Half-year results 2015 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 1
RNS Number : 1056VLegal & General Group Plc05 August 2015IFRS and Cash 27
Operating profit
For the six months ended 30 June 2015
Full year
30.06.15
30.06.14
31.12.14
Notes
m
m
m
From continuing operations
Insurance
2.02
192
179
370
Savings
2.02
50
54
105
Legal & General Retirement (LGR)
2.02
280
188
428
Legal & General Investment Management (LGIM)
2.04
176
149
321
Legal & General Capital (LGC)
2.05
115
102
203
Legal & General America (LGA)
40
43
56
Operating profit from divisions
853
715
1,483
Group debt costs1
(75)
(63)
(142)
Group investment projects and expenses2
2.06
(28)
(16)
(66)
Operating profit
750
636
1,275
Investment and other variances
2.07
(86)
(6)
(44)
Gains on non-controlling interests
8
6
7
Profit before tax attributable to equity holders
672
636
1,238
Tax expense attributable to equity holders of the Company
2.16
(125)
(129)
(246)
Profit for the period
547
507
992
Profit attributable to equity holders of the Company
539
501
985
p
p
p
Earnings per share
Based on profit attributable to equity holders of the Company
2.10
9.11
8.51
16.70
Adjusted earnings per share3
Based on profit attributable to equity holders of the Company
2.10
9.79
8.51
16.70
Diluted earnings per share
Based on profit attributable to equity holders of the Company
2.10
9.05
8.42
16.54
1. Group debt costs exclude interest on non recourse financing.
2. Group investment projects and expenses in H1 15 include restructuring costs of 9m (H1 14: nil; FY 14; 31m).
3. Adjusted earnings per share has been calculated excluding the impairment loss, 40m, resulting from the classification of disposal groups as held for sale.
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.
Following changes to the organisational structure announced in November 2014, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the Workplace Savings business is now included in the LGIM segment. Workplace Savings had previously been recognised in the Savings (LGAS) segment. Comparatives have been amended accordingly in line with this reclassification. The impact of the Workplace Savings reclassification has been to reduce LGIM H1 14 and FY 14 operating profit by 10m and 15m respectively, with an offsetting increase in the Savings segment's 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.
Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF) and Legal & General Netherlands (LGN). Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.
LGR represents Annuities (both individual and bulk purchase), longevity insurance and lifetime mortgages.
The LGIM segment represents institutional and retail investment management and Workplace Savings 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).
The LGA segment comprises protection business written in the USA.
IFRS and Cash 28
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
New
Net
in
Operating
profit/
cash
business
cash
Exper-
valuation
Non-cash
Inter-
profit/
Tax
(loss)
gene-
(strain)/
gene-
ience
assump-
items and
national
(loss)
expense/
before
For the six months ended
ration1
surplus
ration
variances
tions
other
and other2
after tax
(credit)
tax
30 June 2015
m
m
m
m
m
m
m
m
m
m
Insurance
165
-
165
7
2
(15)
(7)
152
40
192
Savings3
64
(5)
59
(1)
-
(18)
-
40
10
50
LGR
170
22
192
15
37
(13)
-
231
49
280
LGIM3
150
(12)
138
(2)
-
1
-
137
39
176
- LGIM excluding Workplace
Savings
139
-
139
-
-
-
-
139
40
179
- Workplace Savings
11
(12)
(1)
(2)
-
1
-
(2)
(1)
(3)
LGC
92
-
92
-
-
-
-
92
23
115
LGA
52
-
52
-
-
-
(34)
18
22
40
Total from divisions
693
5
698
19
39
(45)
(41)
670
183
853
Group debt costs
(60)
-
(60)
-
-
-
-
(60)
(15)
(75)
Group investment projects
and expenses
(9)
-
(9)
-
-
-
(13)
(22)
(6)
(28)
Total
624
5
629
19
39
(45)
(54)
588
162
750
1. Operational cash generation includes dividends remitted from LGF of 1m (H1 14: 1m; FY 14: 2m) and LGN of 18m (H1 14: 14m; FY 14: 29m) within the Insurance line and LGA of 52m (H1 14: 44m; FY 14: 46m).
2. International and other includes 9m of restructuring costs (7m before tax) (H1 14: nil; FY 14: 25m) within the Group investment projects and expenses line.
3. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior year comparatives have been amended.
Operational cash generation for Insurance, Savings, LGR and LGIM represents the expected surplus generated in the year from the in-force non profit Protection, Savings, Annuities and workplace businesses using best estimate assumptions. The Insurance operational cash generation also includes dividends remitted from LGF and LGN and operating profit after tax from General Insurance and the remaining Insurance businesses. The Savings operational cash generation also includes the shareholders' share of bonuses on with-profits business and operating profit after tax from the remaining Savings businesses. The LGIM operational cash generation also includes operating profit after tax from the institutional and retail investment management businesses.
New business strain for Insurance, Savings, LGR and LGIM represents the cost of acquiring new business and setting up regulatory reserves in respect of the new business for UK non profit Protection, Savings, Annuities and Workplace Savings, net of tax. The new business strain and operational cash generation for Insurance, Savings, LGR and LGIM exclude the required solvency margin from the liability calculation.
Net cash generation for Insurance, Savings, LGR and LGIM is defined as operational cash generation less new business strain.
Operational cash generation and net cash for 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 29
2.01 Reconciliation of operational cash to operating profit before tax (continued)
Opera-
Changes
Operating
tional
New
Net
in
Operating
profit/
cash
business
cash
Exper-
valuation
Non-cash
Inter-
profit/
Tax
(loss)
gene-
(strain)/
gene-
ience
assump-
items and
national
(loss)
expense/
before
For the six months ended
ration1
surplus
ration
variances
tions
other
and other
after tax
(credit)
tax
30 June 2014
m
m
m
m
m
m
m
m
m
m
Insurance
166
(8)
158
(9)
15
(24)
(2)
138
41
179
Savings2
64
(8)
56
(3)
-
(10)
-
43
11
54
LGR
146
20
166
(2)
-
(16)
-
148
40
188
LGIM2
132
(15)
117
(3)
(1)
4
-
117
32
149
- LGIM excluding Workplace
Savings
125
-
125
-
-
-
-
125
34
159
- Workplace Savings
7
(15)
(8)
(3)
(1)
4
-
(8)
(2)
(10)
LGC
82
-
82
-
-
-
-
82
20
102
LGA
44
-
44
-
-
-
(17)
27
16
43
Total from divisions
634
(11)
623
(17)
14
(46)
(19)
555
160
715
Group debt costs
(49)
-
(49)
-
-
-
-
(49)
(14)
(63)
Group investment projects
and expenses
(7)
-
(7)
-
-
-
(6)
(13)
(3)
(16)
Total
578
(11)
567
(17)
14
(46)
(25)
493
143
636
1. Operational cash generation includes dividends remitted from LGF of 1m and LGN of 14m within the Insurance line and LGA of 44m.
2. LGIM includes the Workplace Savings business which was previously reported in Savings.
Opera-
Changes
Operating
tional
New
Net
in
Operating
profit/
cash
business
cash
Exper-
valuation
Non-cash
Inter-
profit/
Tax
(loss)
gene-
(strain)/
gene-
ience
assump-
items and
national
(loss)
expense/
before
For the year ended
ration1
surplus
ration
variances
tions
other
and other2
after tax
(credit)
tax
31 December 2014
m
m
m
m
m
m
m
m
m
m
Insurance
332
(5)
327
(8)
24
(50)
(6)
287
83
370
Savings3
127
(14)
113
(7)
3
(22)
(1)
86
19
105
LGR
292
51
343
(13)
48
(32)
-
346
82
428
LGIM3
275
(29)
246
(3)
5
2
-
250
71
321
- LGIM excluding Workplace
Savings
262
-
262
-
-
-
-
262
74
336
- Workplace Savings
13
(29)
(16)
(3)
5
2
-
(12)
(3)
(15)
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 and LGN of 29m within the Insurance line and LGA of 46m.
2. International and other includes 25m of restructuring costs (31m before tax) within the Group investment projects and expenses line.
3. LGIM includes the Workplace Savings business which was previously reported in Savings.
IFRS and Cash 30
2.02 Analysis of Insurance, Savings and LGR operating profit
Insurance
Savings1
LGR
Insurance
Savings1
LGR
30.06.15
30.06.15
30.06.15
30.06.14
30.06.14
30.06.14
m
m
m
m
m
m
Net cash generation
165
59
192
158
56
166
Experience variances
Persistency
1
(4)
-
3
(3)
-
Mortality/Morbidity
4
-
4
(2)
-
5
Expenses
4
-
-
2
-
-
BPA Loading
-
-
(4)
-
-
-
Project and development costs
(1)
-
(6)
(3)
(2)
(8)
Other2
(1)
3
21
(9)
2
1
Total experience variances
7
(1)
15
(9)
(3)
(2)
Changes to valuation assumptions
Persistency
-
-
-
-
-
-
Mortality/Morbidity3
3
-
37
22
-
-
Expenses
1
-
-
-
-
-
Other
(2)
-
-
(7)
-
-
Total valuation assumption changes
2
-
37
15
-
-
Movement in non-cash items
Deferred tax
2
-
-
(1)
(2)
-
Utilisation of brought forward trading losses
(2)
(2)
(13)
(2)
-
(36)
Acquisition expense tax relief
(17)
-
-
(18)
(1)
-
Deferred Acquisition Costs (DAC)4
-
(27)
-
-
(31)
-
Deferred Income Liabilities (DIL)4
-
17
-
-
24
-
Other
2
(6)
-
(3)
-
20
Total non-cash movement items
(15)
(18)
(13)
(24)
(10)
(16)
Other
(7)
-
-
(2)
-
-
Operating profit after tax
152
40
231
138
43
148
Tax gross up
40
10
49
41
11
40
Operating profit before tax
192
50
280
179
54
188
1. Savings excludes the Workplace Savings business which is now reported in LGIM. Prior period comparatives have been amended. The impact includes the increase of net cash generation by 8m and the increase of operating profit by 10m. Offsetting movements have been reflected in the LGIM segment.
2. The other LGR experience variance reflects the benefit to profit of selective longevity and asset reinsurance related to bulk annuity transactions.
3. The mortality/morbidity valuation assumption change in LGR primarily reflects a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants.
4. 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.
