24th Feb 2005 07:01
Legal & General Group PLC24 February 2005 Part 2Legal & General Group Plc P1Consolidated Profit and Loss Account - Achieved Profits basisYear ended 31 December 2004-------------------------------------------------------------------------------- Notes 2004 2003 Restated £m £mProfit on continuing operationsLife and pensions 1 613 620Institutional fund management 103 82General insurance 5 32 36Other operational income 6 34 18 -------- --------Operating profit on continuing operations 782 756Profit on discontinuing operationsGeneral insurance - Gresham 5 7 5 -------- --------Operating profit 789 761Variation from longer term investment return 8 408 422Change in equalisation provision (7) (7)Effect of economic assumption changes 9 32 (32)Effect of UK tax changes 10 - (27) -------- --------Profit on ordinary activities before tax 1,222 1,117Tax charge 10 (352) (258) -------- --------Profit for the financial period 870 859Dividends (329) (318) -------- --------Retained profit 541 541================================================================================Earnings per share 12 p pBased on operating profit after tax 8.80 8.49Based on profit for the financial period 13.40 13.24Diluted earnings per shareBased on operating profit after tax 8.57 8.28Based on profit for the financial period 12.97 12.83Dividend per share 5.06 4.90================================================================================These financial statements were approved by the Board on 23 February 2005 andhave been prepared for long term business using the Achieved Profits (AP) basis.The Modified Statutory Solvency (MSS) results are included in Part 3. Theresults constitute non-statutory accounts within the meaning of Section 240 ofthe Companies Act 1985.Urgent Issues Task Force abstract 38 'Accounting for ESOP trusts' has beenadopted, and the shareholders' investment return for Institutional fundmanagement has been reported as a longer term rate of return within operatingprofit. 2003 comparatives have been restated accordingly.================================================================================ Legal & General Group Plc P2Consolidated Balance Sheet - Achieved Profits basisYear ended 31 December 2004-------------------------------------------------------------------------------- At At Notes 31.12.04 31.12.03 Restated £m £mAssetsInvestments 13 38,336 35,268Assets held to cover linked liabilities 108,297 84,308Long term in-force business asset 2,764 2,365Other assets 4,978 5,320 --------- --------- 154,375 127,261 ========= =========LiabilitiesShareholders' funds 15 6,116 5,584Fund for future appropriations 2,456 1,498Technical provisions ######### #########- Technical provisions for linked : : : : liabilities : 104,887 : : 83,730 :- Long term business provisions : 34,190 : : 33,206 :- General insurance provisions : 457 : : 405 : ######### ######### 139,534 117,341Borrowings ######### #########- Core debt : 1,513 : : 1,475 :- Non recourse financing : 275 : : - : ######### ######### 16 1,788 1,475Other creditors 17 4,481 1,363 --------- --------- 154,375 127,261================================================================================ Statement of Total Recognised Gains and LossesYear ended 31 December 2004-------------------------------------------------------------------------------- 2004 2003 £m £mProfit for the financial period 870 859Exchange losses (9) (7) --------- ---------Total recognised gains and losses 861 852================================================================================ Legal & General Group Plc P3Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------1. Operating profit from long term business Life and pensions Managed Intern- pension UK ational Total funds* Total £m £m £m £m £m2004Contribution from:New business 272 45 317 36 353In-force business - expected return 267 50 317 17 334 - experience variances 43 14 57 16 73 - operating assumption changes** (219) 1 (218) 17 (201)Development costs - - - (1) (1)Shareholder net worth 131 9 140 6 146 ------- ------- ------- ------- -------Operating profit 494 119 613 91 704 ======= ======= ======= ======= =======2003Contribution from:New business 271 34 305 31 336In-force business - expected return 215 45 260 13 273 - experience variances 9 (8) 1 5 6 - operating assumption changes** (107) 1 (106) 20 (86)Development costs (2) - (2) (1) (3)Shareholder net worth 151 11 162 5 167 ------- ------- ------- ------- -------Operating profit 537 83 620 73 693 ======= ======= ======= ======= =======* Included in the Institutional fund management result of £103m (2003: £82m).** The largest impact on UK life and pensions business in 2004 was from thestrengthening of assumptions for annuitant longevity, and in 2003, was from thetightening of future persistency assumptions and the strengthening of provisionsfor claims on the endowment book. ================================================================================ 2. Sterling exchange rates used 31.12.04 31.12.03United States dollar 1.92 1.79Euro 1.41 1.42================================================================================ Legal & General Group Plc P4Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------3. Life and pensions gross premiums and operating profit 2004 2004 2003 2003 Oper- Oper- Premiums rating Premiums rating written profit written profit £m £m £m £mUK 5,345 494 4,541 537USA 294 73 292 50Netherlands 191 32 155 24France 213 14 171 9 -------- -------- -------- -------- 6,043 613 5,159 620 ======== ======== ======== ========International life and pensions gross premiums and operating profit for 2003expressed at 31 December 2004 exchange rates are: Oper- Premiums rating written profit £m £mUSA 272 47Netherlands 