REG - Legal & General Grp - L&G Half Year Results 2016 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 1

Legal & GeneralAnnouncement

09/08/2016 07:08

RNS Number : 5967G
Legal & General Group Plc
09 August 2016
Legal & General Group Plc
Half Year Results 2016 Part 2
IFRS and Operational Cash Generation  Page 27
Operating profit
For the six months ended 30 June 2016
 
Full year 
 
 
30.06.16
30.06.15
31.12.15 
 
Notes 
m 
m
m 
 
 
 
 
 
 
From continuing operations 
 
 
Legal & General Retirement (LGR) 
2.02 
406
281
641 
Legal & General Investment Management (LGIM) 
2.03 
171
176
355 
Legal & General Capital (LGC) 
2.05 
135
115
233 
Insurance 
2.02
138
186
283 
Savings 
2.02 
49
55
107 
Legal & General America (LGA) 
 
43
40
83 
 
 
 
 
 
 
Operating profit from divisions
 
942
853
1,702 
Group debt costs1
 
(86)
(75)
(153) 
Group investment projects and expenses2
2.06 
(34)
(28)
(86) 
 
 
 
 
 
 
Adjusted operating profit 
 
822
750
1,463 
Kingswood office closure costs 
 
(45)
-
(8) 
 
 
 
 
 
 
Operating profit 
 
777
750
1,455 
Investment and other variances 
2.07 
50
(86)
(119) 
(Losses)/gains on non-controlling interests 
 
(1)
8
19 
 
 
 
 
 
 
Profit before tax attributable to equity holders 
 
826
672
1,355 
Tax expense attributable to equity holders of the company 
2.14 
(159)
(125)
(261) 
 
 
 
 
 
 
Profit for the period 
 
667
547
1,094 
 
 
 
 
 
 
 
 
Profit attributable to equity holders of the company 
 
668
539
1,075 
 
 
 
 
 
 
 
 
 
 
p
p
p 
 
 
 
 
 
 
Earnings per share3
2.10
11.27
9.11
18.16 
 
 
 
Diluted earnings per share3
2.10 
11.23
9.05
18.04 
 
 
 
 
 
1. Group debt costs exclude interest on non recourse financing.
2. Group investment projects and expenses in H1 16 include restructuring costs of 16m (H1 15: 9m; FY 15: 42m).
3. All earnings per share calculations are based on profit attributable to equity holders of the company.
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 it provides shareholders with a better understanding of the underlying performance of the business in the year.
LGR represents worldwide pension risk transfer business (including longevity insurance), individual retirement and lifetime mortgages.
The LGIM segment represents institutional and retail investment management and workplace savings businesses.
LGC represents the IFRS profit before tax on its trading businesses and medium term expected investment return (less expenses) on its other group invested assets, using assumptions applied to the average balance of group invested assets (including interest bearing intra-group balances).
Insurance represents business in retail protection, group protection, general insurance, networks and Legal & General Netherlands (LGN). Insurance comparatives include Legal & General France (LGF), which was sold during 2015.
Savings represents business in platforms, SIPPs, mature savings and with-profits.
The LGA segment comprises protection business written in the USA.
During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to Insurance from Savings, and Investment Discounts On Line Limited (the IDOL) has been transferred to LGR from Insurance. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR H1 15 operating profit by 1m (FY 15: increase by 2m), increase Savings H1 15 operating profit by 5m (FY 15: increase by 8m) and reduce Insurance H1 15 operating profit by 6m (FY 15: reduce by 10m).
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 LGC's trading businesses (which reflects IFRS profit before tax) and LGA (which excludes unrealised investment returns to align with the liability measurement under US GAAP). Variances between actual and smoothed investment return 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, and start-up costs, are also excluded from operating profit.
IFRS and Operational Cash Generation  Page 28
2.01 Reconciliation of operational cash generation 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- 
surplus/
gene-
ience
assump-
items and
national 
(loss)
expense/
before
For the six months ended 
ration1
(strain)
ration
variances
tions
other
and other2
after tax
(credit)
tax
30 June 2016 
m 
m
m
m
m
m
m 
m
m
m
 
 
 
 
 
LGR
205 
79
284
(11)
48
13
- 
334
72
406
LGIM
145 
(11)
134
1
-
(1)
- 
134
37
171
- LGIM excluding Workplace
 
 
 Savings
136 
-
136
-
-
-
- 
136
38
174
- Workplace Savings
9 
(11)
(2)
1
-
(1)
- 
(2)
(1)
(3)
LGC
113 
-
113
-
-
-
- 
113
22
135
Insurance
159 
7
166
(16)
17
(13)
(44) 
110
28
138
Savings
51 
(3)
48
-
5
(14)
- 
39
10
49
LGA
61 
-
61
-
-
-
(43) 
18
25
43
 
 
 
 
 
Total from divisions 
734 
72
806
(26)
70
(15)
(87) 
748
194
942
 
 
 
 
 
Group debt costs 
(69) 
-
(69)
-
-
-
- 
(69)
(17)
(86)
Group investment projects 
 
 
and expenses 
(10) 
-
(10)
-
-
-
(17) 
(27)
(7)
(34)
 
 
 
 
 
Adjusted total 
655 
72
727
(26)
70
(15)
(104) 
652
170
822
Kingswood office closure costs3
- 
-
-
-
-
-
(36) 
(36)
(9)
(45)
 
 
 
 
 
Total 
655 
72
727
(26)
70
(15)
(140) 
616
161
777
 
 
 
 
 
1. Operational cash generation includes dividends remitted from LGN of 48m (H1 15: 18m; FY 15: 28m) within the Insurance line and LGA of 61m (H1 15: 52m; FY 15: 54m).
2. International and other includes 13m (H1 15: 7m; FY 15: 34m) of restructuring costs (16m before tax) (H1 15: 9m before tax; FY 15: 42m before tax) within the group investment projects and expenses line.
3. The Kingswood office closure costs reflect expenditure in relation to redundancy, rent and rates. Further costs resulting from the write-off of previously capitalised property, plant and equipment will be recognised in later periods.
Operational cash generation for LGR, LGIM, Insurance and Savings represents the expected IFRS surplus generated in the year from the in-force non profit annuities, workplace savings, protection and savings businesses using best estimate assumptions. The LGIM operational cash generation also includes operating profit after tax from the institutional and retail investment management businesses. The Insurance operational cash generation also includes dividends remitted from 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. 
 
 
New business surplus/strain for LGR, LGIM, Insurance and Savings represents the cost of acquiring new business and setting up prudent reserves in respect of the new business for UK non profit annuities, workplace savings, protection and savings, net of tax. The new business surplus and operational cash generation for LGR, LGIM, Insurance and Savings exclude any capital held in excess of the prudent reserves from the liability calculation.
 
 
Net cash generation for LGR, LGIM, Insurance and Savings is defined as operational cash generation less new business strain. 
 
 
Operational cash generation and net cash generation for LGC represents the operating profit (net of tax).
 
 
The operational cash generation for LGA represents the dividends received.
 
 
During 2016, changes have been made to the organisational structure. The advised sales and India businesses have been transferred to Insurance from Savings, and the IDOL business has been transferred to LGR from Insurance. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR H1 15 operational cash generation by 1m (FY 15: increase by 2m), increase Savings H1 15 operational cash generation by 3m (FY 15: increase by 6m) and reduce Insurance H1 15 operational cash generation by 4m (FY 15: reduce by 8m).
 
 
See Note 2.02 for more detail on experience variances, changes to valuation assumptions and non-cash items.
IFRS and Operational Cash Generation  Page 29
2.01 Reconciliation of operational cash generation 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- 
surplus/
gene-
ience
assump-
items and
national 
(loss)
expense/
before
For the six months ended 
ration1
(strain)
ration
variances
tions
other
and other2
after tax
(credit)
tax
30 June 2015 
m 
m
m
m
m
m
m 
m
m
m
 
 
 
 
 
LGR3
171 
22
193
15
37
(13)
- 
232
49
281
LGIM 
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
Insurance3
161 
-
161
7
2
(15)
(8) 
147
39
186
Savings3
67 
(5)
62
(1)
-
(18)
1 
44
11
55
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)
 
 
 
 
 
Adjusted total 
624 
5
629
19
39
(45)
(54) 
588
162
750
 
 
 
 
 
Total 
624 
5
629
19
39
(45)
(54) 
588
162
750
 
 
 
 
 
1. Operational cash generation includes dividends remitted from LGN of 18m and LGF of 1m within the Insurance line and LGA of 52m. 
2. International and other includes 7m of restructuring costs (9m before tax) within the group investment projects and expenses line.
3. LGR includes the IDOL business which was previously reported in Insurance, and Insurance includes the advised sales and India businesses which were previously reflected in Savings. Comparatives have been amended accordingly.
 
 
 
Opera- 
Changes
Operating
tional 
New
Net
in 
Operating
profit/
cash 
business
cash
Exper-
valuation
Non-cash
Inter- 
profit/
Tax
(loss)
gene- 
surplus/
gene-
ience
assump-
items and
national 
(loss)
expense/
before
For the year ended 
ration1
(strain)
ration
variances
tions
other
and other2
after tax
(credit)
tax
31 December 2015 
m 
m
m
m
m
m
m 
m
m
m
 
 
 
 
 
LGR3
374 
45
419
13
114
(20)
- 
526
115
641
LGIM 
303 
(22)
281
(1)
1
(2)
- 
279
76
355
- LGIM excluding Workplace 
 
 
 Savings 
282 
-
282
-
-
-
- 
282
77
359
- Workplace Savings 
21 
(22)
(1)
(1)
1
(2)
- 
(3)
(1)
(4)
LGC 
187 
-
187
-
-
-
- 
187
46
233
Insurance3
315 
25
340
(14)
(45)
(46)
(11) 
224
59
283
Savings3
125 
(9)
116
(9)
-
(23)
2 
86
21
107
LGA 
54 
-
54
-
-
-
(17) 
37
46
83
 
 
 
 
 
Total from divisions 
1,358 
39
1,397
(11)
70
(91)
(26) 
1,339
363
1,702
 
 
 
 
 
Group debt costs 
(122) 
-
(122)
-
-
-
- 
(122)
(31)
(153)
Group investment projects 
 
 
and expenses 
(19) 
-
(19)
-
-
-
(50) 
(69)
(17)
(86)
 
 
 
 
 
Adjusted total 
1,217 
39
1,256
(11)
70
(91)
(76) 
1,148
315
1,463
Kingswood office closure costs 
- 
-
-
-
-
-
(6) 
(6)
(2)
(8)
 
 
 
 
 
Total 
1,217 
39
1,256
(11)
70
(91)
(82) 
1,142
313
1,455
 
 
 
 
 
1. Operational cash generation includes dividends remitted from LGF of 1m and LGN of 28m within the Insurance line and LGA of 54m. 
2. International and other includes 34m of restructuring costs (42m before tax) within the group investment projects and expenses line.
3. LGR includes the IDOL business which was previously reported in Insurance, and Insurance includes the advised sales and India businesses which were previously reflected in Savings. Comparatives have been amended accordingly.
IFRS and Operational Cash Generation  Page 30
2.02 Analysis of LGR, Insurance and Savings operating profit
 
 
 
LGR
Insurance
Savings 
LGR
Insurance
Savings 
30.06.16
30.06.16
30.06.16 
30.06.15
30.06.15
30.06.15 
m
m
m 
m
m
m 
 
 
 
 
 
Net cash generation
284
166
48 
193
161
62 
 
 
 
 
Experience variances
 
 
 Persistency 
-
1
- 
-
1
(4) 
 Mortality/Morbidity1
2
(15)
- 
4
4
- 
 Expenses 
(7)
3
2 
-
4
- 
 Project and development costs 
(1)
(1)
- 
(6)
(1)
- 
 Other
(5)
(4)
(2) 
17
(1)
3 
 
 
 