IFRS and Cash 31
2.02 Analysis of Insurance, Savings and LGR operating profit (continued)
Insurance
Savings1
LGR
Full year
Full year
Full year
31.12.14
31.12.14
31.12.14
m
m
m
Net cash generation
327
113
343
Experience variances
Persistency
(3)
1
(3)
Mortality/Morbidity2
(7)
2
13
Expenses
1
(2)
(3)
BPA Loading
-
-
6
Project and development costs
(6)
(3)
(19)
Other
7
(5)
(7)
Total experience variances
(8)
(7)
(13)
Changes to valuation assumptions
Persistency3
43
(1)
-
Mortality/Morbidity4
37
-
61
Expenses
11
3
(5)
Other5
(67)
1
(8)
Total valuation assumption changes
24
3
48
Movement in non-cash items
Deferred tax
(3)
6
(11)
Utilisation of brought forward trading losses
(11)
2
(62)
Acquisition expense tax relief
(36)
(6)
-
Deferred Acquisition Costs (DAC)6
-
(76)
-
Deferred Income Liabilities (DIL)6
-
50
-
Other7
-
2
41
Total non-cash movement items
(50)
(22)
(32)
Other
(6)
(1)
-
Operating profit after tax
287
86
346
Tax gross up
83
19
82
Operating profit before tax
370
105
428
1. Savings excludes the Workplace Savings business which is now reported in LGIM. The impact includes the increase of net cash generation by 16m and the increase of operating profit by 15m. Offsetting movements have been reflected in the LGIM segment.
2. The mortality/morbidity experience variances in Insurance in 2014 primarily relates to adverse morbidity on one of our group protection products.
3. The persistency valuation assumption change in Insurance primarily relates to an improvement in the experience and modelling for persistency on some of our long term products.
4. The mortality/morbidity valuation assumption change in Insurance 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.
5. The other valuation assumption change in Insurance primarily relates to a refinement in the modelling for reinsurance on certain long term policies.
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. 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 32
2.03 General insurance operating profit and combined operating ratio
Full year
30.06.15
30.06.14
31.12.14
m
m
m
General insurance operating profit1
38
28
59
General insurance combined operating ratio (%)2
82
88
87
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 LGIM1
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Investment management revenue
347
309
645
Investment management expenses
(168)
(150)
(309)
Workplace Savings operating loss
(3)
(10)
(15)
Total LGIM operating profit
176
149
321
1. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior period comparatives have been amended. Offsetting movements have been reflected in the Savings segment.
2.05 LGC
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Investment return
125
109
219
Expenses
(10)
(7)
(16)
Total LGC operating profit
115
102
203
2.06 Group investment projects and expenses
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Group investment projects and central expenses
(19)
(16)
(35)
Restructuring costs
(9)
-
(31)
Total Group investment projects and expenses
(28)
(16)
(66)
2.07 Investment and other variances
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Investment variance1
(29)
26
(8)
M&A related2
(55)
(15)
(21)
Other3
(2)
(17)
(15)
Total Investment and other variances
(86)
(6)
(44)
1. H1 15 investment variance is negative, primarily arising from the defined pension benefit scheme variance of (26)m (H1 14: 8m; FY 14: 40m), that reflects the actuarial losses and gains and valuation differences arising on annuity assets held by defined benefit pension schemes that have been purchased from Legal & General Assurance Society Limited (Society).
2. M&A related includes gains, expenses and intangible amortisation relating to acquisitions and disposals (including the recognition of 40m impairment losses arising on classification of disposal groups as held for sale).
3. Other includes new business start-up costs and other non-investment related variance items.
IFRS and Cash 33
Consolidated Income Statement
For the six months ended 30 June 2015
Full year
30.06.15
30.06.14
31.12.14
Notes
m
m
m
Revenue
Gross written premiums
3,170
5,291
10,168
Outward reinsurance premiums
(865)
(514)
(1,122)
Net change in provision for unearned premiums
14
6
1
Net premiums earned
2,319
4,783
9,047
Fees from fund management and investment contracts
564
548
1,085
Investment return
5,062
13,481
40,639
Operational income
444
372
746
Total revenue
2.09
8,389
19,184
51,517
Expenses
Claims and change in insurance liabilities
2,090
6,717
15,071
Reinsurance recoveries
(999)
(582)
(975)
Net claims and change in insurance liabilities
1,091
6,135
14,096
Change in provisions for investment contract liabilities
4,958
10,864
33,385
Acquisition costs
429
436
873
Finance costs
91
90
183
Other expenses
930
869
1,748
Transfers to/(from) unallocated divisible surplus
61
50
(181)
Total expenses
7,560
18,444
50,104
Profit before tax
829
740
1,413
Tax expense attributable to policyholder returns
(157)
(104)
(175)
Profit before tax attributable to equity holders
672
636
1,238
Total tax expense
(282)
(233)
(421)
Tax expense attributable to policyholder returns
157
104
175
Tax expense attributable to equity holders
2.16
(125)
(129)
(246)
Profit for the period
547
507
992
Attributable to:
Non-controlling interests
8
6
7
Equity holders of the Company
539
501
985
Dividend distributions to equity holders of the Company during the period
2.18
496
408
580
Dividend distributions to equity holders of the Company proposed after the period end
2.18
205
172
496
p
p
p
Earnings per share
Based on profit attributable to equity holders of the Company
2.10
9.11
8.51
16.70
Adjusted earnings per share 1
Based on profit attributable to equity holders of the Company
2.10
9.79
8.51
16.70
Diluted earnings per share
Based on profit attributable to equity holders of the Company
2.10
9.05
8.42
16.54
1. Adjusted earnings per share has been calculated excluding the impairment loss, 40m, resulting from the classification of disposal groups as held for sale.
IFRS and Cash 34
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2015
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Profit for the period
547
507
992
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes
22
(10)
(94)
Actuarial (losses)/gains on defined benefit pension schemes transferred to unallocated
divisible surplus
(8)
4
38
Total items that will not be reclassified to profit or loss subsequently
14
(6)
(56)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations
(25)
(28)
12
Net change in financial investments designated as available-for-sale
(18)
20
26
Total items that may be reclassified to profit or loss subsequently
(43)
(8)
38
Other comprehensive expense after tax
(29)
(14)
(18)
Total comprehensive income for the period
518
493
974
Total comprehensive income attributable to:
Non-controlling interests
8
6
7
Equity holders of the Company
510
487
967
IFRS and Cash 35
Consolidated Balance Sheet
As at 30 June 2015
30.06.15
30.06.14
31.12.14
Notes
m
m
m
Assets
Goodwill
82
73
79
Purchased interest in long term businesses and other intangible assets
328
341
342
Deferred acquisition costs
1,822
1,848
1,936
Investment in associates and joint ventures
207
138
149
Property, plant and equipment
86
136
146
Investment property
2.15
8,779
7,352
8,152
Financial investments
2.15
351,159
340,170
360,614
Reinsurers' share of contract liabilities
3,360
3,025
2,906
UK deferred tax asset
2.16
33
68
54
Current tax recoverable
185
303
217
Other assets
3,539
3,018
2,249
Assets of operations classified as held for sale
2.13
6,149
-
-
Cash and cash equivalents
19,583
21,087
22,709
Total assets
395,312
377,559
399,553
Equity
Share capital
149
148
149
Share premium
973
966
969
Employee scheme treasury shares
(31)
(36)
(37)
Capital redemption and other reserves
98
54
117
Retained earnings
4,843
4,579
4,830
Shareholders' equity
6,032
5,711
6,028
Non-controlling interests
2.22
281
271
275
Total equity
6,313
5,982
6,303
Liabilities
Participating insurance contracts
5,901
6,596
6,579
Participating investment contracts
5,093
7,452
7,667
Unallocated divisible surplus
798
1,253
983
Value of in-force non-participating contracts
(223)
(234)
(208)
Participating contract liabilities
11,569
15,067
15,021
Non-participating insurance contracts
49,274
44,439
49,876
Non-participating investment contracts
280,472
279,084
288,558
Non-participating contract liabilities
329,746
323,523
338,434
Core borrowings
2.20
2,490
2,991
2,977
Operational borrowings
2.21
645
692
715
Provisions
1,189
1,143
1,247
UK deferred tax liabilities
2.16
277
96
180
Overseas deferred tax liabilities
2.16
414
402
434
Current tax liabilities
40
12
9
Payables and other financial liabilities
2.17
18,449
11,281
16,131
Other liabilities
671
923
963
Net asset value attributable to unit holders
17,513
15,447
17,139
Liabilities of operations classified as held for sale
2.13
5,996
-
-
Total liabilities
388,999
371,577
393,250
Total equity and liabilities
395,312
377,559
399,553
IFRS and Cash 36
Condensed 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 six months ended 30 June 2015
m
m
m
m
m
m
m
m
As at 1 January 2015
149
969
(37)
117
4,830
6,028
275
6,303
Total comprehensive income/(expense)
for the period
-
-
-
(43)
553
510
8
518
Options exercised under
share option schemes
-
4
-
-
-
4
-
4
Net movement in employee scheme
treasury shares
-
-
6
(4)
(16)
(14)
-
(14)
Dividends
-
-
-
-
(496)
(496)
-
(496)
Movement in third party interests
-
-
-
-
-
-
(2)
(2)
Currency translation differences
-
-
-
28
(28)
-
-
-
As at 30 June 2015
149
973
(31)
98
4,843
6,032
281
6,313
Employee
Capital
scheme
redemption
Non-
Share
Share
treasury
and other
Retained
controlling
Total
capital
premium
shares
reserves
earnings
Total
interests
equity
For the six months ended 30 June 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
Total comprehensive income/(expense)
for the period
-
-
-
(8)
495
487
6
493
Options exercised under
share option schemes
-
7
-
-
-
7
-
7
Net movement in employee scheme
treasury shares
-
-
3
(10)
(10)
(17)
-
(17)
Dividends
-
-
-
-
(408)
(408)
-
(408)
Movement in third party interests
-
-
-
-
-
-
-
-
Currency translation differences
-
-
-
15
(15)
-
-
-
As at 30 June 2014
148
966
(36)
54
4,579
5,711
271
5,982
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
Total comprehensive income
for the year
-
-
-
38
929
967
7
974
Options exercised under
share option schemes
1
10
-
-
-
11
-
11
Net movement in employee scheme
treasury shares
-
-
2
3
(17)
(12)
-
(12)
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 37
Consolidated Cash Flow Statement
For the six months ended 30 June 2015
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Cash flows from operating activities
Profit for the period
547
507
992
Adjustments for non cash movements in net profit for the period
Realised and unrealised losses/(gains) on financial investments and investment properties
4,236
(8,705)
(30,851)
Investment income
(4,928)
(4,853)
(9,205)
Interest expense
91
90
183
Tax expense
282
233
421
Other adjustments
(35)
46
87
Net (increase)/decrease in operational assets
Investments held for trading or designated as fair value through profit or loss
(2,450)
2,036
5,931
Investments designated as available-for-sale
210
164
225
Other assets
(1,518)
(857)
(151)
Net increase/(decrease) in operational liabilities
Insurance contracts
(784)
3,923
9,228
Transfer to/(from) unallocated divisible surplus
68
39
(222)
Investment contracts
(5,254)
387
10,156
Value of in-force non-participating contracts
(15)
14
40
Other liabilities
3,249
6,182
9,811
Cash generated used in operations
(6,301)
(794)
(3,355)
Interest paid
(129)
(103)
(203)
Interest received
2,413
2,430
4,857
Tax paid1
(84)
(97)
(76)
Dividends received
2,282
2,169
4,264
Net cash flows (used in)/generated from operating activities
(1,819)
3,605
5,487
Cash flows from investing activities
Net acquisition of plant, equipment and intangibles
(11)
(12)
(80)
Acquisitions (net of cash acquired)2
(5)
(18)
(38)
Disposal of subsidiaries
34
50
56
Investment in joint ventures
(65)
(77)
(77)
Net cash flows from investing activities
(47)
(57)
(139)
Cash flows from financing activities
Dividend distributions to ordinary equity holders of the Company during the period
(496)
(408)
(580)
Proceeds from issue of ordinary share capital
4
7
11
Purchase of employee scheme shares
(7)
(3)
(2)
Proceeds from borrowings
194
592
674
Repayment of borrowings
(649)
(88)
(181)
Net cash flows (used in)/generated from financing activities
(954)
100
(78)
Net increase in cash and cash equivalents
(2,820)
3,648
5,270
Exchange losses on cash and cash equivalents
(65)
(15)
(15)
Cash and cash equivalents at 1 January
22,709
17,454
17,454
Cash and cash equivalents (before reallocation of held for sale cash)
19,824
21,087
22,709
Cash and cash equivalents classified as held for sale
(241)
-
-
Cash and cash equivalents at 30 June/31 December
19,583
21,087
22,709
1. Tax comprises UK corporation tax paid of 8m (H1 14: 1m; FY 14: 29m), overseas corporate taxes of 18m (H1 14: 7m; FY 14: 24m) and withholding tax of 58m (H1 14: 89m; FY 14: 23m).
