REG - Legal & General Grp - L&G Half-year results 2015 Part 3 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 4
05/08/2015 07:02
- Part 4: For the preceding part double click ID:nRSE1058Vc
86
Group embedded value - summary (continued)
Covered business
Insurance Non-
UK overseas covered
business business LGA business Total
For the six months ended 30 June 2014 £m £m £m £m £m
At 1 January 2014
Value of in-force business (VIF) 4,693 197 699 - 5,589
Shareholder net worth (SNW) 3,249 315 234 199 3,997
Embedded value at 1 January 2014 7,942 512 933 199 9,586
Exchange rate movements - (19) (30) 12 (37)
Operating profit after tax for the period 539 11 47 68 665
Non-operating profit/(loss) for the period 59 3 (1) (7) 54
Profit for the period 598 14 46 61 719
Intra-group distributions1 18 (15) (44) 41 -
Dividends to equity holders of the Company - - - (408) (408)
Transfer to non-covered business2 (15) - - 15 -
Other reserve movements including pension deficit3 12 - - (29) (17)
Embedded value at 30 June 2014 8,555 492 905 (109) 9,843
Value of in-force business4,5 4,928 167 717 - 5,812
Shareholder net worth6,7 3,627 325 188 (109) 4,031
Embedded value per share (p)8 166
Additional value of LGIM
30.06.14 30.06.14
Indicative valuation including LGIM p per share £bn
EEV as reported 166 9.9
LGIM VIF 30 1.7
Total including LGIM 196 11.6
30.06.14 30.06.14
Estimated LGIM discounted cash flow valuation p per share £bn
Look through value of profits on covered business 5 0.3
Net asset value 10 0.6
Current value of LGIM in Group embedded value 15 0.9
LGIM VIF 30 1.7
Alternative discounted value of LGIM future cash flows 45 2.6
1. UK intra-group distributions primarily reflect E18m dividend from LGN and £4m dividend from Nationwide Life paid to Society. Dividends of $73m from LGA and E2m from LGF were paid to the group.
2. The transfer to non-covered business represents the IFRS profits arising in the period from the provision of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.
3. The other reserve movements reflect the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.
4. Value of inforce business are shown net of cost of capital, which consists of £449m from UK covered business; £66m from Insurance overseas covered business and £12m from LGA.
5. The time value of options and guarantees deduction included in value of inforce business is £14m.
6. Shareholder net worth of Insurance overseas is made up of £74m of free surplus and £251m of required capital.
7. Shareholder net worth of LGA is made up of £139m of free surplus and £49m of required capital.
8. The number of shares in issue at 30 June 2014 was 5,935,497,507.
Further analysis of the UK covered business can be found in Note 5.01.
European Embedded Value
87
Group embedded value - summary (continued)
Covered business
Insurance Non-
UK overseas covered
business business LGA business Total
For the year ended 31 December 2014 £m £m £m £m £m
At 1 January 2014
Value of in-force business (VIF) 4,693 197 699 - 5,589
Shareholder net worth (SNW) 3,249 315 234 199 3,997
Embedded value at 1 January 2014 7,942 512 933 199 9,586
Exchange rate movements - (30) 44 (16) (2)
Operating profit after tax for the year 1,264 31 (68) 107 1,334
Non-operating profit/(loss) for the year 709 (11) (11) (5) 682
Profit for the year 1,973 20 (79) 102 2,016
Intra-group distributions1 (641) (30) (46) 717 -
Dividends to equity holders of the Company - - - (580) (580)
Transfer to non-covered business2 (26) - - 26 -
Other reserve movements including pension deficit3 389 - (125) (309) (45)
Embedded value at 31 December 2014 9,637 472 727 139 10,975
Value of in-force business4,5 6,118 147 518 - 6,783
Shareholder net worth6,7 3,519 325 209 139 4,192
Embedded value per share (p)8 185
Additional value of LGIM
31.12.14 31.12.14
Indicative valuation including LGIM p per share £bn
EEV as reported 185 11
LGIM VIF 27 1.6
Total including LGIM 212 12.6
31.12.14 31.12.14
Estimated LGIM discounted cash flow valuation p per share £bn
Look through value of profits on covered business 6 0.4
Net asset value 8 0.5
Current value of LGIM in Group embedded value 14 0.9
LGIM VIF 27 1.6
Alternative discounted value of LGIM future cash flows 41 2.5
1. UK intra-group distributions primarily reflect a £675m dividend paid from Society to Group, and dividends of E35m from LGN and £5m from Nationwide Life paid to Society. Dividends of $76m from LGA and E2m from LGF were paid to Group.
2. The transfer to non-covered business represents the IFRS profits arising in the year from the provision of investment management services by LGIM to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.
3. The other reserve movements primarily reflect the effect of reinsurance arrangement transactions between UK and US covered business, pension deficit movement, movement in the savings related share options scheme and intragroup capital contribution.
4. Value of inforce business are shown net of cost of capital, which consists of £545m from UK covered business; £60m from Insurance overseas covered business and £11m from LGA.
5. The time value of options and guarantees deduction included in value of inforce business is £43m.
6. Shareholder net worth of Insurance overseas is made up of £90m of free surplus and £235m of required capital.
7. Shareholder net worth of LGA is made up of £161m of free surplus and £48m of required capital.
8. The number of shares in issue at 31 December 2014 was 5,942,070,229.
Further analysis of the UK covered business can be found in Note 5.01.
European Embedded Value
88
5.01 UK covered business embedded value reconciliation
Shareholder net worth Total
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