 
Total experience variances
(11)
(16)
- 
15
7
(1) 
 
 
 
 
Changes to valuation assumptions
 
 
 Persistency
-
-
5 
-
-
- 
 Mortality/Morbidity2
48
2
- 
37
3
- 
 Expenses3
-
25
- 
-
1
- 
 Other4
-
(10)
- 
-
(2)
- 
 
 
 
 
Total valuation assumption changes
48
17
5 
37
2
- 
 
 
 
 
Movement in non-cash items
 
 
 Deferred tax
-
1
- 
-
2
- 
 Utilisation of brought forward trading losses
-
-
- 
(13)
(2)
(2) 
 Acquisition expense tax relief 5
-
(13)
(2) 
-
(17)
- 
 Deferred Acquisition Costs (DAC)6
-
-
(15) 
-
-
(27) 
 Deferred Income Liabilities (DIL)6
-
-
6 
-
-
17 
 Other7
13
(1)
(3) 
-
2
(6) 
 
 
 
 
Total non-cash movement items
13
(13)
(14) 
(13)
(15)
(18) 
 
 
 
 
Other8
-
(44)
- 
-
(8)
1 
 
 
 
 
Operating profit after tax
334
110
39 
232
147
44 
 
 
 
 
Tax gross up
72
28
10 
49
39
11 
 
 
 
 
Operating profit before tax
406
138
49 
281
186
55 
 
 
 
 
1. The Insurance mortality/morbidity experience variance in 2016 reflects adverse claims experience on the group protection book of business.
2. The mortality/morbidity valuation assumption change in LGR primarily reflects a change in the treatment to historic longevity insurance deals where future fees in excess of prudent estimates of longevity and expense experience are now included as an offset to IFRS reserves. The H1 15 LGR mortality/morbidity change to valuation assumptions primarily reflected a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants.
3. The Insurance expense valuation assumption change is the result of a review of the prudence within renewal expenses on our protection products.
4. The Insurance other valuation assumption change has arisen from the increase of the reinsurance counterparty reserves driven by increased reinsured exposure.
5. Net cash for Insurance and Savings recognises tax relief from prior year acquisition expenses, which are spread evenly over seven years under relevant 'I-E' tax legislation in the period the cash flows actually occur. In contrast, operating profit typically recognises the value of these future cash flows in the same period as the underlying expense as deferred tax amounts. The reconciling amounts arising from these items are included in the table above. Following the removal of new retail protection business from the 'I-E' tax regime, and the removal of commission from new insured savings business under the Retail Distribution Review at the end of 2012, no material amount of deferred tax assets arise on new acquisition expenses and the value of these future cash flows for post-2013 acquisition expenses have been reflected within net cash. The residual prior year acquisition expenses will run off predictably to 2018.
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 movement in non-cash items for LGR is primarily driven by market reference fees as a result of writing higher volumes.
8. Insurance Other in 2016 reflects the difference between the dividend (operational cash generation) remitted from LGN of 48m (H1 15: dividends remitted from LGN of 18m and LGF of 1m) and the LGN operating profit after tax (H1 15: LGN and LGF operating profit after tax).
IFRS and Operational Cash Generation   Page 31
2.02 Analysis of LGR, Insurance and Savings operating profit (continued)
 
 
 
LGR
Insurance
Savings 
 
Full year
Full year
Full year 
31.12.15
31.12.15
31.12.15 
m
m
m 
 
 
 
Net cash generation
419
340
116 
 
 
Experience variances
 
 Persistency 
4
5
(2) 
 Mortality/Morbidity 
18
(16)
- 
 Expenses 
-
2
3 
 Project and development costs 
(20)
(2)
(2) 
 Other1
11
(3)
(8) 
 
 
Total experience variances
13
(14)
(9) 
 
 
Changes to valuation assumptions
 
 Persistency2
-
48
- 
 Mortality/Morbidity3
97
(20)
- 
 Expenses4
17
27
(2) 
 Reinsurance modelling5
-
(93)
- 
 Other
-
(7)
2 
 
 
Total valuation assumption changes
114
(45)
- 
 
 
Movement in non-cash items
 
 Deferred tax
-
-
2 
 Utilisation of brought forward trading losses
(25)
(6)
- 
 Acquisition expense tax relief 6
-
(30)
(4) 
 Deferred Acquisition Costs (DAC)7
-
-
(54) 
 Deferred Income Liabilities (DIL)7
-
-
39 
 Other
5
(10)
(6) 
 
 
Total non-cash movement items
(20)
(46)
(23) 
 
 
Other
-
(11)
2 
 
 
Operating profit after tax
526
224
86 
 
 
Tax gross up
115
59
21 
 
 
Operating profit before tax
641
283
107 
 
 
1. The Other LGR experience variance reflects the benefit to profit of selective longevity and asset reinsurance related to bulk annuity transactions, offset by other smaller experience variances. 
2. The Insurance persistency valuation assumption change reflects continued improvement in retail protection lapse rates. 
3. The mortality/morbidity valuation assumption change in LGR primarily reflects late retirement factor assumption changes and a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants. The Insurance mortality/morbidity valuation assumption change has arisen on the strengthening of the reserving basis on the Whole Life Protection product to reflect the current expectation of future mortality improvement on this business. 
4. The LGR and Insurance positive expense valuation assumption changes represents the continued operational efficiency reducing the existing business cost base. 
5. The reinsurance modelling for our UK protection business has been enhanced. Recent reinsurance contracts have been written on a risk premium basis (as opposed to level premium) and the model change ensures that for these treaties, sufficient prudence is being held in later years. The one-off impact reduced operating profit by 93m in 2015. This also defers a higher proportion of cash generation into later years of these reinsurance contracts. 
6. Net cash for Insurance and Savings recognises tax relief from prior year acquisition expenses, which are spread evenly over seven years under relevant 'I-E' tax legislation in the period the cash flows actually occur. In contrast, operating profit typically recognises the value of these future cash flows in the same period as the underlying expense as deferred tax amounts. The reconciling amounts arising from these items are included in the table above. Following the removal of new retail protection business from the 'I-E' tax regime, and the removal of commission from new insured savings business under the Retail Distribution Review at the end of 2012, no material amount of deferred tax assets arise on new acquisition expenses and the value of these future cash flows for post-2013 acquisition expenses have been reflected within net cash. The residual prior year acquisition expenses will run off predictably to 2018. 
7. 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 Operational Cash Generation  Page 32
2.03 LGIM
 
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
Investment management revenue1
353
347
694
Investment management expenses1
(179)
(168)
(335)
Workplace Savings operating loss 
(3)
(3)
(4)
 
Total LGIM operating profit
171
176
355
 
1. Revenue and expenses are grossed up for costs that are paid to third parties for certain fund related services provided to Index clients and are passed directly onto the clients within their fees.
2.04 General insurance operating profit and combined operating ratio
 
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
General insurance operating profit1
31
38
51
 
General insurance combined operating ratio (%)2
85
82
89
 
1. The general insurance operating profit includes the underwriting result and smoothed investment return.
2. The calculation of the general insurance combined operating ratio incorporates claims, commission and expenses as a percentage of net earned premiums.
2.05 LGC
 
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
Direct investments
68
32
69
Traded portfolio including treasury operations
67
83
164
 
Total LGC operating profit
135
115
233
 
2.06 Group investment projects and expenses
 
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
Group investment projects and central expenses 
(18)
(19)
(44)
Restructuring costs1
(16)
(9)
(42)
 
Total group investment projects and expenses
(34)
(28)
(86)
 
1. Restructuring costs exclude the Kingswood office closure costs which have been presented separately.
2.07 Investment and other variances
 
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
Investment variance1
58
(29)
(57)
M&A related2
(4)
(55)
(57)
Other3
(4)
(2)
(5)
 
Total Investment and other variances
50
(86)
(119)
 
1. H1 16 investment variance is positive, primarily driven by foreign exchange gains on US dollar assets, a lack of defaults on the group's bond portfolios and selective de-risking of investment portfolios, partially offset by the negative impact of rate changes during the period. The defined pension benefit scheme variance of 31m contained within this line (H1 15: (26)m; FY 15: (15)m) 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). A segmental analysis of Investment and other variances can be found in note 2.09 (a).
2. M&A related includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. H1 16 includes the 4m net gain resulting from the disposal of subsidiaries during the period (H1 15: includes the 40m impairment loss resulting from the classification of disposal groups as held for sale; FY 15: includes the 25m net loss resulting from the disposal of subsidiary and joint venture investments during the year).
3. Other includes new business start-up costs and other non-investment related variance items.
IFRS and Operational Cash Generation  Page 33
Consolidated Income Statement
For the six months ended 30 June 2016
Full year
30.06.16
30.06.15
31.12.15
Notes
m
m
m
 
Income 
Gross written premiums 
4.03
5,492
3,170
6,321
Outward reinsurance premiums 
(719)
(865)
(1,603)
Net change in provision for unearned premiums 
6
14
21
 
Net premiums earned 
4,779
2,319
4,739
Fees from fund management and investment contracts 
523
564
1,139
Investment return 
2.09
36,978
5,062
5,947
Operational income 
243
444
876
 
Total income 
2.09
42,523
8,389
12,701
 
Expenses 
Claims and change in insurance liabilities 
11,377
2,090
5,080
Reinsurance recoveries 
(1,454)
(999)
(2,466)
 
Net claims and change in insurance liabilities
9,923
1,091
2,614
Change in provisions for investment contract liabilities 
30,569
4,958
5,615
Acquisition costs 
375
429
838
Finance costs 
98
91
186
Other expenses 
748
930
1,893
Transfers (from)/to unallocated divisible surplus 
(174)
61
141
 
Total expenses 
41,539
7,560
11,287
 
Profit before tax 
984
829
1,414
Tax expense attributable to policyholder returns 
(158)
(157)
(59)
 
Profit before tax attributable to equity holders 
826
672
1,355
 
Total tax expense 
(317)
(282)
(320)
Tax expense attributable to policyholder returns 
158
157
59
 
Tax expense attributable to equity holders 
2.14
(159)
(125)
(261)
 
Profit for the period 
667
547
1,094
 
 
Attributable to: 
Non-controlling interests 
2.20
(1)
8
19
Equity holders of the company 
668
539
1,075
 
 
Dividend distributions to equity holders of the company during the period 
2.16
592
496
701
Dividend distributions to equity holders of the company proposed after the period end 
2.16
238
205
592
 
 
 
 
 
p 
p 
p 
 
Earnings per share1
2.10
11.27
9.11
18.16
 
Diluted earnings per share1
2.10
11.23
9.05
18.04
 
1. All earnings per share calculations are based on profit attributable to equity holders of the company.
IFRS and Operational Cash Generation  Page 34
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016
Full year
30.06.16
30.06.15
31.12.15
m
m
m
Profit for the period
667
547
1,094
Items that will not be reclassified subsequently to profit or loss
Actuarial (losses)/gains on defined benefit pension schemes
(62)
27
47
Tax on actuarial (losses)/gains on defined benefit pension schemes
12
(5)
(11)
Actuarial gains/(losses) on defined benefit pension schemes transferred to unallocated divisible surplus
23
(10)
(17)
Tax on actuarial gains/(losses) on defined benefit pension schemes transferred to unallocated divisible surplus
(4)
2
4
Total items that will not be reclassified to profit or loss subsequently
(31)
14
23
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations
116
(25)
25
Net change in financial investments designated as available-for-sale
66
(27)
(64)
Tax on net change in financial investments designated as available-for-sale
(23)
9
22
Total items that may be reclassified to profit or loss subsequently
159
(43)
(17)
Other comprehensive income/(expense) after tax
128
(29)
6
Total comprehensive income for the period
795
518
1,100
Total comprehensive income attributable to:
Non-controlling interests
(1)
8
19
Equity holders of the company
796
510
1,081
IFRS and Operational Cash Generation  Page 35
Consolidated Balance Sheet
As at 30 June 2016
30.06.16
30.06.15
31.12.15
Notes
m
m
m
 
