REG - Legal & General Grp - L&G Half Year Results 2016 Part 2 <Origin Href="QuoteRef">LGEN.L</Origin> - Part 8
09/08/2016 07:08
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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 Prévoyance.
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
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