2. Net cash flows from acquisitions includes cash paid of 5m (H1 14: 18m; FY 14: 38m) less cash and cash equivalents acquired of nil (H1 14: nil; FY 14: nil).
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 38
2.08 Basis of preparation
The Group's financial information for the six months ended 30 June 2015 has been prepared in accordance with the Listing Rules of the Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting'. The Group's financial information has also been prepared in line with the accounting policies and methods of computation which the Group expects to adopt for the 2015 year end. These policies are consistent with the principal accounting policies which were set out in the Group's 2014 consolidated financial statements which were consistent with IFRSs issued by the International Accounting Standards Board as adopted by the European Commission for use in the European Union.
The preparation of the interim management report 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. The economic and non-economic actuarial assumptions used to establish the liabilities in relation to insurance and investment contracts are significant. For half-year financial reporting, economic assumptions have been updated to reflect market conditions. Non-economic assumptions are consistent with those used in the 31 December 2014 financial statements except for the changes outlined in Note 2.02.
The results for the six months ended 30 June 2015 are unaudited but have been reviewed by PricewaterhouseCoopers LLP. The interim results do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The results from the full year 2014 have been taken from the Group's 2014 Annual Report and Accounts. Therefore, these interim accounts should be read in conjunction with the 2014 Annual Report and Accounts that have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and adopted by the European Commission for use in the European Union. PricewaterhouseCoopers LLP reported on the 2014 financial statements and their report was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The Group's 2014 Annual Report and Accounts has been filed with the Registrar of Companies.
Key technical terms and definitions
The interim management 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.
2.09 Segmental analysis
Reportable segments
The Group has six reportable segments comprising Insurance, Savings, LGR, LGIM, LGA and LGC.
Following changes to the organisational structure, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the Workplace Savings business is now included in the LGIM segment. Workplace Savings had previously been recognised in the Savings (LGAS) segment. Comparatives have been amended accordingly in line with this reclassification. The impact of the Workplace Savings reclassification has been to reduce LGIM H1 14 and FY 14 operating profit by 10m and 15m respectively, with an offsetting increase in the Savings segment's operating profit.
Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF) and Legal & General Netherlands (LGN).
Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.
LGR represents Annuities (both individual and bulk purchase), longevity insurance and lifetime mortgages.
The LGIM segment represents institutional and retail investment management, and Workplace Savings businesses.
The LGC segment includes shareholders' equity supporting the non profit LGR, Insurance and Savings businesses held within Society and Legal & General Pensions Limited (LGPL) and capital held by the Group's treasury function. LGC and group expenses also incorporates inter-segmental eliminations and consolidated unit trusts and property partnerships managed on behalf of clients which do not constitute a separately reportable segment.
The LGA segment represents 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 39
2.09 Segmental analysis (continued)
(a) Profit/(loss) for the period
Group
expenses
and debt
Insurance
Savings
LGR
LGIM
LGC
LGA
costs
Total
For the six months ended 30 June 2015
m
m
m
m
m
m
m
m
Operating profit/(loss)
192
50
280
176
115
40
(103)
750
Investment and other variances1
(48)
(20)
11
(5)
(4)
1
(21)
(86)
Gains attributable to non-controlling
interests
-
-
-
-
-
-
8
8
Profit/(loss) before tax attributable to
equity holders
144
30
291
171
111
41
(116)
672
Tax (expense)/credit attributable to equity
holders of the Company
(38)
(6)
(50)
(38)
(2)
(22)
31
(125)
Profit/(loss) for the period
106
24
241
133
109
19
(85)
547
Group
expenses
and debt
Insurance
Savings2
LGR
LGIM2
LGC
LGA
costs
Total
For the six months ended 30 June 2014
m
m
m
m
m
m
m
m
Operating profit/(loss)
179
54
188
149
102
43
(79)
636
Investment and other variances
14
(18)
76
(5)
(44)
(3)
(26)
(6)
Gains attributable to non-controlling
interests
-
-
-
-
-
-
6
6
Profit/(loss) before tax attributable to
equity holders
193
36
264
144
58
40
(99)
636
Tax (expense)/credit attributable to equity
holders of the Company
(44)
(8)
(56)
(31)
6
(21)
25
(129)
Profit/(loss) for the period
149
28
208
113
64
19
(74)
507
Group
expenses
and debt
Insurance
Savings2
LGR
LGIM2
LGC
LGA
costs
Total
For the year ended 31 December 2014
m
m
m
m
m
m
m
m
Operating profit/(loss)
370
105
428
321
203
56
(208)
1,275
Investment and other variances
12
(24)
67
(7)
(37)
(13)
(42)
(44)
Gains attributable to non-controlling
interests
-
-
-
-
-
-
7
7
Profit/(loss) before tax attributable to
equity holders
382
81
495
314
166
43
(243)
1,238
Tax (expense)/credit attributable to equity
holders of the Company
(90)
(14)
(97)
(68)
(9)
(19)
51
(246)
Profit/(loss) for the year
292
67
398
246
157
24
(192)
992
1. At H1 15 Investment and other variances - Insurance and Savings include the recognition of 38m and 2m respectively of impairment losses arising on the classification of disposal groups as held for sale.
2. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior period comparatives have been amended. At H1 14, the impact includes the reduction of operating profit by 10m and profit before tax by 10m (FY 14: 15m and 10m respectively). Offsetting movements have been reflected in the Savings segment.
IFRS and Cash 40
2.09 Segmental analysis (continued)
(b) Revenue
LGC
and
Insurance
Savings1
LGR
LGIM1
LGA
other2
Total
For the six months ended 30 June 2015
m
m
m
m
m
m
m
Internal revenue
197
-
-
43
(86)
(154)
-
External revenue
1,176
1,714
561
4,752
205
(19)
8,389
Total revenue
1,373
1,714
561
4,795
119
(173)
8,389
LGC
and
Insurance
Savings1
LGR
LGIM1
LGA
other2
Total
For the six months ended 30 June 2014
m
m
m
m
m
m
m
Internal revenue
150
-
-
69
(98)
(121)
-
External revenue
1,269
1,741
5,300
10,410
197
267
19,184
Total revenue
1,419
1,741
5,300
10,479
99
146
19,184
LGC
and
Insurance
Savings1
LGR
LGIM1
LGA
other2
Total
For the year ended 31 December 2014
m
m
m
m
m
m
m
Internal revenue
300
-
373
220
(218)
(675)
-
External revenue
2,444
2,154
13,767
28,345
377
4,430
51,517
Total revenue
2,744
2,154
14,140
28,565
159
3,755
51,517
1. LGIM includes the Workplace Savings business which was previously reported in Savings. Prior year comparatives have been amended. The impact includes the increase of LGIM external revenue for H1 14 by 146m (FY 14: increase of 373m). Offsetting movements have been reflected in the Savings segment.
2. LGC and other includes LGC, inter-segmental eliminations and group consolidation adjustments.
Total revenue includes investment return of 5,062m (H1 14: 13,481m; FY 14: 40,639m).
IFRS and Cash 41
2.10 Earnings per share
(a) Earnings per share
Adjusted
Adjusted
Profit
Earnings
profit
earnings
Profit
Earnings
after tax
per share
after tax
per share1,2
after tax
per share1
30.06.15
30.06.15
30.06.15
30.06.15
30.06.14
30.06.14
m
p
m
p
m
m
Operating profit
588
9.94
588
9.94
493
8.38
Investment and other variances
(49)
(0.83)
(9)
(0.15)
9
0.15
Impact of change in UK tax rates3
-
-
-
-
(1)
(0.02)
Earnings per share based on profit
attributable to equity holders
539
9.11
579
9.79
501
8.51
Profit
Earnings
after tax
per share1
Full year
Full year
31.12.14
31.12.14
m
m
Operating profit
998
16.92
Investment and other variances
(13)
(0.22)
Impact of change in UK tax rates
-
-
Earnings per share based on profit
attributable to equity holders
985
16.70
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.
2. Adjusted earnings per share has been calculated excluding the impairment loss, 40m, resulting from the classification of disposal groups as held for sale.
3. The impact of the further corporation tax reductions announced on 8 July 2015 has not been included in the half year 2015 results as required under IAS 12. The impact will be included in the FY 15 results.
(b) Diluted earnings per share
Profit
Number
Earnings
Profit
Number
Earnings
after tax
of shares1
per share
after tax
of shares1
per share
30.06.15
30.06.15
30.06.15
30.06.14
30.06.14
30.06.14
m
m
p
m
m
p
Profit attributable to equity holders of the Company
539
5,915
9.11
501
5,884
8.51
Net shares under options allocable for no further consideration
-
38
(0.06)
-
65
(0.09)
Diluted earnings per share
539
5,953
9.05
501
5,949
8.42
Profit
Number
Earnings
after tax
of shares1
per share
Full year
Full year
Full year
31.12.14
31.12.14
31.12.14
m
m
p
Profit attributable to equity holders of the Company
985
5,897
16.70
Net shares under options allocable for no further consideration
-
59
(0.16)
Diluted earnings per share
985
5,956
16.54
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 42
2.11 Acquisition
On 1 April 2015, the Group acquired 100% of New Life Home Finance Limited, a UK based lifetime mortgage provider for a consideration of 5m. The acquisition gave rise to an increase in the Group's goodwill of 2m and an increase in purchased interest in long term businesses (PILTB) and other intangibles of 2m. This enables the Group to offer lifetime mortgages as part of its retirement solutions suite of products.