Assets 
Goodwill 
79
82
83
Purchased interest in long term businesses and other intangible assets 
251
328
292
Deferred acquisition costs 
2,007
1,822
1,887
Investment in associates and joint ventures 
237
207
220
Property, plant and equipment 
97
86
92
Investment property 
2.13/3.04
8,227
8,779
8,082
Financial investments 
2.13/3.04
397,123
351,159
354,063
Reinsurers' share of contract liabilities 
4,955
3,360
4,120
UK deferred tax asset 
2.14
5
33
20
Current tax recoverable 
271
185
236
Other assets 
10,900
3,539
3,618
Assets of operations classified as held for sale 
2.12
-
6,149
3,409
Cash and cash equivalents 
18,956
19,583
20,677
 
Total assets 
443,108
395,312
396,799
 
 
Equity 
Share capital 
2.17
149
149
149
Share premium 
978
973
976
Employee scheme treasury shares 
(32)
(31)
(30)
Capital redemption and other reserves 
211
98
89
Retained earnings 
5,285
4,843
5,220
 
Shareholders' equity 
6,591
6,032
6,404
Non-controlling interests 
2.20
292
281
289
 
Total equity 
6,883
6,313
6,693
 
 
Liabilities 
Participating insurance contracts 
5,864
5,901
5,618
Participating investment contracts 
5,260
5,093
4,912
Unallocated divisible surplus 
693
798
893
Value of in-force non-participating contracts 
(135)
(223)
(184)
 
Participating contract liabilities 
11,682
11,569
11,239
 
 
Non-participating insurance contracts 
58,437
49,274
49,754
Non-participating investment contracts 
300,605
280,472
278,554
 
Non-participating contract liabilities 
359,042
329,746
328,308
 
 
Core borrowings 
2.18
3,064
2,490
3,092
Operational borrowings 
2.19
411
645
536
Provisions 
2.23
1,205
1,189
1,171
UK deferred tax liabilities 
2.14
206
277
137
Overseas deferred tax liabilities 
2.14
523
414
436
Current tax liabilities 
120
40
95
Payables and other financial liabilities 
2.15
36,756
18,449
22,709
Other liabilities 
617
671
737
Net asset value attributable to unit holders 
22,599
17,513
18,277
Liabilities of operations classified as held for sale 
2.12
-
5,996
3,369
 
Total liabilities 
436,225
388,999
390,106
 
Total equity and liabilities 
443,108
395,312
396,799
 
IFRS and Operational Cash Generation  Page 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 2016 
m
m
m
m
m
m
m
m
 
As at 1 January 2016
149
976
(30)
89
5,220
6,404
289
6,693
Total comprehensive income/(expense)
for the period 
-
-
-
159
637
796
(1)
795
Options exercised under
share option schemes
-
2
-
-
-
2
-
2
Net movement in employee scheme 
treasury shares 
-
-
(2)
(5)
(12)
(19)
-
(19)
Dividends 
-
-
-
-
(592)
(592)
-
(592)
Movement in third party interests 
-
-
-
-
-
-
4
4
Currency translation differences 
-
-
-
(32)
32
-
-
-
 
As at 30 June 2016
149
978
(32)
211
5,285
6,591
292
6,883
 
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 year ended 31 December 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 year
-
-
-
(17)
1,098
1,081
19
1,100
Options exercised under
share option schemes
-
7
-
-
-
7
-
7
Net movement in employee scheme 
treasury shares
-
-
7
3
(21)
(11)
-
(11)
Dividends
-
-
-
-
(701)
(701)
-
(701)
Movement in third party interests
-
-
-
-
-
-
(5)
(5)
Currency translation differences
-
-
-
(14)
14
-
-
-
As at 31 December 2015
149
976
(30)
89
5,220
6,404
289
6,693
IFRS and Operational Cash Generation  Page 37
Consolidated Cash Flow Statement
For the six months ended 30 June 2016
30.06.16
30.06.15 
31.12.15 
 
Notes
m
m 
m 
 
 
 
 
 
 
Cash flows from operating activities 
 
 
Profit for the period 
667
547 
1,094 
Adjustments for non cash movements in net profit for the period 
 
 
Realised and unrealised (gains)/losses on financial investments and investment properties 
(31,213)
4,236 
4,077 
Investment income 
(5,164)
(4,928) 
(9,760) 
Interest expense 
98
91 
186 
Tax expense 
317
282 
320 
Other adjustments 
(7)
(35) 
(70) 
Net (increase)/decrease in operational assets 
 
 
Investments held for trading or designated as fair value through profit or loss 
(1,923)
(2,450) 
1,007 
Investments designated as available-for-sale 
327
210 
158 
Other assets 
(7,947)
(1,518) 
(2,594) 
Net increase/(decrease) in operational liabilities 
 
 
Insurance contracts 
8,921
(784) 
(1,083) 
Transfer (from)/to unallocated divisible surplus 
(200)
68 
(90) 
Investment contracts 
19,164
(5,254) 
(9,524) 
Value of in-force non-participating contracts 
49
(15) 
24 
Other liabilities 
10,674
3,249 
6,645 
 
 
 
 
 
 
Cash used in operations 
(6,237)
(6,301) 
(9,610) 
Interest paid 
(75)
(129) 
(186) 
Interest received 
2,740
2,413 
5,286 
Tax paid1
(217)
(84) 
(244) 
Dividends received 
2,622
2,282 
3,931 
 
 
 
 
 
 
Net cash flows used in operating activities 
(1,167)
(1,819) 
(823) 
 
 
 
 
Cash flows from investing activities 
 
 
Net acquisition of plant, equipment and intangibles 
(29)
(11) 
(24) 
Acquisitions2
-
(5) 
(5) 
Disposal of subsidiaries3
2.11
(340)
34 
(82) 
Investment in joint ventures 
(17)
(65) 
(71) 
 
 
 
 
 
 
Net cash flows from investing activities 
(386)
(47) 
(182) 
 
 
 
 
Cash flows from financing activities 
 
 
Dividend distributions to ordinary equity holders of the company during the period 
2.16
(589)
(496) 
(701) 
Proceeds from issue of ordinary share capital 
3
4 
7 
Purchase of employee scheme shares 
2
(7) 
(8) 
Proceeds from borrowings 
253
194 
697 
Repayment of borrowings 
(315)
(649) 
(527) 
 
 
 
 
 
 
Net cash flows used in financing activities 
(646)
(954) 
(532) 
 
 
 
 
Net decrease in cash and cash equivalents 
(2,199)
(2,820) 
(1,537) 
Exchange gains/(losses) on cash and cash equivalents 
89
(65) 
(106) 
Cash and cash equivalents at 1 January (before reallocation of held for sale cash) 
21,066
22,709 
22,709 
 
 
 
 
 
 
Cash and cash equivalents (before reallocation of held for sale cash) 
18,956
19,824 
21,066 
Cash and cash equivalents classified as held for sale 
2.12
-
(241) 
(389) 
 
 
 
 
 
 
Cash and cash equivalents at 30 June/31 December 
18,956
19,583 
20,677 
 
 
 
 
1. Tax comprises UK corporation tax paid of 108m (H1 15: 8m; FY 15: 128m), overseas corporate taxes of 5m (H1 15: 18m; FY 15: 36m) and withholding tax of 104m (H1 15: 58m; FY 15: 80m). 
2. Net cash flows from acquisitions includes cash paid of nil (H1 15: 5m; FY 15: 5m) less cash and cash equivalents acquired of nil (H1 15: nil; FY 15: nil). 
3. Net cash flows from disposals includes cash received of 74m (H1 15: nil; FY 15: 242m) less cash and cash equivalents disposed of 414m (H1 15: nil; FY 15: 324m). 
 
 
 
The group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including 669m (H1 15: 541m; FY 15: 856m) relating to the with-profit fund policyholders and 15,540m (H1 15: ,16,928m; FY 15: 16,116m) relating to unit-linked policyholders. 
IFRS and Operational Cash Generation  Page 38
2.08 Basis of preparation
The group's financial information for the six months ended 30 June 2016 has been prepared in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's 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 2016 year end. These policies are consistent with the principal accounting policies which were set out in the group's 2015 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. Following an amendment to IAS 1 more detail is provided around the methodology of the split of policyholder and shareholder tax.
For presentation, the tax shown in the Consolidated Income Statement has been apportioned between that attributable to policyholders' returns and equity holders' profits. This represents the fact that the group's long-term business in the UK incurs tax on policyholder investment return, in addition to the corporation tax charge charged on shareholder profit. Both types of tax are accounted for in the total tax charge in the group's Consolidated Income Statement, and the separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes.
For this apportionment, the equity holders' tax on long-term business is estimated using equity holders' profit after tax, which is grossed up at the statutory tax rate. The balance of income tax associated with UK long term business is classified as income tax attributable to policyholders' returns.
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 2015 financial statements except for the changes outlined in Note 2.02. 
The results for the six months ended 30 June 2016 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 2015 have been taken from the group's 2015 Annual Report and Accounts. Therefore, these interim accounts should be read in conjunction with the 2015 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 2015 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 2015 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 section of these interim financial statements.
Alternative performance measures
The group uses a number of alternative performance measures (APMs), including operational cash generation, net cash generation and operating profit, in the discussion of its business performance and financial position as the group believes that they provide a better indication of performance. Definitions of key APMs can be found in the glossary.
2.09 Segmental analysis
Reportable segments
The group has six reportable segments comprising LGR, LGIM, LGC, Insurance, Savings and LGA. Central group expenses and debt costs are reported separately.
LGR represents worldwide pension risk transfer business (including longevity insurance), individual retirement and lifetime mortgages.
The LGIM segment represents institutional and retail investment management and workplace savings businesses. 
LGC represents the IFRS profit before tax on its trading businesses and investment return (less expenses) on its other group invested assets. LGC and group expenses also incorporate inter-segmental eliminations, consolidated unit trusts and property partnerships managed on behalf of clients, which do not constitute a separately reportable segment. 
Insurance represents business in retail protection, group protection, general insurance, networks and Legal & General Netherlands (LGN). Insurance comparatives include Legal & General France (LGF), which was sold during 2015.
Savings represents business in platforms, SIPPs, mature savings and with-profits.
The LGA segment represents protection business written in the USA.
During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to Insurance from Savings, and the IDOL business has been transferred to LGR from Insurance. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR H1 15 operating profit by 1m (FY 15: increase by 2m), increase Savings H1 15 operating profit by 5m (FY 15: increase by 8m) and reduce Insurance H1 15 operating profit by 6m (FY 15: reduce by 10m).
Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.
IFRS and Operational Cash Generation  Page 39
2.09 Segmental analysis (continued)
 
(a) Profit/(loss) for the period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group 
 
 
 
 
expenses 
 
 
 
 
and debt 
LGR1
LGIM 
LGC
Insurance1
Savings1
LGA
costs 
Total
For the six months ended 30 June 2016
m 
m 
m
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
406 
171 
135
138 
49 
43
(165) 
777
Investment and other variances2
63 
(8) 
60
(92) 
4 
2
21 
50
Losses attributable to non-controlling 
 
 
 
 
 
interests
- 
- 
-
- 
- 
-
(1) 
(1)
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before tax attributable to 
 
 
 
 
 
equity holders
469 
163 
195
46 
53 
45
(145) 
826
Tax (expense)/credit attributable to equity
 
 
 
 
 
holders of the company 
(82) 
(35) 
(24)
(11) 
(10) 
(25)
28 
(159)
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) for the period
387 
128 
171
35 
43 
20
(117) 
667
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group 
 
 
 
 
 
expenses 
 
 
 
