REG - Legal & General Grp - L&G Half Year Results 2016 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 4
09/08/2016 07:08
- Part 4: For the preceding part double click ID:nRSI5967Gc
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
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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
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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:
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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
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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
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