2.12 Disposal
On 29 May 2015, the Group sold its interests in Snow + Rock Group Holding Limited to Cotswold Outdoor Limited for 34m. The carrying value of the investment was 6m, net of amortisation of the brand, hence realising a profit on disposal of 28m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.
2.13 Held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
In February 2015 the Group entered into an agreement to sell Legal & General International (Ireland) Limited (LGII), the Group's Dublin based offshore bond provider to Canada Life. The sale completed on 1 July 2015. The assets and liabilities of LGII are a disposal group and have been classified as held for sale at 30 June 2015.
On 12 July 2015, the Group entered into an agreement to sell Commercial International Life Insurance Company SAE (CIL), the Group's Egypt based life insurance joint venture, to AXA. In addition on 28 July 2015 the Group entered into an agreement to sell its interest in Legal & General Gulf BSC (LGG), the Group's Bahrain based life insurance joint venture, to a third party. Completion of these transactions are subject to customary closing conditions, including the receipt of regulatory approvals, and are expected to take place by the end of 2015. The assets and liabilities of CIL and LGG are disposal groups and have been classified as held for sale at 30 June 2015.
On 30 July 2015 the Group entered into exclusive negotiations to sell Legal & General Holdings (France) S.A (LGF), the Group's French insurance business after receiving a binding offer from APICIL Prvoyance. The transaction is subject to the signing of a definitive agreement, customary closing conditions and regulatory approvals. The assets and liabilities of LGF have accordingly been assessed as a disposal group and have been classified as held for sale as at 30 June 2015.
The assets and liabilities of all disposal groups were remeasured to the lower of their carrying amount and their estimated fair value less costs to sell at the date of the classification as held for sale. The impairment loss arising of 40m is recognised in other expenses.
Neither LGF, LGII, CIL nor LGG is a discontinued operation as none represent a major line of business or geographical segment of the group.
Total
30.06.15
m
Assets classified as held for sale
Investment in associates
12
DAC
71
Property, plant and equipment
45
Financial investments
5,601
Reinsurers' share of contract liabilities
10
Other assets
410
Total assets of the disposal group
6,149
Liabilities classified as held for sale
Insurance contract liabilities
(320)
Investment contract liabilities
(5,187)
Unallocated divisible surplus
(229)
Tax liabilities
(22)
Other liabilities
(238)
Total liabilities of the disposal group
(5,996)
Total net assets of the disposal group
153
IFRS and Cash 43
2.14 Post balance sheet events
On 1 July 2015, the Group sold Legal & General International (Ireland) Limited (LGII), the Group's Dublin based offshore bond provider, to Canada Life for 16m.
On 12 July 2015, the Group sold Commercial International Life Insurance Company SAE (CIL), the Group's Egypt based life insurance company, to AXA for an estimated 34m, subject to regulatory approval.
2.15 Financial investments and Investment property
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Equities
161,507
161,552
162,177
Unit trusts
7,303
7,252
7,529
Debt securities1
170,910
164,104
178,766
Accrued interest
1,393
1,548
1,604
Derivative assets2
9,625
5,251
10,035
Loans and receivables
421
463
503
Financial investments
351,159
340,170
360,614
Investment property
8,779
7,352
8,152
Total financial investments and investment property
359,938
347,522
368,766
1. Detailed analysis of debt securities which shareholders are directly exposed to is disclosed in Note 4.05.
2. 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 5,819m (H1 14: 2,888m; FY 14: 6,011m) held on behalf of unit linked policyholders.
(a) Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Group's view of market assumptions in the absence of observable market information. The Group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs).
All of the Group's level 2 assets have been valued using standard market pricing sources, such as iBoxx, IDC and Bloomberg, which use mathematical modelling and multiple source validation in order to determine "consensus" prices, except for bespoke CDO and swaps holdings (see below). In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have classified them as level 2.
These CDOs are valued using an external valuation based on observable market inputs, which include CDX and iTraxx index tranches and CDS spreads on underlying reference entities. This is then validated against the internal valuation. Accordingly, these assets have also been classified in level 2.
The table on the following page presents the Group's assets by IFRS 13 hierarchy levels:
IFRS and Cash 44
2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)
Amortised
Total
Level 1
Level 2
Level 3
cost
For the six months ended 30 June 2015
m
m
m
m
m
Shareholder
Equity securities
1,932
1,681
-
251
-
Debt securities
4,570
1,861
2,445
264
-
Accrued interest
30
11
15
4
-
Derivative assets
87
81
6
-
-
Loans and receivables
419
-
-
-
419
Investment property
183
-
-
183
-
Non profit non-unit linked
Equity securities
307
296
11
-
-
Debt securities
38,851
5,845
32,155
851
-
Accrued interest
445
32
407
6
-
Derivative assets
3,664
264
3,400
-
-
Loans and receivables
-
-
-
-
-
Investment property
2,037
-
-
2,037
-
With-profits
Equity securities
3,596
3,084
2
510
-
Debt securities
6,886
3,265
3,604
17
-
Accrued interest
79
35
44
-
-
Derivative assets
55
37
18
-
-
Loans and receivables
2
-
-
-
2
Investment property
1,057
-
-
1,057
-
Unit linked
Equity securities
162,975
159,401
3,331
243
-
Debt securities
120,603
79,895
40,701
7
-
Accrued interest
839
295
544
-
-
Derivative assets
5,819
960
4,859
-
-
Loans and receivables
-
-
-
-
-
Investment property
5,502
-
-
5,502
-
Total financial investments and investment property
359,938
257,043
91,542
10,932
421
IFRS and Cash 45
2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)
Amortised
Total
Level 1
Level 2
Level 3
cost
For the six months ended 30 June 2014
m
m
m
m
m
Shareholder
Equity securities
1,445
1,268
24
153
-
Debt securities
5,135
2,124
2,846
165
-
Accrued interest
45
19
24
2
-
Derivative assets
153
52
101
-
-
Loans and receivables
178
-
-
-
178
Investment property
328
-
-
328
-
Non profit non-unit linked
Equity securities
84
72
12
-
-
Debt securities
33,330
5,343
27,115
872
-
Accrued interest
404
38
359
7
-
Derivative assets
2,184
313
1,871
-
-
Loans and receivables
-
-
-
-
-
Investment property
1,692
-
-
1,692
-
With-profits
Equity securities
4,206
3,674
13
519
-
Debt securities
10,619
4,377
6,225
17
-
Accrued interest
146
52
94
-
-
Derivative assets
26
24
2
-
-
Loans and receivables
30
-
-
-
30
Investment property
961
-
-
961
-
Unit linked
Equity securities
163,069
160,615
2,127
327
-
Debt securities
115,020
78,246
36,771
3
-
Accrued interest
953
343
610
-
-
Derivative assets
2,888
908
1,980
-
-
Loans and receivables
255
-
-
-
255
Investment property
4,371
-
-
4,371
-
Total financial investments and investment property
347,522
257,468
80,174
9,417
463
IFRS and Cash 46
2.15 Financial investments and Investment property (continued)
(a) Fair value hierarchy (continued)
Amortised
Total
Level 1
Level 2
Level 3
cost
For the year ended 31 December 2014
m
m
m
m
m
Shareholder
Equity securities
1,891
1,664
1
226
-
Debt securities
5,033
1,975
2,818
240
-
Accrued interest
41
20
19
2
-
Derivative assets
113
28
85
-
-
Loans and receivables
286
-
-
-
286
Investment property
151
-
-
151
-
Non profit non-unit linked
Equity securities
279
268
-
11
-
Debt securities
40,238
6,315
32,951
972
-
Accrued interest
476
42
427
7
-
Derivative assets
3,850
41
3,809
-
-
Loans and receivables
-
-
-
-
-
Investment property
1,879
-
-
1,879
-
With-profits
Equity securities
4,065
3,531
14
520
-
Debt securities
8,860
4,174
4,668
18
-
Accrued interest
111
45
66
-
-
Derivative assets
61
31
30
-
-
Loans and receivables
29
-
-
-
29
Investment property
1,034
-
-
1,034
-
Unit linked
Equity securities
163,471
157,191
5,895
385
-
Debt securities
124,635
84,287
40,344
4
-
Accrued interest
976
339
637
-
-
Derivative assets
6,011
444
5,567
-
-
Loans and receivables
188
-
-
-
188
Investment property
5,088
-
-
5,088
-
Total financial investments and investment property
368,766
260,395
97,331
10,537
503
IFRS and Cash 47
2.15 Financial investments and Investment property (continued)
(b) Assets measured at fair value based on level 3
Level 3 assets where internal models are used represent a small proportion of assets to which shareholders are exposed. These comprise both property and unquoted equities, the latter including investments in private equity, property vehicles and suspended securities.
In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the Group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the Group has classified within level 3.
The Group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The Group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the Group's credit standing, liquidity and risk margins on unobservable inputs.
Where quoted market prices are not available, fair value estimates are made at a point in time, based on relevant market data, as well as the best information about the individual financial instrument. Illiquid market conditions have resulted in inactive markets for certain of the Group's financial instruments. As a result, there is generally no or limited observable market data for these assets and liabilities. Fair value estimates for financial instruments deemed to be in an illiquid market are based on judgments regarding current economic conditions, liquidity discounts, currency, credit and interest rate risks, loss experience and other factors. These fair values are estimates and involve considerable uncertainty and variability as a result of the inputs selected and may differ significantly from the values that would have been used had a ready market existed, and the differences could be material. As a result, such calculated fair value estimates may not be realisable in an immediate sale or settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value measurement technique could significantly affect these fair value estimates.
Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee.
There have been no significant transfers between level 1 and level 2 for the period ended 30 June 2015 (H1 14: nil; FY 14: nil).
IFRS and Cash 48
2.15 Financial investments and Investment property (continued)
(b) Assets measured at fair value based on level 3 (continued)
Other
Other
financial
financial
Equity
invest-
Investment
Equity
invest-
Investment
securities
ments1
property
Total
securities
ments1
property
Total
30.06.15
30.06.15
30.06.15
30.06.15
30.06.14
30.06.14
30.06.14
30.06.14
m
m
m
m
m
m
m
m
As at 1 January
1,142
1,243
8,152
10,537
974
633
6,377
7,984
Total gains or (losses) for the period
recognised in profit:
- in other comprehensive income
-
-
-
-
-
5
-
5
- realised and unrealised
gains or (losses)2
97
(21)
226
302
21
25
237
283
Purchases / Additions
26
164
512
702
37
426
863
1,326
Improvements
-
-
63
63
-
-
7
7
Sales / Disposals
(140)
(105)
(174)
(419)
(50)
(125)
(132)
(307)
Transfers into level 33
12
5
-
17
30
112
-
142
Transfers out of level 33
(126)
(144)
-
(270)
(13)
(10)
-
(23)
Other
(7)
7
-
-
-
-
-
-
As at 30 June
1,004
1,149
8,779
10,932
999
1,066
7,352
9,417
1. Other financial investments comprise debt securities and derivative assets.
2. The realised and unrealised gains and losses have been recognised in investment return in the Consolidated Income Statement.
3. The Group holds regular discussion with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as result of this process.