 
 
and debt 
 
LGR1
LGIM 
LGC
Insurance1
Savings1
LGA
costs 
Total
For the six months ended 30 June 2015 
m 
m 
m
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
281 
176 
115
186 
55 
40
(103) 
750
Investment and other variances2
11 
(5) 
(4)
(48) 
(20) 
1
(21) 
(86)
Gains attributable to non-controlling 
 
 
 
 
 
interests
- 
- 
-
- 
- 
-
8 
8
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before tax attributable to 
 
 
 
 
 
equity holders 
292 
171 
111
138 
35 
41
(116) 
672
Tax (expense)/credit attributable to equity 
 
 
 
 
 
holders of the company
(50) 
(38) 
(2)
(37) 
(7) 
(22)
31 
(125)
 
 
 
 
 
 
 
 
 
 
Profit/(loss) for the period
242 
133 
109
101 
28 
19
(85) 
547
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group 
 
 
 
 
 
expenses 
 
 
 
 
 
and debt 
 
LGR1
LGIM 
LGC
Insurance1
Savings1
LGA
costs 
Total
For the year ended 31 December 2015 
m 
m 
m
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
641 
355 
233
283 
107 
83
(247) 
1,455
Investment and other variances2
78 
(20) 
(116)
(39) 
3 
(13)
(12) 
(119)
Gains attributable to non-controlling 
 
 
 
 
 
interests
- 
- 
-
- 
- 
-
19 
19
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before tax attributable to 
 
 
 
 
 
equity holders
719 
335 
117
244 
110 
70
(240) 
1,355
Tax (expense)/credit attributable to equity 
 
 
 
 
 
holders of the company
(131) 
(74) 
(9)
(60) 
(16) 
(41)
70 
(261)
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) for the year
588 
261 
108
184 
94 
29
(170) 
1,094
 
 
 
 
 
 
 
 
 
 
 
1. During 2016, changes have been made to the organisational structure. The advised sales and India businesses have been transferred to Insurance from Savings, and the IDOL business has been transferred to LGR from Insurance. Comparatives have been amended accordingly. The impact of the reclassification has been to increase LGR H1 15 operating profit by 1m and profit before tax by 1m (FY 15: increase by 2m and 1m respectively), increase Savings H1 operating profit by 5m and profit before tax by 5m (FY 15: increase by 8m and 8m respectively), and reduce Insurance H1 15 operating profit by 6m and profit before tax by 6m (FY 15: reduce by 10m and 9m respectively).
2. H1 16 Investment and other variances - Insurance and Savings include the 4m net gain resulting from the disposal of subsidiaries during the period (H1 15: includes the 40m impairment loss resulting from the classification of disposal groups as held for sale; FY 15: includes the 25m net loss resulting from the disposal of subsidiary and joint venture investments during the year).
IFRS and Operational Cash Generation  Page 40
2.09 Segmental analysis (continued) 
 
 
 
 
(b) Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LGC 
 
 
 
 
and 
LGR1
LGIM 
Insurance1
Savings1
LGA
other2
Total
For the six months ended 30 June 2016
m 
m 
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
Internal income 
- 
121 
357 
- 
136
(614) 
-
External income 
9,083 
24,153 
912 
2,344 
421
5,610 
42,523
 
 
 
 
 
 
 
 
 
Total income 
9,083 
24,274 
1,269 
2,344 
557
4,996 
42,523
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LGC
 
 
 
 
 
and
 
LGR1
LGIM 
Insurance1
Savings1
LGA
other2,3
Total
For the six months ended 30 June 2015
m 
m 
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
 
Internal income 
- 
43 
197 
- 
109
(349) 
-
External income3
571 
4,752 
1,169 
1,711 
399
(213) 
8,389
 
 
 
 
 
 
 
 
 
 
Total income
571 
4,795 
1,366 
1,711 
508
(562) 
8,389
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LGC
 
 
 
 
 
and
 
LGR1
LGIM 
Insurance1
Savings1
LGA
other2,3
Total
For the year ended 31 December 2015
m 
m 
m 
m 
m
m 
m
 
 
 
 
 
 
 
 
 
Internal income 
- 
267 
495 
- 
238
(1,000) 
-
External income3
2,554 
5,514 
2,111 
2,473 
754
(704) 
12,702
 
 
 
 
 
 
 
 
 
Total income
2,554 
5,781 
2,606 
2,473 
992
(1,704) 
12,702
 
 
 
 
 
 
 
 
 
1. During 2016, changes have been made to the organisational structure. The advised sales and India businesses have transferred to Insurance from Savings, and the IDOL business has been transferred to LGR from Insurance. Comparatives have been amended accordingly. The impact of this reclassification has been to increase LGR H1 15 external income by 10m (FY 15: increase by 26m), reduce Savings H1 15 external income by 3m (FY 15: reduce by 5m) and reduce Insurance H1 15 external income by 7m (FY 15: reduce by 21m).
2. LGC and other includes LGC, inter-segmental eliminations and group consolidation adjustments.
3. LGC and other internal revenue includes inter-segmental eliminations previously classified as LGA (H1 15: 195m; FY 15: 441m). In addition, external revenue has been reclassified to exclude an internal transaction between LGC and other and LGA.
 
 
 
 
Total revenue includes investment return of 36,978m (H1 15: 5,062m; FY 15: 5,947m).
IFRS and Operational Cash Generation   Page 41
2.10 Earnings per share
(a) Earnings per share
 
 
 
 
 
Adjusted
Adjusted 
 
Adjusted
Adjusted 
 
Profit
Earnings 
profit
earnings 
Profit
Earnings 
profit
earnings 
 
after tax
per share1
after tax
per share1,2
after tax
per share1
after tax
per share1,2
 
30.06.16
30.06.16 
30.06.16
30.06.16 
30.06.15
30.06.15 
30.06.15
30.06.15 
m
p 
m
p 
m
p 
m
p 
 
 
 
 
 
 
 
 
 
 
Operating profit after tax
616
10.39 
616
10.39 
588
9.94 
588
9.94 
Investment and other variances
52
0.88 
48
0.81 
(49)
(0.83) 
(9)
(0.15) 
 
 
 
 
 
 
 
 
 
 
Earnings per share based on profit
 
 
 
 
attributable to equity holders
668
11.27 
664
11.20 
539
9.11 
579
9.79 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted
Adjusted
 
 
Profit
Earnings 
profit
earnings 
 
 
after tax
per share1
after tax
per share1,2
 
 
Full year
Full year 
Full year
Full year 
 
 
31.12.15
31.12.15 
31.12.15
31.12.15 
 
m
p 
m
p 
 
 
 
 
 
 
 
 
 
 
Operating profit after tax
 
1,142
19.29 
1,142
19.29
Investment and other variances
(67)
(1.13) 
(42)
(0.71)
 
 
 
 
 
 
 
 
 
 
Earnings per share based on profit
 
 
attributable to equity holders
 
1,075
18.16 
1,100
18.58
 
 
 
 
 
 
 
 
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 period, excluding employee scheme treasury shares. 
2. Adjusted earnings per share has been calculated excluding the net gain, 4m, resulting from the disposal of subsidiaries (H1 15: excluding the 40m impairment loss resulting from classification of disposal groups as held for sale; FY 15: excluding the 25m net loss resulting from the disposal of subsidiary and joint venture investments).
IFRS and Operational Cash Generation  Page 42
2.10 Earnings per share (continued)
(b) Diluted earnings per share
Adjusted
Adjusted
Number 
Profit
Earnings
profit
earnings
of shares1
after tax
per share
after tax
per share2
30.06.16 
30.06.16
30.06.16
30.06.16
30.06.16
m 
m
p
m
p
 
 
 
Profit attributable to equity holders of the company
5,927 
668
11.27
664
11.20
Net shares under options allocable for no further consideration
22 
-
(0.04)
-
(0.04)
 
 
 
Diluted earnings per share
5,949 
668
11.23
664
11.16
 
 
 
 
 
 
 
 
 
Adjusted
Adjusted
Number 
Profit
Earnings
profit 
earnings 
of shares1
after tax
per share
after tax 
per share2
30.06.15 
30.06.15
30.06.15
30.06.15 
30.06.15 
m 
m
p
m 
p 
 
 
 
 
Profit attributable to equity holders of the company
5,915 
539
9.11
579 
9.79 
Net shares under options allocable for no further consideration
38 
-
(0.06)
- 
(0.06) 
 
 
 
 
 
Diluted earnings per share
5,953 
539
9.05
579 
9.73 
 
 
 
 
 
 
 
 
Adjusted
Adjusted
Number 
Profit
Earnings
profit 
earnings 
of shares1
after tax
per share
after tax 
per share2
31.12.15 
31.12.15
31.12.15
31.12.15 
31.12.15 
m 
m
p
m 
p 
 
 
 
 
 
Profit attributable to equity holders of the company
5,920 
1,075
18.16
1,100 
18.58 
Net shares under options allocable for no further consideration
38 
-
(0.12)
- 
(0.12) 
 
 
 
 
 
Diluted earnings per share
5,958 
1,075
18.04
1,100 
18.46 
 
 
 
 
 
 
 
 
 
 
 
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.
2. Adjusted earnings per share has been calculated excluding the net 4m gain, resulting from the disposal of subsidiaries (H1 15: excluding the 40m impairment loss resulting from classification of disposal groups as held for sale; FY 15: excluding 25m net loss resulting from the disposal of subsidiary and joint venture investments).
2.11 Disposals
During H1 2016, the group made the following disposals:
- Suffolk Life Group Limited was sold to Curtis Banks Group plc for 45m (excluding transaction costs). The carrying value of the investment was 40m, realising a profit on disposal of 5m (excluding transaction costs) reported in operational income in the Consolidated Income Statement. The disposal of Suffolk Life Group Limited was not classified as a discontinued operation as it does not represent a major line of business or geographical segment of the group.
- The investment in ABI Alpha Limited was sold to a management buyout led by CBPE Capital with cash proceeds for the group's investment of 29m. The carrying value of the investment was 23m, realising a profit on disposal of 6m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.
- Air Energi is no longer controlled by the group following its merger with Swift WWR to create Airswift. The group now holds less than 50% of Airswift and therefore has classified the investment as an associate included in financial investments. The investment has been revalued to fair value, increasing the carrying value of the investment by 13m which has been reported in operational income in the Consolidated Income Statement. The majority of the profit on merger is allocated to the with-profits fund.
IFRS and Operational Cash Generation  Page 43
2.12 Held for sale
 
 
 
 
Full year 
30.06.16
30.06.151
31.12.152
m 
m 
m 
 
 
 
 
Assets classified as held for sale
 
Purchased interest in long term business and other intangible assets
-
- 
28 
DAC
-
71 
- 
Investment in associates
-
12 
- 
Property, plant and equipment
-
45 
1 
Investment property
-
- 
1,140 
Financial investments 
-
5,601 
1,801 
Reinsurers' share of contract liabilities
-
10 
39 
Cash and cash equivalents
-
241 
389 
Other assets
-
169 
11 
 
 
 
 
Total assets of the disposal group
-
6,149 
3,409 
 
 
 
 
Liabilities classified as held for sale
 
Insurance contract liabilities
-
(320) 
- 
Investment contract liabilities
-
(5,187) 
(3,235) 
Unallocated divisible surplus
-
(229) 
- 
Operational borrowings
-
- 
(102) 
Tax liabilities
-
(22) 
(5) 
Other liabilities 
-
(238) 
(27) 
 
 
 
 
Total liabilities of the disposal group
-
(5,996) 
(3,369) 
 
 
 
 
Total net assets of the disposal group
-
153 
40 
 
 
 
 
1. At H1 15, Legal & General International (Ireland) Limited, Commercial International Life Insurance Company SAE, Legal & General Gulf BSC, and Legal & General Holdings (France) S.A. were classified as held for sale.
2. At FY 15, Suffolk Life Group Limited was classified as held for sale.
IFRS and Operational Cash Generation  Page 44
2.13 Financial investments and investment property
Full year
30.06.16
30.06.15
31.12.15
m
m
m
 
