REG - Legal & General Grp - L&G Half-year results 2015 Part 3 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 5
05/08/2015 07:02
- Part 5: For the preceding part double click ID:nRSE1058Vd
Free Required Value of embedded
surplus capital Total in-force value
For the six months ended 30 June 2015 £m £m £m £m £m
At 1 January 2015 887 2,632 3,519 6,118 9,637
Operating profit/(loss) after tax:
- New business contribution1 (67) 72 5 119 124
- Expected return on VIF - - - 185 185
- Expected transfer from VIF to SNW2 463 (108) 355 (355) -
- Expected return on SNW 10 73 83 - 83
Generation of embedded value 406 37 443 (51) 392
- Experience variances 52 - 52 (62) (10)
- Operating assumption changes 28 4 32 9 41
- Development costs (7) - (7) - (7)
Variances 73 4 77 (53) 24
Operating profit after tax 479 41 520 (104) 416
Non-operating profit/(loss) after tax:
- Economic variances 64 4 68 (20) 48
- Other taxation impacts3 - - - - -
Non-operating profit/(loss) after tax 64 4 68 (20) 48
Profit for the period 543 45 588 (124) 464
Intra-group distributions4 (282) - (282) - (282)
Transfer to non-covered business5 (17) - (17) - (17)
Other reserve movements including pension deficit (13) (4) (17) 30 13
Embedded value at 30 June 2015 1,118 2,673 3,791 6,024 9,815
1. The UK free surplus reduction of £67m to finance new business primarily reflects £72m additional required capital in relation to new business.
2. The increase in UK free surplus of £463m from the expected transfer from the in-force non profit business includes £355m of operational cash generation and a £108m reduction in required capital. The £549m operational cash generation from Insurance, Savings, LGR and LGIM per Note 2.01 also includes an £18m dividend from LGN, £1m dividend from LGF and £175m primarily reflecting profit from non-covered business.
3. The impact of the further corporation tax reductions announced on 8 July 2015 have not been included in the H1 15 results as they were not known at the reporting date. The impact will be included in the FY 15 results.
4. Intra-group distributions primarily reflect a £300m declared dividend from Society to Group and dividends of E23m from LGN to Society.
5. 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.
The value of in-force business of £6,024m is comprised of £5,685m of non profit business and £339m of with-profits business.
European Embedded Value
89
5.01 UK covered business embedded value reconciliation (continued)
Shareholder net worth Total
Free Required Value of embedded
surplus capital Total in-force value
For the six months ended 30 June 2014 £m £m £m £m £m
At 1 January 2014 1,107 2,142 3,249 4,693 7,942
Operating profit/(loss) after tax:
- New business contribution1 (195) 184 (11) 305 294
- Expected return on VIF - - - 157 157
- Expected transfer from VIF to SNW2 457 (113) 344 (344) -
- Expected return on SNW 26 62 88 - 88
Generation of embedded value 288 133 421 118 539
- Experience variances (6) 3 (3) 34 31
- Operating assumption changes 11 - 11 (31) (20)
- Development costs (11) - (11) - (11)
Variances (6) 3 (3) 3 -
Operating profit after tax 282 136 418 121 539
Non-operating profit/(loss) after tax - UK business:
- Economic variances (30) 42 12 26 38
- Effect of tax rate changes and other taxation impacts3 (12) - (12) 33 21
Non-operating profit/(loss) after tax (42) 42 - 59 59
Profit for the period 240 178 418 180 598
Intra-group distributions4 18 - 18 - 18
Transfer to non-covered business5 (15) - (15) - (15)
Other reserve movements including pension deficit6 (56) 13 (43) 55 12
Embedded value at 30 June 2014 1,294 2,333 3,627 4,928 8,555
1. The free surplus reduction of £195m to finance new business includes £11m new business strain and £184m additional required capital.
2. The increase in free surplus of £457m from the expected transfer from the in-force covered business includes £344m of operational cash generation and a £113m reduction in required capital. The £508m operational cash generation from Insurance, Savings, LGR and LGIM per Note 2.01 also includes a £14m dividend from LGN, £1m dividend from LGF and £149m primarily reflecting profit from non-covered business.
3. Reflects the implementation of the UK reductions in corporation tax to 20% on 1 April 2015.
4. Intra-group distributions primarily reflect £4m dividends from the non-covered subsidiary, Nationwide Life, to Society.
5. 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.
6. The other reserve movements reflects 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.
The UK value of in-force business of £4,928m is comprised of £4,510m of non profit business and £419m of with-profits business.
European Embedded Value
90
5.01 UK covered business embedded value reconciliation (continued)
Shareholder net worth Total
Free Required Value of embedded
surplus capital Total in-force value
For the year ended 31 December 2014 £m £m £m £m £m
At 1 January 2014 1,107 2,142 3,249 4,693 7,942
Operating profit/(loss) after tax:
Contribution from new risks after cost of capital
- New business contribution1 (340) 343 3 607 610
- Intragroup transfer from With-Profit to Non Profit Fund - - - 80 80
- Expected return on VIF - - - 317 317
- Expected transfer from VIF to SNW2 901 (213) 688 (688) -
- Expected return on SNW 55 116 171 - 171
Generation of embedded value 616 246 862 316 1,178
- Experience variances 175 (83) 92 (6) 86
- Operating assumption changes 171 (109) 62 (36) 26
- Development costs (26) - (26) - (26)
Variances 320 (192) 128 (42) 86
Operating profit after tax 936 54 990 274 1,264
Non-operating profit/(loss) after tax:
- Economic variances (359) 219 (140) 851 711
- Effect of tax rate changes and other taxation impacts3 (12) - (12) 10 (2)
Non-operating profit/(loss) after tax (371) 219 (152) 861 709
Profit for the year 565 273 838 1,135 1,973
Intra-group distributions4 (641) - (641) - (641)
Transfer to non-covered business5 (26) - (26) - (26)
Other reserve movements including pension deficit6 (118) 217 99 290 389
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