Other
financial
Equity
invest-
Investment
securities
ments1
property
Total
Full year
Full year
Full year
Full year
31.12.14
31.12.14
31.12.14
31.12.14
m
m
m
m
As at 1 January
974
633
6,377
7,984
Total gains for the year
recognised in profit:
- in other comprehensive income
-
9
-
9
- realised and unrealised gains2
71
99
668
838
Purchases / Additions
210
1,026
1,559
2,795
Improvements
-
-
20
20
Sales / Disposals
(118)
(531)
(472)
(1,121)
Transfers into level 33
5
10
-
15
Transfers out of level 33
-
(3)
-
(3)
As at 31 December
1,142
1,243
8,152
10,537
1. Other financial investments comprise debt securities and derivative assets.
2. The realised and unrealised gains and losses have been recognised in investment return in the Consolidated Income Statement.
3. The Group holds regular discussion with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as result of this process.
IFRS and Cash 49
2.15 Financial investments and Investment property (continued)
(c) Effect on changes in significant unobservable inputs to reasonably possible alternative assumptions on level 3 assets
Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data. The following table shows the level 3 financial instruments carried at fair value as at the balance sheet date, the valuation basis, main assumptions used in the valuation of these instruments and reasonably possible increases or decreases in fair value based on reasonably possible alternative assumptions.
Reasonably possible
alternative assumptions
Current
Increase
Decrease
fair
in fair
in fair
For the six months ended 30 June 2015
Main
value
value
value
Financial instruments and investment property
assumptions
m
m
m
Assets
Shareholder
- Private equity investment vehicles1
Price earnings multiple
15
1
(1)
- Unquoted investments in property vehicles2
Property yield; occupancy
137
7
(7)
- Untraded and other debt securities
Cash flows; expected defaults
268
13
(13)
- Unquoted and other securities
Cash flows; expected defaults
99
3
(3)
- Investment property2
Property yield; occupancy
183
9
(9)
Non profit non-linked
- Asset backed securities
Cash flows; expected defaults
725
36
(36)
- Untraded and other debt securities
Cash flows; expected defaults
3
-
-
- Unquoted and other securities
Cash flows; expected defaults
129
6
(6)
- Investment property2
Property yield; occupancy
2,037
102
(102)
With-profits
- Private equity investment vehicles1
Price earnings multiple
140
8
(8)
- Asset backed securities
Cash flows; expected defaults
5
-
-
- Unquoted and other securities
Cash flows; expected defaults
379
19
(19)
- Other
3
-
-
- Investment property2
Property yield; occupancy
1,057
53
(53)
Unit linked
- Unquoted investments in property vehicles2
Property yield; occupancy
37
2
(2)
- Suspended securities
Estimated recoverable amount
11
1
(1)
- Asset backed securities
Cash flows; expected defaults
4
-
-
- Untraded and other debt securities
Cash flows; expected defaults
2
-
-
- Unquoted and other securities
Cash flows; expected defaults
196
22
(22)
- Investment property2
Property yield; occupancy
5,502
276
(276)
Total
10,932
558
(558)
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 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 yield and occupancy assumptions.
IFRS and Cash 50
2.15 Financial investments and Investment property (continued)
(c) Effect on 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 six months ended 30 June 2014
Main
value
value
value
Financial instruments and investment property
assumptions
m
m
m
Assets
Shareholder
- Unquoted investments in property vehicles2
Property yield; occupancy
153
16
(16)
- Untraded and other debt securities
Cash flows; expected defaults
167
8
(8)
- Investment property2
Property yield; occupancy
328
16
(16)
Non profit non-linked
- Untraded and other debt securities
Cash flows; expected defaults
879
29
(29)
- Investment property2
Property yield; occupancy
1,692
85
(85)
With-profits
- Private equity investment vehicles1
Price earnings multiple
170
9
(9)
- Unquoted investments in property vehicles2
Property yield; occupancy
366
19
(19)
- Investment property2
Property yield; occupancy
961
48
(48)
Unit linked
- Unquoted investments in property vehicles2
Property yield; occupancy
321
23
(23)
- Suspended securities
Estimated recoverable amount
6
1
(1)
- Asset backed securities
Cash flows; expected defaults
3
-
-
- Investment property2
Property yield; occupancy
4,371
210
(210)
Total
9,417
464
(464)
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 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 yield and occupancy assumptions.
IFRS and Cash 51
2.15 Financial investments and Investment property (continued)
(c) Effect on 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 2014
Main
value
value
value
Financial instruments and investment property
assumptions
m
m
m
Assets
Shareholder
- Private equity investment vehicles1
Price earnings multiple
16
1
(1)
- Unquoted investments in property vehicles2
Property yield; occupancy
117
7
(7)
- Untraded and other debt securities
Cash flows; expected defaults
241
12
(12)
- Unquoted and other securities
Cash flows; expected defaults
94
2
(2)
- Investment property2
Property yield; occupancy
151
8
(8)
Non profit non-linked
- Asset backed securities
Cash flows; expected defaults
497
25
(25)
- Untraded and other debt securities
Cash flows; expected defaults
281
14
(14)
- Unquoted and other securities
Cash flows; expected defaults
173
6
(6)
- Other
39
-
-
- Investment property2
Property yield; occupancy
1,879
94
(94)
With-profits
- Private equity investment vehicles1
Price earnings multiple
160
9
(9)
- Unquoted and other securities2
Cash flows; expected defaults
375
18
(18)
- Other
3
-
-
- Investment property2
Property yield; occupancy
1,034
52
(52)
Unit linked
- Suspended securities
Estimated recoverable amount
7
-
-
- Asset backed securities
Cash flows; expected defaults
7
4
(4)
- Untraded and other debt securities
Cash flows; expected defaults
2
-
-
- Unquoted and other securities
Cash flows; expected defaults
373
15
(15)
- Investment property2
Property yield; occupancy
5,088
255
(255)
Total
10,537
522
(522)
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 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 yield and occupancy assumptions.
IFRS and Cash 52
2.16 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
30.06.15
30.06.14
31.12.14
m
m
m
Profit before tax attributable to equity holders
672
636
1,238
Tax calculated at 20.25% (2014: 21.5%)
136
137
266
Effects of:
Adjustments in respect of prior years
-
1
8
Income not subject to tax, such as dividends
(3)
(2)
(9)
Change in valuation of tax losses
-
(17)
(6)
Higher rate of tax on profits taxed overseas
10
15
8
Additional allowances/non-deductible expenses
(4)
(3)
(7)
Impact of reduction in UK corporate tax rate on deferred tax balances1
-
1
-
Differences between taxable and accounting investment gains
(11)
(1)
(15)
Other
(3)
(2)
1
Tax attributable to equity holders
125
129
246
Equity holders' effective tax rate2
18.6%
20.3%
19.9%
1. The impact of the further corporation tax reductions announced on 8 July 2015 has not been included in the half year 2015 results as required under IAS 12. The impact will be included in the FY 15 results.
2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.
IFRS and Cash 53
2.16 Tax (continued)
(b) Deferred Tax
Full year
30.06.15
30.06.14
31.12.14
(i) UK deferred tax (liabilities)/assets
m
m
m
Realised and unrealised gains on investments
(256)
(154)
(168)
Excess of depreciation over capital allowances
17
21
19
Excess expenses1
89
145
105
Deferred acquisition expenses
(56)
(66)
(61)
Difference between the tax and accounting value of insurance contracts
(126)
(95)
(143)
Accounting provisions
16
3
3
Trading losses2
10
53
45
Pension fund deficit
85
90
98
Purchased interest in long term business
(23)
(25)
(24)
Net UK deferred tax liabilities3
(244)
(28)
(126)
Presented on the Consolidated Balance Sheet as:
UK deferred tax asset
33
68
54
UK deferred tax liability
(277)
(96)
(180)
Net UK deferred liabilities
(244)
(28)
(126)
(ii) Overseas deferred tax (liabilities)/assets
Realised and unrealised gains on investments
(32)
(48)
(53)
Deferred acquisition expenses
(284)
(256)
(295)
Difference between the tax and accounting value of insurance contracts
(234)
(216)
(242)
Accounting provisions
(19)
(20)
(20)
Trading losses
164
149
186
Pension fund deficit
2
2
-
Purchased interest in long term business
(11)
(13)
(10)
Net Overseas deferred tax liabilities
(414)
(402)
(434)
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. LGPL has utilised its remaining losses against profits that arose during the first half of the year. The remaining losses mainly relate to Cofunds.
3. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of 33m and a liability of 277m where the relevant items cannot be offset.
IFRS and Cash 54
2.17 Payables and other financial liabilities
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Derivative liabilities
5,806
3,469
6,877
Other1
12,643
7,812
9,254
Payables and other financial liabilities
18,449
11,281
16,131
1. Other liabilities include obligations under repurchase agreements of 9.5bn (H1 14: 5.2bn; FY 14: 7.0bn) and net variation margins on derivative contracts which are maintained daily. Included within the variation margins are collateral held and pledged of 384m and 20m respectively (H1 14: 55m and 5m respectively; FY 14: 107m and 235m respectively). The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements.
Other also includes future commission payments which have contingent settlement provisions of 182m (H1 14: 189m; FY 14: 186m). This liability has been determined using the net present value of the future commission which will be payable on fund values. This valuation technique uses assumptions which are consistent with the Group's effective rate of interest, investment return assumptions and persistency assumptions used in other valuations, but it is not determined by reference to published price quotations.
Fair value hierarchy
Amortised
Total
Level 1
Level 2
Level 3
cost
As at 30 June 2015
m
m
m
m
m
Derivative liabilities
5,806
843
4,963
-
-
Other
12,643
260
14
184
12,185
Payables and other financial liabilities
18,449
1,103
4,977
184
12,185
Amortised
Total
Level 1
Level 2
Level 3
cost
As at 30 June 2014
m
m
m
m
m
Derivative liabilities
3,469
415
3,054
-
-
Other
7,812
78
59
194
7,481
Payables and other financial liabilities
11,281
493
3,113
194
7,481
Amortised
Total
Level 1
Level 2
Level 3
cost
As at 31 December 2014
m
m
m
m
m
Derivative liabilities
6,877
593
6,284
-
-
Other
9,254
869
29
186
8,170
Payables and other financial liabilities
16,131
1,462
6,313
186
8,170
Trail commissions are modelled using expected cash flows, incorporating expected future persistency. They have therefore been classified as level 3 liabilities. The entire movement in the balance has been reflected in the Consolidated Income Statement during the period. A reasonably possible alternative persistency assumption would have the effect of increasing the liability by 6m (H1 14: 6m; FY 14: 6m).
Significant transfers between levels
There have been no significant transfers between levels 1, 2 and 3 for the period ended 30 June 2015 (H1 14 and FY 14: No significant transfers between levels 1, 2 and 3).