Equities 
176,194
161,507
166,892
Unit trusts 
6,594
7,303
6,021
Debt securities1
197,008
170,910
169,720
Accrued interest 
1,395
1,393
1,456
Derivative assets2
15,424
9,625
9,509
Loans and receivables 
508
421
465
 
Financial investments
397,123
351,159
354,063
 
Investment property3
8,227
8,779
8,082
 
Total financial investments and investment property
405,350
359,938
362,145
 
1. Detailed analysis of debt securities which shareholders are directly exposed to is disclosed in Note 4.06. 
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 9,543m (H1 15: 5,819m; FY 15: 5,795m) held on behalf of unit linked policyholders.
3. Detailed analysis of investment property which shareholders are directly exposed to is disclosed in Note 4.07. 
(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.
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 valuation is then validated against the internal valuation. Accordingly, these assets have also been classified in level 2.
There have been no significant transfers between level 1 and level 2 for the period ended 30 June 2016 (30 June 2015: nil; 31 December 2015: nil).
The table on the following page presents the group's assets by IFRS 13 hierarchy levels:
IFRS and Operational Cash Generation  Page 45
2.13 Financial investments and investment property (continued)
(a) Fair value hierarchy (continued)
 
Total
Level 1
Level 2
Level 3
For the six months ended 30 June 2016
m
m
m
m
 
Shareholder
Equity securities
2,331
2,025
-
306
Debt securities
4,789
2,071
2,361
357
Accrued interest
33
15
15
3
Derivative assets
62
6
56
-
Investment property
200
-
-
200
 
Non profit non-unit linked
Equity securities
56
52
4
-
Debt securities
47,436
6,998
36,995
3,443
Accrued interest
496
38
453
5
Derivative assets
5,661
325
5,326
10
Investment property
2,257
-
-
2,257
 
With-profits
Equity securities
3,607
3,382
1
224
Debt securities
7,054
3,660
3,384
10
Accrued interest
69
29
40
-
Derivative assets
158
40
118
-
Investment property
920
-
-
920
 
Unit linked
Equity securities
176,794
173,351
3,062
381
Debt securities
137,729
96,007
41,722
-
Accrued interest
797
291
506
-
Derivative assets
9,543
225
9,318
-
Investment property
4,850
-
-
4,850
 
Total financial investments and investment property at fair value1
404,842
288,515
103,361
12,966
 
1. This table excludes loans and receivables of 508m, which are held at amortised cost.
IFRS and Operational Cash Generation  Page 46
2.13 Financial investments and investment property (continued)
(a) Fair value hierarchy (continued)
 
Total
Level 1
Level 2
Level 3
For the six months ended 30 June 2015
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
-
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
-
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
-
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
-
Investment property
5,502
-
-
5,502
 
Total financial investments and investment property at fair value1
359,517
257,043
91,542
10,932
 
1. This table excludes loans and receivables of 421m, which are held at amortised cost.
IFRS and Operational Cash Generation  Page 47
2.13 Financial investments and investment property (continued)
(a) Fair value hierarchy (continued)
Total
Level 1
Level 2
Level 3
For the year ended 31 December 2015
m
m
m
m
 
Shareholder
Equity securities
1,923
1,663
-
260
Debt securities
4,516
1,966
2,188
362
Accrued interest
32
16
14
2
Derivative assets
36
13
23
-
Investment property
190
-
-
190
 
Non profit non-unit linked
Equity securities
149
138
11
-
Debt securities
38,888
5,174
32,646
1,068
Accrued interest
465
34
426
5
Derivative assets
3,640
74
3,566
-
Investment property
2,157
-
-
2,157
 
With-profits
Equity securities
3,365
3,002
6
357
Debt securities
6,385
3,029
3,343
13
Accrued interest
69
24
45
-
Derivative assets
38
11
27
-
Investment property
930
-
-
930
 
Unit linked
Equity securities
167,476
164,118
3,112
246
Debt securities
119,931
82,388
37,537
6
Accrued interest
890
310
580
-
Derivative assets
5,795
332
5,463
-
Investment property
4,805
-
-
4,805
 
Total financial investments and investment property at fair value1
361,680
262,292
88,987
10,401
 
1. This table excludes loans and receivables of 465m, which are held at amortised cost.
IFRS and Operational Cash Generation  Page 48
2.13 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 property, unquoted equities, untraded debt securities and securities where the broker methodology is unknown. Unquoted equities include suspended securities and investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans and lifetime mortgages.
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 and validated independently as appropriate.
The group's policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time.
IFRS and Operational Cash Generation  Page 49
2.13 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
30.06.16
30.06.16 
30.06.16
30.06.16
30.06.15
30.06.15 
30.06.15
30.06.15
m
m 
m
m
m
m 
m
m
 
 
 
 
As at 1 January 
863
1,456 
8,082
10,401
1,142
1,243 
8,152
10,537
Total gains or (losses) for the period 
 
recognised in profit:
 
 
- in other comprehensive income
-
15 
-
15
-
- 
-
-
- realised and unrealised
 
 
gains or (losses)2
9
269 
(51)
227
97
(21) 
226
302
Purchases / Additions
260
586 
283
1,129
26
164 
512
702
Improvements
-
- 
-
-
-
- 
63
63
Sales / Disposals
(244)
(112) 
(87)
(443)
(140)
(105) 
(174)
(419)
Transfers into level 33
26
1,670 
-
1,696
12
5 
-
17
Transfers out of level 33
(3)
(56) 
-
(59)
(126)
(144) 
-
(270)
Other
-
- 
-
-
(7)
7 
-
-
 
 
 
 
As at 30 June
911
3,828-
8,227
12,966
1,004
1,149-
8,779
10,932
 
 
 
 
1. Other financial investments comprise debt securities, lifetime mortgages 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 discussions with its pricing providers to determine whether transfers between levels of the fair value hierarchy have occurred. The above transfers occurred as a result of this process. In 2016, transfers into level 3 included 1,670m of commercial real estate loans, which were previously classified as level 2.
 
 
 
Other 
 
financial 
 
Equity
invest- 
Investment
securities
ments1
property
Total
Full year
Full year 
Full year
Full year
 
31.12.15
31.12.15 
31.12.15
31.12.15
 
m
m 
m
m
 
 
 
 
As at 1 January 
 
1,142
1,243 
8,152
10,537
Total gains or (losses) for the year 
 
recognised in profit:
 
- in other comprehensive income
-
(12) 
-
(12)
- realised and unrealised
 
gains or (losses)2
110
(10) 
486
586
Purchases / Additions
 
68
394 
1,061
1,523
Sales / Disposals
 
(246)
(234) 
(482)
(962)
Transfers into level 33
 
66
76 
-
142
Transfers out of level 33
 
(260)
- 
-
(260)
Transfers to held for sale4
 
(17)
(1) 
(1,135)
(1,153)
 
 
 
 
As at 31 December
 
863
1,456 
8,082
10,401
 
 
 
 
1. Other financial investments comprise debt securities, lifetime mortgages 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.
4. The Suffolk Life Group was sold in May 2016 and therefore was classified as held for sale at 31 December 2015.
IFRS and Operational Cash Generation  Page 50
2.13 Financial investments and investment property (continued)
(c) Effect of 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 2016
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
283
1
(2)
- Asset backed securities
Cash flows; expected defaults
2
-
-
- Untraded and other debt securities3
Cash flows; expected defaults
358
2
(2)
- Unquoted and other securities3
Cash flows; expected defaults
7
-
-
- Investment property2
Property yield
200
10
(20)
Non profit non-linked
- Lifetime mortgage loans
Market spreads; LTVs
440
8
(7)
- Untraded and other debt securities3
Cash flows; expected defaults
1,197
-
-
- Commercial real estate loans
Cash flows; expected defaults
1,811
32
(32)
- Investment property2,4
Cash flows; property yield
2,257
56
(113)
- Other 
Cash flows
10
-
-
With-profits
- Private equity investment vehicles1
Price earnings multiple
17
-
-
- Unquoted investments in property vehicles2
Property yield
207
13
(25)
- Untraded and other debt securities3
Cash flows; expected defaults
10
-
-
- Investment property2
Property yield
920
47
(92)
Unit linked
- Private equity investment vehicles1
Price earnings multiple
1
-
-
- Unquoted investments in property vehicles2
Property yield
369
19
(38)
- Suspended securities
Estimated recoverable amount
11
-
-
- Investment property2
Property yield
4,850
247
(485)
 
Total
12,966
436
(817)
 
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 using valuations provided 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 yields.
3. No reasonably possible increases or decreases in fair values have been given for securities where the broker methodology is unknown.
4. The sensitivity of the non profit non-linked property to reasonably possible alternative assumptions is primarily driven by the vacant property value at the end of the lease, which represents only a partial component of the overall valuation calculation. The properties are primarily let to investment grade tenants on long-term leases and as a consequence of this, the cash flows received from these leases are deemed less sensitive to market fluctuation by the group.
IFRS and Operational Cash Generation  Page 51
2.13 Financial investments and investment property (continued)
(c) Effect of 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 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
137
7
(7)
- Untraded and other debt securities3
Cash flows; expected defaults
268
13
(13)
- Unquoted and other securities3
Cash flows; expected defaults
99
3
(3)
- Investment property2
Property yield
183
9
(9)
Non profit non-linked
- Asset backed securities
Cash flows; expected defaults
725
36
(36)
- Untraded and other debt securities3
Cash flows; expected defaults
3
-
-
- Unquoted and other securities3
Cash flows; expected defaults
129
6
(6)
- Investment property2
Property yield
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 securities3
Cash flows; expected defaults
379
19
(19)
- Other
3
-
-
- Investment property2
Property yield
1,057
53
(53)
Unit linked
- Unquoted investments in property vehicles2
Property yield
37
2
(2)
- Suspended securities
Estimated recoverable amount
11
1
(1)
- Asset backed securities
Cash flows; expected defaults
4
-
-
- Untraded and other debt securities3
Cash flows; expected defaults
2
-
-
- Unquoted and other securities3
Cash flows; expected defaults
196
22
(22)
- Investment property2
Property yield
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 using valuations provided 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 yields.
3. No reasonably possible increases or decreases in fair values have been given for securities where the broker methodology is unknown.
IFRS and Operational Cash Generation  Page 52
2.13 Financial investments and investment property (continued)
(c) Effect of 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 2015 
Main
value
value
value
Financial instruments and investment property
assumptions
m
m
m
 
Assets
Shareholder
Private equity investment vehicles1
Price earnings multiple
9
1
(1)
Unquoted investments in property vehicles2
Property yield
244
11
(11)
Untraded and other debt securities3
Cash flows; expected defaults
364
1
(1)
Unquoted and other securities3
Cash flows; expected defaults
7
-
-
Investment property2
Property yield
190
9
(9)
Non profit non-linked
Lifetime mortgage loans
Market spreads; LTVs
206
5
(7)
Untraded and other debt securities3
Cash flows; expected defaults
867
-
-
Investment property2
Property yield
2,157
110
(110)
With-profits
Private equity investment vehicles1
Price earnings multiple
11
1
(1)
Unquoted investments in property vehicles2
Property yield
346
21
(21)
Untraded and other debt securities3
Cash flows; expected defaults
13
-
-
Investment property2
Property yield
930
47
(47)
Unit linked
Private equity investment vehicles1
Price earnings multiple
8
-
-
Unquoted investments in property vehicles2
Property yield
133
8
(8)
Untraded and other debt securities3
Cash flows; expected defaults
6
-
-
Unquoted and other securities3
Cash flows; expected defaults
105
5
(5)
Investment property2
Property yield
4,805
243
(243)
 
Total
10,401
462
(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 using valuations provided 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 yields.
3. No reasonably possible increases or decreases in fair values have been given for securities where the broker methodology is unknown.
IFRS and Operational Cash Generation  Page 53
2.14 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
 
