REG - Legal & General Grp - L&G Half-year results 2015 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 7
05/08/2015 07:01
- Part 7: For the preceding part double click ID:nRSE1056Vf
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 E600m 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
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