IFRS and Cash 55
2.18 Dividends
Per
Per
Per
Dividend
share1
Dividend1
share1
Dividend
share1
Full year
Full year
30.06.15
30.06.15
30.06.14
30.06.14
31.12.14
31.12.14
m
p
m
p
m
p
Ordinary share dividends paid in the period:
- Prior year final dividend
496
8.35
408
6.90
408
6.90
- Current year interim dividend
-
-
-
-
172
2.90
496
8.35
408
6.90
580
9.80
Ordinary share dividend proposed2
205
3.45
172
2.90
496
8.35
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.
2.19 Share capital and share premium
Number of
Number of
Number of
shares
shares
shares
Full year
30.06.15
30.06.14
31.12.14
As at 1 January
5,942,070,229
5,917,066,636
5,917,066,636
Options exercised under share option schemes:
- Savings related share option scheme
3,704,493
18,430,871
25,003,593
As at 30 June / 31 December
5,945,774,722
5,935,497,507
5,942,070,229
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 56
2.20 Core Borrowings
Carrying
Fair
Carrying
Fair
Carrying
Fair
amount
value
amount
value
amount
value
Full year
Full year
30.06.15
30.06.15
30.06.14
30.06.14
31.12.14
31.12.14
m
m
m
m
m
m
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)
647
634
669
654
658
642
5.875% Sterling undated subordinated notes (Tier 2)
414
423
416
439
416
431
4.0% Euro subordinated notes 2025 (Tier 2)
-
-
474
491
472
482
10% Sterling subordinated notes 2041 (Tier 2)
310
394
310
417
310
424
5.5% Sterling subordinated notes 2064 (Tier 2)
588
622
588
594
588
666
Client fund holdings of Group debt1
(28)
(29)
(22)
(23)
(28)
(31)
Total subordinated borrowings
1,931
2,044
2,435
2,572
2,416
2,614
Senior borrowings
Sterling medium term notes 2031-2041
602
762
602
728
609
800
Client fund holdings of Group debt1
(43)
(55)
(46)
(55)
(48)
(62)
Total senior borrowings
559
707
556
673
561
738
Total core borrowings
2,490
2,751
2,991
3,245
2,977
3,352
1. 71m (H1 14: 68m; FY 14: 76m) 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. On 8 June 2015, the Group redeemed these notes at par.
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 57
2.21 Operational Borrowings
Carrying
Fair
Carrying
Fair
Carrying
Fair
amount
value
amount
value
amount
value
Full year
Full year
30.06.15
30.06.15
30.06.14
30.06.14
31.12.14
31.12.14
m
m
m
m
m
m
Short term operational borrowings
Euro Commercial paper
41
41
123
123
73
73
Bank loans/other
7
7
13
13
13
13
Total short term operational borrowings
48
48
136
136
86
86
Non recourse borrowings
US Dollar Triple X securitisation 2037
283
239
260
225
286
240
Suffolk Life unit linked borrowings
99
99
106
106
120
120
LGV 6/LGV 7 Private Equity Fund Limited Partnership
123
123
116
116
136
136
Consolidated Property Limited Partnerships
153
153
129
129
148
148
Total non recourse borrowings
658
614
611
576
690
644
Group holding of operational borrowings1
(61)
(51)
(55)
(48)
(61)
(52)
Total operational borrowings
645
611
692
664
715
678
1. Group investments in operational borrowings have been eliminated from the 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 48m (H1 14: 136m; FY 14: 86m). 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 30 June 2015, 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 30 June 2015.
2.22 Non-controlling interests
Non-controlling interests represent third party interests in private equity and property investment vehicles which are consolidated in the Group's results. The majority of the net increase in the non-controlling interests in 2015 arises from the revaluation of the third party interests in the Legal & General UK Property Ungeared Fund Limited Partnership and the Leisure Fund Unit Trust.
IFRS and Cash 58
2.23 Foreign exchange rates
Principal rates of exchange used for translation are:
Period end exchange rates
At 30.06.15
At 30.06.14
At 31.12.14
United States Dollar
1.57
1.71
1.56
Euro
1.41
1.25
1.29
01.01.15 -
01.01.14 -
01.01.14 -
Average exchange rates
30.06.15
30.06.14
31.12.14
United States Dollar
1.52
1.67
1.65
Euro
1.37
1.22
1.24
2.24 Related party transactions
There were no material transactions between key management and the Legal & General group of companies during the period. All transactions between the Group and its key management are on commercial terms which are no more favourable than those available to employees in general. Contributions to the post-employment defined benefit plans were 54m (H1 14: 42m; FY 14: 69m) for all employees.
At 30 June 2015, 30 June 2014 and 31 December 2014 there were no loans outstanding to officers of the Company.
Key management personnel compensation
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:
Full year
30.06.15
30.06.14
31.12.14
m
m
m
Salaries
3
3
8
Social security costs
2
1
2
Post-employment benefits
1
1
2
Share-based incentive awards
2
2
4
Key management personnel compensation
8
7
16
Number of key management personnel
16
17
16
The Group UK defined benefit pension schemes have purchased annuity contracts issued by Society for consideration of 28m (H1 14: 12m; FY 14: 60m) during the period, priced on an arm's length basis.
The Group's investment portfolio includes investments in venture capital, property and financial investments which are held via collective investment vehicles. Net investments into associate investment vehicles totalled 7m during the period (H1 14: 2m; FY 14: 5m). The Group received investment management fees of 1m during the period (H1 14: 1m; FY 14: 1m). Distributions from these investment vehicles to the Group totalled 7m (H1 14: 1m; FY 14: 13m).
The loans outstanding from CALA at 30 June 2015 total 57m (H1 14: nil; FY 14: 55m).
The equity stake in Pemberton of 5.8m (H1 14: nil; FY 14: 6.2m), acquired in 2014, has further conditional commitments of 8.9m (H1 14: nil; FY 14: 8.9m).
A commitment of 177m was previously made to Pemberton's first co-mingled funds, none of which was drawn as at 30 June 2015 or 31 December 2014. An additional commitment of 71m (H1 14: nil; FY 14: 78m) was previously made to an L&G segregated account with Pemberton. As at 30 June 2015, 60m of this was drawn (H1 14: nil; FY 14: 25m).
During the period, LGC invested 116m into a joint venture, MediaCity, in the form of 61m equity and 55m debt. The loans outstanding from MediaCity total 56m.
2.25 Pension cost
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 30 June 2015, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at 351m (H1 14: 366m; FY 14: 394m). These amounts have been recognised in the financial statements with 221m charged against shareholder equity (H1 14: 231m; FY 14: 248m) and 130m against the unallocated divisible surplus (H1 14: 135m; FY 14: 146m).
IFRS and Cash 59
2.26 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 & 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 warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of Group companies in support of their business activities, including Pension Protection Fund compliant guarantees in respect of certain Group companies' liabilities under the Group pension fund and scheme.
IFRS and Cash 60
Independent review report to Legal & General Group Plc - IFRS
Report on the consolidated interim financial statements
Our conclusion
We have reviewed the consolidated interim financial statements, defined below, in the interim management report of Legal & General Group Plc ("the Group") for the six months ended 30 June 2015.Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in the remainder of this report.
What we have reviewed
The consolidated interim financial statements, which are prepared by Legal & General Group Plc, comprise:
the Consolidated Balance Sheet as at 30 June 2015;
the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the period then ended;
the Consolidated Cash Flow Statement for the period then ended;
the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
the explanatory notes to the consolidated interim financial statements (pages 27 - 59).
As disclosed in Note 2.08, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The consolidated interim financial statements included in the interim management report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
What a review of consolidated interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim management report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated interim financial statements.
Responsibilities for the consolidated interim financial statements and the review
Our responsibilities and those of the directors
The interim management report, including the consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim management report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on the consolidated interim financial statements in the interim management report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
4 August 2015
London
Notes:
(a) The maintenance and integrity of the Legal & General Group Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Asset and premium flows 61
3.01 Legal & General investment management total assets
Active
fixed
Solu-
Active
Total
Advisory
Total
For the six months
Index
income
tions1
Property
equities
AUM
assets
assets
ended 30 June 2015
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2015
274.8
103.8
293.3
13.6
8.2
693.7
14.8
708.5
External inflows
15.9
4.8
3.9
0.7
-
25.3
25.3
External outflows
(17.1)
(2.5)
(3.4)
(0.3)
-
(23.3)
(23.3)
Overlay/ advisory net flows
-
-
11.8
-
-
11.8
(3.5)
8.3
External net flows2
(1.2)
2.3
12.3
0.4
-
13.8
(3.5)
10.3
Internal net flows
(0.3)
(0.8)
-
0.2
(0.3)
(1.2)
-
(1.2)
Total net flows
(1.5)
1.5
12.3
0.6
(0.3)
12.6
(3.5)
9.1
Cash management movements3
-
1.7
-
-
-
1.7
-
1.7
Market and other movements2
1.4
0.3
2.6
1.6
0.7
6.6
-
6.6
At 30 June 2015
274.7
107.3
308.2
15.8
8.6
714.6
11.3
725.9
Assets attributable to:
External
624.8
11.3
636.1
Internal
89.8
-
89.8
Assets attributable to:
UK
598.8
-
598.8
International
115.8
11.3
127.1
Active
fixed
Solu-
Active
Total
Advisory
Total
For the six months
Index
income
tions1
Property
equities
AUM
assets
assets
ended 30 June 2014
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2014
269.8
89.4
232.5
11.3
8.6
611.6
-
611.6
External inflows
11.0
2.9
5.2
0.6
0.1
19.8
19.8
External outflows
(19.3)
(1.9)
(2.1)
(0.2)
(0.1)
(23.6)
(23.6)
Overlay/ advisory net flows
-
-
12.3
-
-
12.3
0.1
12.4
External net flows2
(8.3)
1.0
15.4
0.4
-
8.5
0.1
8.6
Internal net flows
(0.1)
0.7
0.5
0.7
(0.2)
1.6
-
1.6
Total net flows
(8.4)
1.7
15.9
1.1
(0.2)
10.1
0.1
10.2
Acquisition of GIA assets
-
-
-
-
-
-
13.4
13.4
Cash management movements3
-
0.2
-
-
-
0.2
-
0.2
Market and other movements2
7.3
5.9
4.7
0.4
(0.2)
18.1
0.2
18.3
At 30 June 2014
268.7
97.2
253.1
12.8
8.2
640.0
13.7
653.7
Assets attributable to:
External
556.6
13.7
570.3
Internal
83.4
-
83.4
Assets attributable to:
UK
570.8
-
570.8
International
69.2
13.7
82.9
1. Solutions include liability driven investments, multi-asset funds, and include 208.1bn at 30 June 2015 (H1 14: 174.9bn) of derivative notionals associated with the Solutions business.