30.06.16
30.06.15
31.12.15
 
m
m
m
 
 
 
Profit before tax attributable to equity holders
826
672
1,355
Tax calculated at 20.00% (H1 15: 20.25%; FY 15: 20.25%)
165
136
274
Effects of: 
 
Adjustments in respect of prior years
-
-
(5)
Income not subject to tax, such as dividends
(5)
(3)
(11)
Higher rate of tax on profits taxed overseas
4
10
16
Additional allowances/non-deductible expenses
2
(4)
(4)
Impact of reduction in UK corporate tax rate to 18% from 2020 on deferred tax balances1
(2)
-
1
Differences between taxable and accounting investment gains
(5)
(11)
(10)
Other
-
(3)
-
 
 
 
Tax attributable to equity holders
 
159
125
261
 
 
 
Equity holders' effective tax rate2
 
19.2%
18.6%
19.3%
 
 
 
1. The impact of future corporation tax reductions announced in March 2016 has not been included in the Half Year 2016 results. The impact will be included in the FY 16 results when permitted under IAS 12.
2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders. Please refer to note 2.08 for detail on the methodology of the split of policyholder and equity holders' tax.
IFRS and Operational Cash Generation  Page 54
2.14 Tax (continued)
(b) Deferred Tax
Full year
30.06.16
30.06.15
31.12.15
(i) UK deferred tax (liabilities)/assets
m
m
m
Realised and unrealised gains on investments
(172)
(256)
(146)
Excess of depreciation over capital allowances
14
17
18
Management expenses 
62
89
74
Deferred acquisition expenses
(48)
(56)
(51)
Difference between the tax and accounting value of insurance contracts
(125)
(126)
(83)
Accounting provisions
4
16
8
Trading losses 
7
10
6
Pension fund deficit
71
85
72
Purchased interest in long term business
(14)
(23)
(15)
Net UK deferred tax liabilities
(201)
(244)
(117)
Presented on the Consolidated Balance Sheet as:
UK deferred tax asset
5
33
20
UK deferred tax liability
(206)
(277)
(137)
Net UK deferred liabilities1
(201)
(244)
(117)
(ii) Overseas deferred tax (liabilities)/assets
Realised and unrealised gains on investments
(38)
(32)
(8)
Deferred acquisition expenses
(344)
(284)
(308)
Difference between the tax and accounting value of insurance contracts
(180)
(234)
(241)
Accounting provisions
(33)
(19)
(27)
Trading losses
81
164
159
Pension fund deficit
-
2
-
Purchased interest in long term business
(11)
(11)
(11)
Excess of depreciation over capital allowances
2
-
-
Net Overseas deferred tax liabilities
(523)
(414)
(436)
1. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of 5m and a liability of 206m where the relevant items cannot be offset.
IFRS and Operational Cash Generation  Page 55
2.15 Payables and other financial liabilities
Full year 
 
30.06.16
30.06.15
31.12.15 
m
m
m 
 
 
Derivative liabilities 
15,473
5,806
8,047 
Repurchase agreements1
17,295
9,532
13,343 
Other2
3,988
3,111
1,319 
 
 
Payables and other financial liabilities
36,756
18,449
22,709 
 
 
1. The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements. 
2. Other financial liabilities include net variation margins on derivative contracts, which are maintained daily. Included within the variation margins are collateral held and pledged of 8m and 979m respectively (H1 15: 384m and 20m; FY 15: 94m and 50m). Other also includes the present value of future commission costs which have contingent settlement provisions of 175m (H1 15: 182m; FY 15: 175m). 
 
 
 
 
Fair value hierarchy
 
 
Amortised 
 
Total
Level 1
Level 2
Level 3
cost 
As at 30 June 2016
m
m
m
m
m 
 
 
 
 
Derivative liabilities 
15,473
5,519
9,954
-
- 
Repurchase agreements 
17,295
-
-
-
17,295 
Other 
3,988
522
14
174
3,278 
 
 
Payables and other financial liabilities
36,756
6,041
9,968
174
20,573 
 
 
 
 
 
 
 
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
-
- 
Repurchase agreements 
9,532
-
-
-
9,532 
Other 
3,111
260
14
184
2,653 
 
 
 
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 31 December 2015
m
m
m
m
m 
 
 
 
 
Derivative liabilities 
8,047
1,451
6,596
-
- 
Repurchase agreements 
13,343
-
-
-
13,343 
Other 
1,319
5
12
175
1,127 
 
 
Payables and other financial liabilities
22,709
1,456
6,608
175
14,470 
 
 
 
 
Future commission costs 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/decreasing the liability by 4m (H1 15: 6m; FY 15: 6m).
 
 
 
 
Significant transfers between levels
There have been no significant transfers between levels 1, 2 and 3 for the period ended 30 June 2016 (H1 15 and FY 15: No significant transfers between levels 1, 2 and 3).
IFRS and Operational Cash Generation  Page 56
2.16 Dividends
 
 
 
 
Per
 
Per 
Per 
 
Dividend
share1
Dividend1
share1
Dividend
share1
 
30.06.16
30.06.16
30.06.15 
30.06.15 
31.12.15
31.12.15 
 
m
p
m 
p 
m
p 
 
 
 
 
 
 
 
 
 
Ordinary share dividends paid in the period:
 
 
 
- Prior year final dividend 
592
9.95
496 
8.35 
496
8.35 
- Current year interim dividend 
-
-
- 
- 
205
3.45 
 
 
 
 
 
 
 
 
 
 
592
9.95
496 
8.35 
701
11.80 
 
 
 
 
 
 
 
 
 
Ordinary share dividend proposed2
238
4.00
205 
3.45 
592
9.95 
 
 
 
 
 
 
 
 
 
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.
2.17 Share capital 
 
Number of
Number of
Number of
shares
shares
shares
Full year
30.06.16
30.06.15
31.12.15
 
As at 1 January
5,948,788,480
5,942,070,229
5,942,070,229
Options exercised under share option schemes:
- Savings related share option scheme 
3,465,839
3,704,493
6,718,251
 
As at 30 June / 31 December
5,952,254,319
5,945,774,722
5,948,788,480
 
 
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 Operational Cash Generation  Page 57
2.18 Core Borrowings
Carrying
Fair
Carrying
Fair
Carrying
Fair 
amount
value
amount
value
amount
value
Full year
Full year
30.06.16
30.06.16
30.06.15
30.06.15
31.12.15
31.12.15
m
m
m
m
m
m
 
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)
626
615
647
634
637
631
5.875% Sterling undated subordinated notes (Tier 2)
412
412
414
423
413
426
10% Sterling subordinated notes 2041 (Tier 2)
310
392
310
394
310
398
5.5% Sterling subordinated notes 2064 (Tier 2) 
589
534
588
622
589
570
5.375% Sterling subordinated notes 2045 (Tier 2) 
602
607
-
-
602
611
Client fund holdings of group debt1
(33)
(32)
(28)
(29)
(26)
(27)
 
Total subordinated borrowings
2,506
2,528
1,931
2,044
2,525
2,609
 
Senior borrowings
Sterling medium term notes 2031-2041
602
801
602
762
609
779
Client fund holdings of group debt1
(44)
(58)
(43)
(55)
(42)
(54)
 
Total senior borrowings
558
743
559
707
567
725
 
Total core borrowings
3,064
3,271
2,490
2,751
3,092
3,334
 
1. 77m (H1 15: 71m; FY15: 68m) 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 Solvency II purposes these securities are treated as tier 1 own funds. 
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 own funds for Solvency II purposes. 
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. They are treated as tier 2 own funds for Solvency II purposes.
5.5% Sterling subordinated notes 2064
In 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. They are treated as tier 2 own funds for Solvency II purposes.
5.375% Sterling subordinated notes 2045
On 27 October 2015, Legal & General Group Plc issued 600m of 5.375% dated subordinated notes. The notes are callable at par on 27 October 2025 and every five years thereafter. If not called, the coupon from 27 October 2025 will be reset to the prevailing five year benchmark gilt yield plus 4.58% pa. These notes mature on 27 October 2045. They are treated as tier 2 own funds for Solvency II purposes.
IFRS and Operational Cash Generation  Page 58
2.19 Operational borrowings
Carrying
Fair
Carrying
Fair
Carrying
Fair
amount
value
amount
value
amount
value
Full year
Full year
30.06.16
30.06.16
30.06.15
30.06.15
31.12.2015
31.12.2015
m
m
m
m
m
m
 
Short term operational borrowings
Euro Commercial paper 
103
103
41
41
15
15
Bank loans and overdrafts 
69
69
7
7
2
2
 
Total short term operational borrowings
172
172
48
48
17
17
 
Non recourse borrowings
US Dollar Triple X securitisation 2037
-
-
283
239
302
258
Suffolk Life unit linked borrowings1
-
-
99
99
-
-
LGV 6/LGV 7 Private Equity Fund Limited Partnership
42
42
123
123
98
98
Consolidated Property Limited Partnerships
197
197
153
153
184
184
 
Total non recourse borrowings
239
239
658
614
584
540
 
Group holding of operational borrowings2
-
-
(61)
(51)
(65)
(56)
 
Total operational borrowings
411
411
645
611
536
501
 
1. On 25 May 2016, the group sold Suffolk Life Group Limited to Curtis Banks Group. At FY 15, the Suffolk Life unit linked borrowings were transferred to held for sale, refer to Note 2.12.
2. 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 the short term Euro Commercial paper, bank loans and overdrafts of 172m (H1 15: 48m; FY 15: 17m). 
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 in 2005 and 2006. It was secured on the cash flows related to that tranche of business. On 15 June 2016, this securitisation was redeemed at par.
Suffolk Life unit linked borrowings
All of these non recourse borrowings were in relation to commercial properties held within SIPP plans and the borrowings solely related to client investments. On 25 May 2016, the group sold Suffolk Life Group (SLG) to Curtis Banks Group plc.
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 2016, the group had in place a 1.00bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2020. No drawings were made under this facility year to date. 
2.20 Non-controlling interests
Non-controlling interests represent third party interests in direct equity investments as well as investments in private equity and property investment vehicles which are consolidated in the group's results. The majority of the non-controlling interests in 2016 are in relation to investments in the Leisure Fund Unit Trust, the Legal & General UK Property Ungeared Fund Limited Partnership and Thorpe Park Developments Limited. 
IFRS and Operational Cash Generation  Page 59
2.21 Foreign exchange rates
Principal rates of exchange used for translation are:
Period end exchange rates
At 30.06.16
At 30.06.15
At 31.12.15
 
United States Dollar 
1.34
1.57
1.47
Euro 
1.20
1.41
1.36
 
 
 
01.01.16 - 
01.01.15 - 
01.01.15 - 
Average exchange rates
30.06.16
30.06.15
31.12.15
 
United States Dollar 
1.43
1.52
1.53
Euro 
1.28
1.37
1.38
 
2.22 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 34m (H1 15: 54m; FY 15: 93m) for all employees.
At 30 June 2016, 30 June 2015 and 31 December 2015 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:
 
30.06.16
30.06.15
31.12.15
m
m
m
 
Salaries 
2
3
10
Social security costs 
1
2
2
Post-employment benefits 
-
1
1
Share-based incentive awards 
2
2
5
 
