REG - Legal & General Grp - L&G Half-year results 2015 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 8
05/08/2015 07:02
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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
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