2. 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 30 June 2015 was 48.2bn (H1 14: 33.3bn) and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Asset and premium flows 62
3.01 Legal & General investment management total assets (continued)
Active
fixed
Solu-
Active
Total
Advisory
Total
For the year ended
Index
income
tions1
Property
equities
AUM
assets
assets
31 December 2014
bn
bn
bn
bn
bn
bn
bn
bn
As at 1 January 2014
269.8
89.4
232.5
11.3
8.6
611.6
-
611.6
External inflows
23.7
5.5
8.5
1.4
0.1
39.2
39.2
External outflows
(39.5)
(3.8)
(6.6)
(0.5)
(0.1)
(50.5)
(50.5)
Overlay/ advisory net flows
-
-
18.8
-
-
18.8
(0.2)
18.6
External net flows2
(15.8)
1.7
20.7
0.9
-
7.5
(0.2)
7.3
Internal net flows
(0.2)
(0.5)
0.4
0.7
(0.1)
0.3
-
0.3
Total net flows
(16.0)
1.2
21.1
1.6
(0.1)
7.8
(0.2)
7.6
Acquisition of GIA assets
-
-
-
-
-
-
13.4
13.4
Cash management movements3
-
(1.6)
-
-
-
(1.6)
-
(1.6)
Market and other movements2
21.0
14.8
39.7
0.7
(0.3)
75.9
1.6
77.5
As at 31 December 2014
274.8
103.8
293.3
13.6
8.2
693.7
14.8
708.5
Assets attributable to:
External
603.7
14.8
618.5
Internal
90.0
-
90.0
Assets attributable to:
UK
579.7
-
579.7
International
114.0
14.8
128.8
1. Solutions include liability driven investments, multi-asset funds, and included 194.6bn at 31 December 2014 of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2014 was 46.5bn, and the movement in these assets is included in market and other movements for overlay assets.
3.Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Asset and premium flows 63
3.02 Legal & General investment management total assets quarterly progression
Active
fixed
Solu-
Active
Total
Advisory
Total
For the six months ended
Index
income
tions1
Property
equities
AUM
assets
assets
30 June 2015
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2015
274.8
103.8
293.3
13.6
8.2
693.7
14.8
708.5
External inflows
6.8
2.3
1.4
0.3
-
10.8
10.8
External outflows
(8.3)
(1.6)
(1.6)
(0.1)
-
(11.6)
(11.6)
Overlay/ advisory net flows
-
-
5.1
-
-
5.1
(1.2)
3.9
External net flows2
(1.5)
0.7
4.9
0.2
-
4.3
(1.2)
3.1
Internal net flows
-
(0.6)
-
0.2
(0.1)
(0.5)
-
(0.5)
Total net flows
(1.5)
0.1
4.9
0.4
(0.1)
3.8
(1.2)
2.6
Cash management movements3
-
1.7
-
-
-
1.7
-
1.7
Market and other movements2
11.3
4.8
5.8
1.3
0.1
23.3
0.7
24.0
At 31 March 2015
284.6
110.4
304.0
15.3
8.2
722.5
14.3
736.8
External inflows
9.1
2.5
2.5
0.4
-
14.5
14.5
External outflows
(8.8)
(0.9)
(1.8)
(0.2)
-
(11.7)
(11.7)
Overlay/ advisory net flows
-
-
6.7
-
-
6.7
(2.3)
4.4
External net flows2
0.3
1.6
7.4
0.2
-
9.5
(2.3)
7.2
Internal net flows
(0.3)
(0.2)
-
-
(0.2)
(0.7)
-
(0.7)
Total net flows
-
1.4
7.4
0.2
(0.2)
8.8
(2.3)
6.5
Cash management movements3
-
-
-
-
-
-
-
-
Market and other movements2
(9.9)
(4.5)
(3.2)
0.3
0.6
(16.7)
(0.7)
(17.4)
At 30 June 2015
274.7
107.3
308.2
15.8
8.6
714.6
11.3
725.9
1. Solutions include liability driven investments, multi-asset funds, and include 208.1bn at 30 June 2015 (Q1 15: 197.1bn) of derivative notionals associated with the Solutions business.
2. 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 30 June 2015 is 48.2bn (Q1 15: 44.0bn), and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Asset and premium flows 64
3.02 Legal & General investment management total assets quarterly progression (continued)
Active
fixed
Solu-
Active
Total
Advisory
Total
For the year ended
Index
income
tions1
Property
equities
AUM
assets
assets
31 December 2014
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2014
269.8
89.4
232.5
11.3
8.6
611.6
-
611.6
External inflows
4.9
1.4
2.4
0.3
-
9.0
9.0
External outflows
(5.8)
(0.5)
(1.2)
(0.1)
-
(7.6)
(7.6)
Overlay/ advisory net flows
-
-
5.2
-
-
5.2
-
5.2
External net flows2
(0.9)
0.9
6.4
0.2
-
6.6
-
6.6
Internal net flows
-
2.0
-
0.5
(0.1)
2.4
-
2.4
Total net flows
(0.9)
2.9
6.4
0.7
(0.1)
9.0
-
9.0
Cash management movements3
-
-
-
-
-
-
-
-
Market and other movements2
1.5
2.9
5.9
(0.1)
0.1
10.3
-
10.3
At 31 March 2014
270.4
95.2
244.8
11.9
8.6
630.9
-
630.9
External inflows
6.1
1.5
2.8
0.3
0.1
10.8
10.8
External outflows
(13.5)
(1.4)
(0.9)
(0.1)
(0.1)
(16.0)
(16.0)
Overlay/ advisory net flows
-
-
7.1
-
-
7.1
0.1
7.2
External net flows2
(7.4)
0.1
9.0
0.2
-
1.9
0.1
2.0
Internal net flows
(0.1)
(1.3)
0.5
0.2
(0.1)
(0.8)
-
(0.8)
Total net flows
(7.5)
(1.2)
9.5
0.4
(0.1)
1.1
0.1
1.2
Acquisition of GIA assets
-
-
-
-
-
-
13.4
13.4
Cash management movements3
-
0.2
-
-
-
0.2
-
0.2
Market and other movements2
5.8
3.0
(1.2)
0.5
(0.3)
7.8
0.2
8.0
At 30 June 2014
268.7
97.2
253.1
12.8
8.2
640.0
13.7
653.7
External inflows
5.6
1.0
1.5
0.3
-
8.4
8.4
External outflows
(8.7)
(0.8)
(1.4)
(0.2)
-
(11.1)
(11.1)
Overlay/ advisory net flows
-
-
2.5
-
-
2.5
-
2.5
External net flows2
(3.1)
0.2
2.6
0.1
-
(0.2)
-
(0.2)
Internal net flows
(0.3)
(0.9)
(0.1)
(0.1)
(0.1)
(1.5)
-
(1.5)
Total net flows
(3.4)
(0.7)
2.5
-
(0.1)
(1.7)
-
(1.7)
Cash management movements3
-
(0.7)
-
-
-
(0.7)
-
(0.7)
Market and other movements2
5.2
1.7
17.4
0.4
(0.2)
24.5
0.5
25.0
At 30 September 2014
270.5
97.5
273.0
13.2
7.9
662.1
14.2
676.3
External inflows
7.1
1.6
1.8
0.5
-
11.0
11.0
External outflows
(11.5)
(1.1)
(3.1)
(0.1)
-
(15.8)
(15.8)
Overlay/ advisory net flows
-
-
4.0
-
-
4.0
(0.3)
3.7
External net flows2
(4.4)
0.5
2.7
0.4
-
(0.8)
(0.3)
(1.1)
Internal net flows
0.2
(0.3)
-
0.1
0.2
0.2
-
0.2
Total net flows
(4.2)
0.2
2.7
0.5
0.2
(0.6)
(0.3)
(0.9)
Cash management movements3
-
(1.1)
-
-
-
(1.1)
-
(1.1)
Market and other movements2
8.5
7.2
17.6
(0.1)
0.1
33.3
0.9
34.2
At 31 December 2014
274.8
103.8
293.3
13.6
8.2
693.7
14.8
708.5
1. Solutions include liability driven investments, multi-asset funds, and include 194.6bn at 31 December 2014 (Q1 14: 168.3bn; H1 14: 174.9bn; Q3 14: 185.3bn) of derivative notionals associated with the Solutions business.
2. External net flows exclude movements in overlay assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2014 was 46.5bn (Q1 14: 33.8bn; H1 14: 33.3bn; Q3 14: 41.2bn), and the movement in these assets is included in market and other movements for overlay assets.
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Asset and premium flows 65
3.02 Legal & General investment management total assets quarterly progression (continued)
As at
As at
As at
As at
As at
As at
30.06.15
31.03.15
31.12.14
30.09.14
30.06.14
31.03.14
bn
bn
bn
bn
bn
bn
Total assets attributable to:1
External
636.1
644.5
618.5
591.5
570.3
547.8
Internal
89.8
92.3
90.0
84.8
83.4
83.1
Total assets attributable to:1
UK
598.8
610.4
579.7
589.8
570.8
564.9
International2
127.1
126.4
128.8
86.5
82.9
66.0
1. Total assets at 30 June 2015 include 11.3bn of advisory assets (Q1 15: 14.3bn; Q4 14: 14.8bn; Q3 14: 14.2bn; H1 14: 13.7bn; Q1 14: nil).
2. In Q4 14, International assets included 37.5bn of assets transferred from our London office to our Chicago office.
3.03 Legal & General investment management total external assets under management net flows
3
3
3
3
3
3
months
months
months
months
months
months
to
to
to
to
to
to
30.06.15
30.03.15
31.12.14
30.09.14
30.06.14
31.03.14
bn
bn
bn
bn
bn
bn
LGIM total external AUM net flows1
9.5
4.3
(0.8)
(0.2)
1.9
6.6
Attributable to:
International
4.6
0.8
1.6
1.3
2.4
3.4
UK Institutional
- Defined contribution
0.6
0.4
0.9
0.7
0.5
0.6
- Defined benefit
4.0
3.1
(3.6)
(2.2)
(1.2)
2.3
UK Retail
0.3
-
0.3
-
0.2
0.3
1. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and cash management movements.