Key management personnel compensation
5
8
18
 
Number of key management personnel 
16
16
16
 
 
The group has the following related party transactions: 
- Annuity contracts issued by Society for consideration of 4m (H1 15: 28m; FY 15: 105m) purchased by the group's UK defined benefit pension schemes during the period, priced on an arm's length basis;
- Investments in venture capital, property and financial investments held via collective investment vehicles. The net investments into associate investment vehicles totalled 27m during the period (H1 15: 7m; FY 15: nil). The group received investment management fees of 1m during the period (H1 15: 1m; FY 15: 2m). Distributions from these investment vehicles to the group totalled 6m (H1 15: 7m; FY 15: 10m);
- Loans outstanding from CALA at 30 June 2016 total 63m (H1 15: 57m; FY 15: 59m);
- Further conditional commitments of 4m (H1 15: 9m; FY 15: 8m) in the equity stake in Pemberton of 12.0m (H1 15: 5.8m; FY 15: 7.0m). A commitment of 198m (H1 15: 177m; FY 15: 182m) was previously made to Pemberton's first co-mingled funds, 75% of which was drawn as at 30 June 2016;
- A 50/50 joint venture in MediaCity in the form of 61m (H1 15: 61m; FY 15: 61m) equity and 55m (H1 15: 55m; FY 15: 55m) loan notes. The loans outstanding from MediaCity total 55m as at 30 June 2016 (H1 15: 55m; FY 15: 55m);
- An 18% equity stake in NTR Wind Management Limited, an asset management company set up to manage wind farms entered into in December 2015, of 2m. The equity stake was increased to 25% and further investment of 1m was made during the year, with a commitment of a further 1.8m. The fund reached final close at its hard cap of 195m (246m) in February 2016 and L&G Capital has committed 47.5% of the funds;
- A 50/50 joint venture in Access Development Partnership entered into in March 2016 for 23m equity for build-to-rent developments in Walthamstow, Salford and Bristol.
IFRS and Operational Cash Generation  Page 60
2.23 Pension costs
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. The schemes were closed to future accrual on 31 December 2015. At 30 June 2016, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at 306m (H1 15: 351m; FY 15: 308m). These amounts have been recognised in the financial statements with 193m charged against shareholder equity (H1 15: 221m; FY 15: 194m) and 113m against the unallocated divisible surplus (H1 15: 130m; FY 15: 114m).
2.24 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. Legal & General (Portfolio Management Services) Limited (PMS) is currently co-operating with an investigation by FCA into Structured Deposits products issued by PMS between 2006 and 2014. PMS has responded to FCA's requests for information and awaits FCA's feedback. This matter is at an early stage and the probability, timing and amount of any outflows is uncertain. As matters progress, management and legal advisers will evaluate on an ongoing basis whether a provision should be recognised. 
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. LGAS has provided indemnities, a liquidity and expense risk agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group's matching adjustment reorganisation pursuant to Solvency II.
IFRS and Operational Cash Generation  Page 61
Independent review report to Legal & General Group Plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Legal & General Group Plc's consolidated interim financial statements (the "interim financial statements") in the Interim Management Statement of Legal & General Group Plc for the 6 month period ended 30 June 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
 the Consolidated Balance Sheet as at 30 June 2016;
 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 interim financial statements (pages 27 to 60).
The interim financial statements included in the Interim Management Statement have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2.08 to the interim financial statements, 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.
Responsibilities for the consolidated interim financial statements and the review
Our responsibilities and those of the directors 
The Interim Management Statement, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Management Statement in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Interim Management Statement 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 Rules and Transparency Rules of the United Kingdom's 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.
What a review of 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 Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
8 August 2016
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 interim 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.
IFRS and Operational Cash Generation  Page 62
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Asset and premium flows  Page 63
3.01 Legal & General investment management total assets 
 
 
 
 
 
Active 
 
 
 
 
 
fixed 
Solu- 
Real 
Active 
Total 
Advisory
Total
For the six months
Index
income 
tions1
assets 
equities 
AUM 
assets
assets
ended 30 June 2016
bn
bn 
bn 
bn 
bn 
bn 
bn
bn
 
 
 
 
 
 
 
 
At 1 January 2016
274.3
106.8 
338.2 
18.3 
8.5 
746.1 
10.5
756.6
External inflows 
17.6
3.5 
6.6 
0.8 
- 
28.5 
28.5
External outflows 
(16.0)
(2.2) 
(6.6) 
(0.7) 
(0.1) 
(25.6) 
(25.6)
Overlay/advisory net flows
-
- 
6.7 
- 
- 
6.7 
(0.3)
6.4
 
 
 
 
 
 
 
 
External net flows2
1.6
1.3 
6.7 
0.1 
(0.1) 
9.6
(0.3)
9.3
Internal net flows 
(0.4)
0.7 
(0.1) 
0.1 
- 
0.3 
-
0.3
 
 
 
 
 
 
 
 
Total net flows 
1.2
2.0 
6.6 
0.2 
(0.1) 
9.9 
(0.3)
9.6
Cash management movements3
-
(0.6) 
- 
- 
- 
(0.6) 
-
(0.6)
Market and other movements2
24.9
17.6 
44.3 
(0.1) 
(0.6) 
86.1 
1.4
87.5
 
 
 
 
 
 
 
At 30 June 20164
300.4
125.8 
389.1 
18.4 
7.8 
841.5 
11.6
853.1
 
 
 
Assets attributable to:
 
 
 
External 
 
 
749.8 
11.6
761.4
Internal
 
 
91.7 
-
91.7
 
 
 
 
 
 
 
 
Assets attributable to:
 
 
 
 
UK
 
 
689.6 
-
689.6
International 
 
 
151.9 
11.6
163.5
 
 
 
 
 
 
 
 
Active
 
fixed
Solu- 
Real
Active
Total
Advisory
Total
For the six months
Index
income
tions1
assets
equities
AUM
assets
assets
ended 30 June 2015
bn
bn
bn 
bn
bn
bn
bn
bn
 
 
 
At 1 January 2015
274.8
102.9
293.3 
14.5
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)
- 
0.4
(0.3)
(1.0)
-
(1.0)
 
 
 
Total net flows 
(1.5)
1.5
12.3 
0.8
(0.3)
12.8
(3.5)
9.3
 
Cash management movements3
-
1.7
- 
-
-
1.7
-
1.7
Market and other movements2
1.4
0.3
2.6 
1.4
0.7
6.4
-
6.4
 
 
 
At 30 June 20154
274.7
106.4
308.2 
16.7
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
 
 
 
1. Solutions include liability driven investments, multi-asset funds, and include 244.0bn at 30 June 2016 (30 June 2015: 208.1bn) of derivative notionals associated with the Solutions business. 
2. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2016 was 71.0bn (30 June 2015: 48.2bn) and the movement in these assets is included in market and other movements for Solutions assets. 
3. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes. 
4. Total assets under management have been reconciled to the financial investments and investment property held on the Consolidated Balance Sheet in note 3.04.
Asset and premium flows  Page 64
3.01 Legal & General investment management total assets (continued)
 
 
 
 
 
 
Active 
 
 
 
 
fixed 
Solu- 
Real 
Active
Total 
Advisory
Total
For the year ended
Index
income 
tions1
assets 
equities
AUM 
assets
assets
31 December 2015
bn
bn 
bn 
bn 
bn
bn 
bn
bn
 
 
 
 
 
 
 
 
 
At 1 January 2015
274.8
102.9 
293.3 
14.5 
8.2
693.7 
14.8
708.5
External inflows2
33.4
11.1 
16.3 
1.4 
-
62.2 
62.2
External outflows 
(30.9)
(4.3) 
(6.6) 
(0.9) 
-
(42.7) 
(42.7)
Overlay/advisory net flows 
-
- 
18.2 
- 
-
18.2 
(4.6)
13.6
 
 
 
 
 
 
 
 
 
External net flows3
2.5
6.8 
27.9 
0.5 
-
37.7 
(4.6)
33.1
Internal net flows 
(0.7)
(1.9) 
- 
0.9 
(0.4)
(2.1) 
-
(2.1)
Disposal of LGF4
-
(2.3) 
- 
- 
-
(2.3) 
-
(2.3)
 
 
 
 
 
 
 
 
 
Total net flows 
1.8
2.6 
27.9 
1.4 
(0.4)
33.3 
(4.6)
28.7
 
 
 
 
Cash management movements5
-
0.8 
- 
- 
-
0.8 
-
0.8
Market and other movements3
(2.3)
0.5 
17.0 
2.4 
0.7
18.3 
0.3
18.6
 
 
 
 
 
 
 
 
 
At 31 December 20156
274.3
106.8 
338.2 
18.3 
8.5
746.1 
10.5
756.6
 
 
 
 
 
 
 
 
 
Assets attributable to:
 
 
 
External
661.0 
10.5
671.5
Internal
85.1 
-
85.1
 
 
 
 
 
 
 
 
 
Assets attributable to:
 
 
 
UK
623.7 
-
623.7
International
122.4 
10.5
132.9
 
 
 
 
 
 
 
 
 
1. Solutions include liability driven investments, multi-asset funds and included 226.2bn at 31 December 2015 of derivative notionals associated with the Solutions business. 
2. Solutions external inflows include 11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.
3. External net flows exclude movements in short-term solutions 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 2015 was 59.9bn (30 June 2015: 48.2bn), and the movement in these assets is included in market and other movements for Solutions assets. 
4. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prvoyance.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. Total assets under management have been reconciled to the financial investments and investment property held on the Consolidated Balance Sheet in note 3.04.
Asset and premium flows  Page 65
3.02 Legal & General investment management total assets half-yearly progression
 
 
 
 
 
Active 
 
 
 
 
fixed 
Solu- 
Real 
Active
Total 
Advisory
Total 
For the year ended
Index
income 
tions1
assets 
equities
AUM 
assets
assets
31 December 2015
bn
bn 
bn 
bn 
bn
bn 
bn
bn
 
 
 
 
 
 
 
 
 
At 1 January 2015
274.8
102.9 
293.3 
14.5 
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 flows3
(1.2)
2.3 
12.3 
0.4 
-
13.8 
(3.5)
10.3
Internal net flows 
(0.3)
(0.8) 
- 
0.4 
(0.3)
(1.0) 
-
(1.0)
 
 
 
 
 
 
 
 
 
Total net flows 
(1.5)
1.5 
12.3 
0.8 
(0.3)
12.8 
(3.5)
9.3
 
 
 
 
Cash management movements5
-
1.7 
- 
- 
-
1.7 
-
1.7
Market and other movements3
1.4
0.3 
2.6 
1.4 
0.7
6.4 
-
6.4
 
 
 
 
 
 
 
 
 
At 30 June 2015
274.7
106.4 
308.2 
16.7 
8.6
714.6 
11.3
725.9
 
 
 
 
 
 
 
 
 
External inflows2
17.5
6.3 
12.4 
0.7 
-
36.9 
36.9
External outflows 
(13.8)
(1.8) 
(3.2) 
(0.6) 
-
(19.4) 
(19.4)
Overlay/advisory net flows 
-
- 
6.4 
- 
-
6.4 
(1.1)
5.3
 
 
 
 
 
 
 
 
 
External net flows3
3.7
4.5 
15.6 
0.1 
-
23.9 
(1.1)
22.8
Internal net flows 
(0.4)
(1.1) 
- 
0.5 
(0.1)
(1.1) 
-
(1.1)
Disposal of LGF4
-
(2.3) 
- 
- 
-
(2.3) 
-
(2.3)
 
 
 
 
 
 
 
 
 
Total net flows 
3.3
1.1 
15.6 
0.6 
(0.1)
20.5 
(1.1)
19.4
Cash management movements5
-
(0.9) 
- 
- 
-
(0.9) 
-
(0.9)
Market and other movements3
(3.7)
0.2 
14.4 
1.0 
-
11.9 
0.3
12.2
 
 
 
 
 
 
 
 
 
At 31 December 20156
274.3
106.8 
338.2 
18.3 
8.5
746.1 
10.5
756.6
 
 
 
 
1. Solutions include liability driven investments, multi-asset funds, and include 226.2bn at 31 December 2015 (30 June 2015: 208.1bn) of derivative notionals associated with the Solutions business. 
2. Solutions external inflows include 11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.
3. External net flows exclude movements in short-term solutions 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 2015 was 59.9bn (30 June 2015: 48.2bn), and the movement in these assets is included in market and other movements for Solutions assets. 
4. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prvoyance.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. Total assets under management have been reconciled to the financial investments and investment property on the Consolidated Balance Sheet in note 3.04.
Asset and premium flows  Page 66
3.02 Legal & General investment management total assets half-yearly progression (continued)
 
