REG - Legal & General Grp - L&G Half Year Results 2016 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 6
09/08/2016 07:08
- Part 6: For the preceding part double click ID:nRSI5967Ge
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
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