Asset and premium flows 66
3.04 Assets under administration
Digital
LGIM
Consol-
France
Mature
idation
and
Retail
Suffolk
Retail
adjust-
Total
Nethe-
Work-
Invest-
For the six months
Platforms
Life
Savings2,3
ment4
Savings
rlands
place
ments5
Annuities
ended 30 June 2015
bn
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2015
71.9
7.7
36.0
(6.9)
108.7
4.4
11.1
21.3
44.2
Gross inflows1
3.8
0.6
0.7
(0.2)
4.9
0.2
1.2
3.0
1.0
Gross outflows
(2.7)
(0.3)
(2.2)
0.4
(4.8)
(0.2)
(0.3)
(3.0)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(1.1)
Net flows
1.1
0.3
(1.5)
0.2
0.1
-
0.9
-
(0.1)
Market and other
movements
1.6
0.3
0.3
(0.2)
2.0
(0.2)
1.1
1.2
(0.7)
At 30 June 2015
74.6
8.3
34.8
(6.9)
110.8
4.2
13.1
22.5
43.4
Digital
LGIM
Consol-
France
Mature
idation
and
Retail
Suffolk
Retail
adjust-
Total
Nethe-
Work-
Invest-
For the six months
Platforms
Life
Savings2
ment4
Savings
rlands
place
ments5
Annuities
ended 30 June 2014
bn
bn
bn
bn
bn
bn
bn
bn
bn
As at 1 January 2014
64.1
6.6
36.3
(6.8)
100.2
4.5
8.7
20.5
34.4
Gross inflows1
4.8
0.6
0.7
(0.2)
5.9
0.2
1.3
1.9
3.5
Gross outflows
(2.3)
(0.2)
(2.2)
0.4
(4.3)
(0.2)
(0.3)
(2.4)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(1.0)
Net flows
2.5
0.4
(1.5)
0.2
1.6
-
1.0
(0.5)
2.5
Market and other
movements
0.8
0.2
1.1
(0.1)
2.0
-
(0.2)
0.6
1.6
At 30 June 2014
67.4
7.2
35.9
(6.7)
103.8
4.5
9.5
20.6
38.5
Digital
LGIM
Consol-
France
Mature
idation
and
Retail
Suffolk
Retail
adjust-
Total
Nethe-
Work-
Invest-
For the year ended
Platforms
Life
Savings2
ment4
Savings
rlands
place
ments5
Annuities
ended 31 December 2014
bn
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2014
64.1
6.6
36.3
(6.8)
100.2
4.5
8.7
20.5
34.4
Gross inflows1
10.1
1.3
1.4
(0.5)
12.3
0.4
2.8
4.4
6.5
Gross outflows
(4.7)
(0.5)
(4.4)
0.7
(8.9)
(0.4)
(0.6)
(4.8)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(2.1)
Net flows
5.4
0.8
(3.0)
0.2
3.4
-
2.2
(0.4)
4.4
Market and other
movements
2.4
0.3
2.7
(0.3)
5.1
(0.1)
0.2
1.2
5.4
At 31 December 2014
71.9
7.7
36.0
(6.9)
108.7
4.4
11.1
21.3
44.2
1. Platforms gross inflows include Cofunds institutional net flows. Total H1 15 Platforms comprise 37.9bn (H1 14: 37.3bn; FY 14: 38.3bn) of retail assets and 36.7bn (H1 14: 30.1bn; FY 14: 33.6bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Total AUA at 30 June 2015 includes 2.8bn of assets relating to Legal & General International (Ireland) Limited, which was sold to Canada Life Group on 1 July 2015.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
5. H1 15 Retail Investments include 1.8bn (H1 14: 1.5bn; FY 14: 1.7bn) of LGIM unit trust assets held on our Cofunds platform and 3.3bn (H1 14: 3.2bn; FY 14: 3.2bn) of LGIM unit trust assets held on our IPS platform.
Asset and premium flows 67
3.05 Assets under administration quarterly progression
Digital
LGIM
Consol-
France
Mature
idation
and
Retail
Suffolk
Retail
adjust-
Total
Nethe-
Work-
Invest-
For the six months
Platforms
Life
Savings2,3
ment4
Savings
rlands
place
ments5
Annuities
ended 30 June 2015
bn
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2015
71.9
7.7
36.0
(6.9)
108.7
4.4
11.1
21.3
44.2
Gross inflows1
1.9
0.3
0.3
-
2.5
0.1
0.6
1.5
0.7
Gross outflows
(1.2)
(0.1)
(0.9)
0.2
(2.0)
(0.1)
(0.1)
(1.6)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.5)
Net flows
0.7
0.2
(0.6)
0.2
0.5
-
0.5
(0.1)
0.2
Market and other
movements
3.4
0.3
0.7
(0.4)
4.0
(0.1)
1.4
1.2
1.2
At 31 March 2015
76.0
8.2
36.1
(7.1)
113.2
4.3
13.0
22.4
45.6
Gross inflows1
1.9
0.3
0.4
(0.2)
2.4
0.1
0.6
1.5
0.3
Gross outflows
(1.5)
(0.2)
(1.3)
0.2
(2.8)
(0.1)
(0.2)
(1.4)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.6)
Net flows
0.4
0.1
(0.9)
-
(0.4)
-
0.4
0.1
(0.3)
Market and other
movements
(1.8)
-
(0.4)
0.2
(2.0)
(0.1)
(0.3)
-
(1.9)
At 30 June 2015
74.6
8.3
34.8
(6.9)
110.8
4.2
13.1
22.5
43.4
1. Platforms gross inflows include Cofunds institutional net flows. Total H1 15 Platforms comprise 37.9bn (Q1 15: 38.8bn) of retail assets and 36.7bn (Q1 15: 37.2bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Total AUA at 30 June 2015 includes 2.8bn of assets relating to Legal & General International (Ireland) Limited, which was sold to Canada Life Group on 1 July 2015.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
5. At 30 June 2015 Retail Investments include 1.8bn (Q1 15: 1.8bn) of LGIM unit trust assets held on our Cofunds platform and 3.3bn (Q1 15: 3.4bn) of LGIM unit trust assets held on our IPS platform.
Asset and premium flows 68
3.05 Assets under administration quarterly progression (continued)
Digital
LGIM
Consol-
France
Mature
idation
and
Retail
Suffolk
Retail
adjust-
Total
Nether-
Work-
Invest-
For the year ended
Platforms
Life
Savings2
ment3
Savings
lands
place
ments4
Annuities
31 December 2014
bn
bn
bn
bn
bn
bn
bn
bn
bn
At 1 January 2014
64.1
6.6
36.3
(6.8)
100.2
4.5
8.7
20.5
34.4
Gross inflows1
2.6
0.3
0.4
(0.1)
3.2
0.1
0.7
1.0
3.3
Gross outflows
(1.1)
(0.1)
(1.1)
0.2
(2.1)
(0.1)
(0.2)
(0.9)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.5)
Net flows
1.5
0.2
(0.7)
0.1
1.1
-
0.5
0.1
2.8
Market and other
movements
-
0.1
0.5
(0.1)
0.5
(0.1)
(0.1)
0.2
1.1
At 31 March 2014
65.6
6.9
36.1
(6.8)
101.8
4.4
9.1
20.8
38.3
Gross inflows1
2.2
0.3
0.3
(0.1)
2.7
0.1
0.6
0.9
0.2
Gross outflows
(1.2)
(0.1)
(1.1)
0.2
(2.2)
(0.1)
(0.1)
(1.5)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.5)
Net flows
1.0
0.2
(0.8)
0.1
0.5
-
0.5
(0.6)
(0.3)
Market and other
movements
0.8
0.1
0.6
-
1.5
0.1
(0.1)
0.4
0.5
At 30 June 2014
67.4
7.2
35.9
(6.7)
103.8
4.5
9.5
20.6
38.5
Gross inflows1
2.8
0.4
0.4
(0.2)
3.4
0.1
0.7
1.2
0.4
Gross outflows
(1.3)
(0.2)
(1.2)
0.2
(2.5)
(0.1)
(0.2)
(1.3)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.6)
Net flows
1.5
0.2
(0.8)
-
0.9
-
0.5
(0.1)
(0.2)
Market and other
movements
0.1
0.1
0.4
(0.1)
0.5
(0.1)
0.1
0.2
1.6
At 30 September 2014
69.0
7.5
35.5
(6.8)
105.2
4.4
10.1
20.7
39.9
Gross inflows1
2.5
0.3
0.3
(0.1)
3.0
0.1
0.8
1.3
2.6
Gross outflows
(1.1)
(0.1)
(1.0)
0.1
(2.1)
(0.1)
(0.1)
(1.1)
-
Payments to pensioners
-
-
-
-
-
-
-
-
(0.5)
Net flows
1.4
0.2
(0.7)
-
0.9
-
0.7
0.2
2.1
Market and other
movements
1.5
-
1.2
(0.1)
2.6
-
0.3
0.4
2.2
At 31 December 2014
71.9
7.7
36.0
(6.9)
108.7
4.4
11.1
21.3
44.2
1. Platforms gross inflows include Cofunds institutional net flows. At 31 December 2014 Platforms comprise 38.3bn (Q1 14 36.6bn; H1 14: 37.3bn; Q3 14: 37.4bn) of retail assets and 33.6bn (Q1 14: 29.0bn; H1 14: 30.1bn; Q3 14: 31.6bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Retail Savings assets included in the Platforms column.
4. At 31 December 2014 Retail Investments include 1.7bn (Q1 14: 1.6bn; H1 14: 1.5bn; Q3 14: 1.6bn) of LGIM unit trust assets held on our Cofunds platform and 3.2bn (Q1 14: 3.2bn; H1 14: 3.2bn; Q3 14: 3.2bn) of LGIM unit trust assets held on our IPS platform.
Asset and premium flows 69
3.06 LGR new business
3
3
3
3
3
3
months
months
months
months
months
months
to
to
to
to
to
to
30.06.15
31.03.15
31.12.14
30.09.14
30.06.14
31.03.14
m
m
m
m
m
m
Individual Annuities
81
99
83
125
139
244
Bulk Purchase Annuities
491
655
2,619
233
90
3,045
Lifetime Mortgage Advances1
37
-
-
-
-
-
Total LGR new business
609
754
2,702
358
229
3,289
1. 12m of these advances were funded by L&G prior to our acquisition of New Life Home Finance Ltd.
3.07 Insurance new business annual premiums
3
3
3
3
3
3
months
months
months
months
months
months
to
to
to
to
to
to
30.06.15
31.03.15
31.12.14
30.09.14
30.06.14
31.03.14
m
m
m
m
m
m
UK Retail Protection
41
38
41
41
41
42
UK Group Protection
22
18
11
14
20
20
France Protection
-
31
-
-
-
33
Netherlands Protection
2
1
-
1
-
2
US Protection
21
20
21
23
24
23
Total Insurance new business
86
108
73
79
85
120
3.08 Gross written premiums on Insurance business
3
3
3
3
3
3
months
months
months
months
months
months
to
to
to
to
to
to
30.06.15
31.03.15
31.12.14
30.09.14
30.06.14
31.03.14
m
m
m
m
m
m
UK Retail Protection
275
270
273
269
260
254
UK Group Protection
127
102
57
65
130
99
General Insurance
83
81
95
104
94
84
France Protection
42
43
41
41
45
46
Netherlands Protection
11
13
9
16
12
14
US Protection
202
184
184
162
170
162
Longevity Insurance
85
79
82
84
83
84
Total gross written premiums on insurance business
825
772
741
741
794
743
Asset and premium flows 70
3.09 Overseas new business in local currency
Annual
Single
Annual
Single
Annual
Single
premiums
premiums
premiums
premiums
premiums
premiums
30.06.15
30.06.15
30.06.14
30.06.14
31.12.14
31.12.14
US (US$m)
62
-
78
-
150
-
Netherlands (m)
8
59
4
51
10
138
France (m)
42
208
40
168
41
351
India (Rs m) - Group's 26% interest
262
1,515
266
2,257
408
4,003
Egypt (Pounds m) - Group's 55% interest
61
-
84
-
149
-
Gulf (US$m) - Group's 50% interest
2
2
1
1
3
5
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR PKQDNABKDBFK
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