As at
As at
As at
30.06.16
31.12.15
30.06.15
bn
bn
bn
 
Total assets attributable to:1
External
761.4
671.5
636.1
Internal
91.7
85.1
89.8
 
Total assets attributable to:1
UK
689.6
623.7
598.8
International 
163.5
132.9
127.1
 
1. Total assets at 30 June 2016 include 11.6bn of advisory assets (30 June 2015: 11.3bn; 31 December 2015: 10.5bn).
3.03 Legal & General investment management total external assets under management net flows 
 
6
6
6
months
months
months
to 
to 
to 
30.06.16
31.12.15
30.06.15
bn
bn
bn
 
LGIM total external AUM net flows1
9.6
23.9
13.8
Attributable to: 
International 
6.7
4.1
5.4
UK Institutional 
- Defined contribution 
0.8
1.9
1.0
- Defined benefit2
1.4
17.0
7.1
UK Retail 
0.7
0.9
0.3
 
1. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and cash management movements. 
2. External inflows in the 6 months to 31 December 2015 include 11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.
3.04 Assets under management reconciliation to Consolidated Balance Sheet financial assets
As at
As at
As at
30.06.16
31.12.15
30.06.15
bn
bn
bn
 
Assets under management 
841.5
746.1
714.6
Derivative notionals 
(244.0) 
(226.2) 
(208.1) 
Third party assets 
(202.3) 
(157.9) 
(147.6) 
Derivative liabilities 
15.4
8.0
5.8
Other1
(5.2) 
(7.9) 
(4.8) 
 
Total group financial investments and investment property 
405.4
362.1
359.9
 
1. Other includes assets that are managed by third parties on behalf of the group, cash and broker balances.
Asset and premium flows  Page 67
3.05 Assets under administration
 
 
 
 
 
 
 
LGIM 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consol- 
 
 
 
 
Mature 
idation 
 
Retail 
 
 
Suffolk 
Retail 
adjust- 
Total
Nethe- 
Work-
Invest- 
For the six months 
Platforms2
Life 
Savings3
ment4
Savings
rlands 
place
ments5
Annuities
ended 30 June 2016
bn 
bn 
bn 
bn 
bn
bn 
bn
bn 
bn
 
 
 
 
 
 
 
 
 
 
 
 
At 1 January 2016
76.9 
8.6 
29.6 
(6.8) 
108.3
1.6 
14.7
22.6 
43.4
Gross inflows1
2.2 
0.5 
0.5 
(0.2) 
3.0
0.1 
2.3
3.0 
4.0
Gross outflows 
(2.9) 
(0.3) 
(1.8) 
0.3 
(4.7)
(0.1) 
(0.5)
(3.2) 
-
Payments to pensioners 
- 
- 
- 
- 
-
- 
-
- 
(1.4)
 
 
 
 
 
 
Net flows
(0.7) 
0.2 
(1.3) 
0.1 
(1.7)
- 
1.8
(0.2) 
2.6
Market and other 
 
 
 
 
 
 
movements 
1.3 
- 
1.1 
- 
2.4
0.2 
0.8
0.9 
5.0
Disposals6
- 
(8.8) 
- 
1.8 
(7.0)
- 
-
- 
-
 
 
 
 
 
 
 
 
 
 
 
 
At 30 June 2016
77.5 
- 
29.4 
(4.9) 
102.0
1.8 
17.3
23.3 
51.0
 
 
 
 
 
 
 
 
 
 
 
 
LGIM 
 
 
 
 
 
 
 
 
 
 
Consol-
France 
 
 
 
 
Mature
idation
and 
Retail
 
 
Suffolk 
Retail 
adjust- 
Total
Nethe- 
Work-
Invest- 
For the six months
Platforms2
Life 
Savings3
ment4
Savings
rlands 
place
ments5
Annuities
ended 30 June 2015
bn 
bn 
bn 
bn 
bn
bn 
bn
bn 
bn
 
 
 
 
 
 
As 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LGIM 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consol-
France 
 
 
 
 
Mature
idation
and 
Retail
 
 
Suffolk 
Retail 
adjust- 
Total
Nethe- 
Work-
Invest- 
For the year ended
Platforms2
Life 
Savings3
ment4
Savings
rlands 
place
ments5
Annuities
31 December 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
8.7 
1.2 
1.1 
(0.5) 
10.5
0.4 
3.3
5.9 
3.0
Gross outflows 
(5.2) 
(0.5) 
(4.1) 
0.8 
(9.1)
(0.3) 
(0.7)
(5.7) 
-
Payments to pensioners 
- 
- 
- 
- 
-
- 
-
- 
(2.6)
Disposals7
- 
- 
(2.8) 
- 
(2.8)
(2.7) 
-
- 
-
 
 
 
 
 
 
 
 
 
 
 
 
Net flows
3.5 
0.7 
(5.8) 
0.3 
(1.4)
(2.6) 
2.6
0.2 
0.4
Market and other 
 
 
 
 
 
 
movements 
1.5 
0.2 
(0.6) 
(0.2) 
1.0
(0.2) 
1.0
1.1 
(1.2)
 
 
 
 
 
 
 
 
 
 
 
 
At 31 December 2015
76.9 
8.6 
29.6 
(6.8) 
108.3
1.6 
14.7
22.6 
43.4
 
 
 
 
 
 
 
 
 
 
 
 
1. Platforms gross inflows include Cofunds institutional net flows. 30 June 2016 Platforms comprise 77.5bn of which 37.2bn is retail assets (30 June 2015: 37.9bn; 31 December 2015: 37.5bn) and 40.3bn (30 June 2015: 36.7bn; 31 December 2015: 39.4bn) of assets held on behalf of institutional clients. 
2. Platforms AUA comprise ISAs: 20.1bn (30 June 2015: 20.0bn; 31 December 2015: 19.9bn); onshore bonds 2.8bn (30 June 2015: 3.2bn; 31 December 2015: 3.0bn); offshore bonds 0.1bn (30 June 2015: 0.1bn; 31 December 2015: 0.1bn); platform SIPPs 3.6bn (30 June 2015: 3.4bn; 31 December 2015: 3.5bn) and non-wrapped funds 49.5bn (30 June 2015: 46.7bn; 31 December 2015: 50.4bn).
3. Mature Retail Savings products include with-profits products, bonds and retail pensions.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column. 
5. Retail Investments include 1.8bn (30 June 2015: 1.8bn; 31 December 2015: 2.0bn) of LGIM unit trust assets held on our Cofunds platform and 3.4bn (30 June 2015: 3.3bn; 31 December 2015: 3.2bn) of LGIM unit trust assets held on our IPS platform. 
6. Suffolk Life was sold on 25 May 2016 to Curtis Banks Group plc.
7. 2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015. 2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prvoyance.
Asset and premium flows  Page 68
3.06 Assets under administration half-yearly progression
 
 
 
 
 
 
LGIM
 
 
 
 
 
 
 
Consol-
France
 
 
Mature 
idation 
and
Retail 
 
 
Suffolk
Retail 
adjust- 
Total
Nether-
Work-
Invest- 
For the year ended
Platforms2
Life
Savings3
ment4
Savings
lands
place
ments6
Annuities
31 December 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 
1.4
Gross outflows 
(2.7) 
(0.3)
(2.2) 
0.4 
(4.8)
(0.2)
(0.3)
(3.0) 
-
Payments to pensioners 
- 
-
- 
- 
-
-
-
- 
(1.2)
 
 
 
 
 
 
 
 
Net flows
1.1 
0.3
(1.5) 
0.2 
0.1
-
0.9
- 
0.2
Market and other 
 
 
 
movements 
1.6 
0.3
0.3 
(0.2) 
2.0
(0.2)
1.1
1.2 
(1.0)
 
 
 
 
 
 
 
 
At 30 June 2015
74.6 
8.3
34.8 
(6.9) 
110.8
4.2
13.1
22.5 
43.4
 
 
 
 
 
 
 
 
Gross inflows1
4.9 
0.6
0.4 
(0.3) 
5.6
0.2
2.1
2.9 
1.6
Gross outflows 
(2.5) 
(0.2)
(1.9) 
0.4 
(4.2)
(0.1)
(0.4)
(2.7) 
-
Payments to pensioners 
- 
-
- 
- 
-
-
-
- 
(1.4)
Disposals5
- 
-
(2.8) 
- 
(2.8)
(2.7)
-
- 
-
 
 
 
 
 
 
 
 
Net flows
2.4 
0.4
(4.3) 
0.1 
(1.4)
(2.6)
1.7
0.2 
0.2
Market and other 
 
 
 
 
movements 
(0.1) 
(0.1)
(0.9) 
- 
(1.1)
-
(0.1)
(0.1) 
(0.2)
 
 
 
 
 
 
 
 
At 31 December 2015
76.9 
8.6
29.6 
(6.8) 
108.3
1.6
14.7
22.6 
43.4
 
 
 
 
 
 
 
 
1. Platforms gross inflows include Cofunds institutional net flows. At 31 December 2015 Platforms comprised 37.5bn (30 June 2015: 37.9bn) of retail assets and 39.4bn (30 June 2015: 36.7bn) of assets held on behalf of institutional clients.
2. At 31 December 2015 Platforms AUA comprise ISAs: 19.9bn (30 June 2015: 20.0bn); onshore bonds 3.0bn (30 June 2015: 3.2bn); offshore bonds 0.1bn (30 June 2015: 0.1bn); platform SIPPs 3.5bn (30 June 2015: 3.4bn) and non-wrapped funds 50.4bn (30 June 2015: 46.7bn).
3. Mature Retail Savings products include with-profits products, bonds and retail pensions.
4. Consolidation adjustment represents Suffolk Life and Retail Savings assets included in the Platforms column.
5. 2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015. 2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prvoyance.
6. At 31 December 2015 Retail Investments included 2.0bn (30 June 2015: 1.8bn) of LGIM unit trust assets held on our Cofunds platform and 3.2bn (30 June 2015: 3.3bn) of LGIM unit trust assets held on our IPS platform.
Asset and premium flows   Page 69
3.07 LGR new business
 
6
6
6
months
months
months
to
to
to
30.06.16
31.12.15
30.06.15
m
m
m
 
Bulk Purchase Annuities 
 - UK 
3,585
831
1,146
 - USA 
45
295
-
 - Netherlands 
-
145
-
Individual Annuities 
158
147
180
Lifetime Mortgage Advances1
231
164
37
 
Total LGR new business
4,019
1,582
1,363
1. In H1 15, 12m of these advances were funded by L&G prior to the group's acquisition of New Life Home Finance Ltd.
3.08 Insurance new business annual premiums 
 
6
6
6
months
months
months
to
to
to
30.06.16
31.12.15
30.06.15
m
m
m
 
UK Retail Protection 
82
83
79
UK Group Protection 
36
29
40
France Protection1
-
-
30
Netherlands Protection 
2
2
3
US Protection 
28
29
41
 
Total Insurance new business
148
143
193
1. Legal & General Holdings (France) S.A. was sold on 31 December 2015 to APICIL Prvoyance.
3.09 Gross written premiums on Insurance business 
 
6
6
6
months
months
months
to
to
to
30.06.16
31.12.15
30.06.15
 
m
m
m
UK Retail Protection 
582
567
545
UK Group Protection 
233
101
229
General Insurance 
156
173
164
France Protection1
-
83
85
Netherlands Protection 
25
22
24
US Protection 
420
387
386
Longevity Insurance 
161
162
164
Total gross written premiums on insurance business
1,577
1,495
1,597
1. Legal & General Holdings (France) S.A. was sold on 31 December 2015 to APICIL Prvoyance.
Asset and premium flows  Page 70
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