156 24France 172 9================================================================================4. Half yearly analysis of operating profit from continuing operations 2004 2003 First Second First Second half half half half Restated Restated Restated £m £m £m £mLife and pensions 408 205 314 306Institutional fund management 53 50 45 37General insurance 15 17 18 18Other operational income 17 17 15 3 -------- -------- -------- --------Total 493 289 392 364================================================================================5. General insurance net premiums and operating profit 2004 2004 2003 2003 Oper- Oper- Premiums rating Premiums rating written profit written profitContinuing operations £m £m £m £mHousehold 209 22 178 14Other business 86 10 75 22 -------- -------- -------- -------- 295 32 253 36Discontinuing operationsGresham - Household 134 5 130 3Gresham - Other business 3 2 4 2 -------- -------- -------- -------- 432 39 387 41 ======== ======== ======== ========On 3 February 2005 the Group announced that it had agreed in principle to sellits 90% stake in its subsidiary Gresham Insurance Company Limited (Gresham) toBarclays Bank PLC subject to FSA approval. The transaction is expected tocomplete on 31 March 2005 and result in an exceptional profit before tax ofapproximately £26m (£26m after tax).================================================================================ Legal & General Group Plc P5Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------6. Other operational income 2004 2003 £m £mShareholders' other income- Investment return on shareholders' funds 109 100- Interest expense (62) (58) -------- -------- 47 42Retail investments 4 (15)Other operations (4) 1Unallocated corporate and development expenses (13) (10) -------- -------- 34 18================================================================================7. General insurance and shareholders' investment return 2004 2003 Restated £m £mInvestment income 106 92Interest expense and charges (64) (60)Realised investment gains/(losses) 9 (12)Unrealised investment appreciation 58 101 -------- -------- 109 121 ======== ========reported within:Institutional fund management 8 5General insurance 22 18Other operational income 47 42Variation from longer term investment return ######## ######## - Institutional fund management* : 0 : : (2): - General insurance : (3): : 5 : - Other operational income : 35 : : 53 : ######## ######## 32 56 -------- -------- 109 121 ======== ========* Shareholders' investment return for Institutional fund management business of£Nil (2003: negative £2m) which was previously recorded within operating profithas been reported as variation from longer term investment return.The investment return shown represents the return on the General insurance andCorporate funds.Shareholders' other income, reported within Other operational income, has beenallocated based on a longer term rate of investment return with the variationfrom the actual return being reported as variation from longer term investmentreturn.================================================================================ Legal & General Group Plc P6Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------8. Variation from longer term investment return 2004 2003 Restated £m £mLife and pensions- UK 364 346- International 0 4 -------- --------Total life and pensions 364 350Managed pension funds 12 16 -------- --------Total long term business 376 366 ######## ########Institutional fund management : 0 : : (2):General insurance : (3): : 5 :Other operational income : 35 : : 53 : ######## ######## 32 56 -------- -------- 408 422 ======== ========For long term business the variation from longer term investment returnrepresents the effect of the investment performance and changes to investmentpolicy in respect of shareholder net worth and in-force business, compared withembedded value assumptions at the beginning of the period.================================================================================9. Effect of economic assumption changes 2004 2003 £m £mLife and pensions- UK 15 (16)- International 17 (16) -------- --------Total 32 (32)================================================================================ Legal & General Group Plc P7Notes to Financial Statements - Achieved Profits BasisYear ended 31 December 2004--------------------------------------------------------------------------------10. Analysis of tax 2004 2004 2003 2003 Profit Tax Profit Tax before (charge)/ before (charge)/ tax credit tax creditProfit on continuing operations £m £m £m £mUK life and pensions 494 (139) 537 (150)International life and pensions 119 (41) 83 (29) -------- -------- -------- -------- 613 (180) 620 (179)Institutional fund management 103 (31) 82 (24)General insurance 32 (9) 36 (12)Other operational income 34 4 18 6 -------- -------- -------- --------Operating profit on continuing operations 782 (216) 756 (209)Profit on discontinuing operationsGeneral insurance - Gresham 7 (2) 5 (1) -------- -------- -------- --------Operating profit 789 (218) 761 (210)Variation from longer term investment return 408 (126) 422 (67)Change in equalisation provision (7) 2 (7) 2Effect of economic assumption changes 32 (10) (32) 9Effect of UK tax change * - - (27) 8 -------- -------- -------- --------Profit on ordinary activities and tax 1,222 (352) 1,117 (258) ======== ======== ======== ========* Changes in the 2003 Budget to the corporation tax rates applicable to thepolicyholders' share of certain income and gains reduced the UK life andpensions embedded value by £19m. The effect was reported as a charge before taxof £27m.================================================================================ 11. Pension costs The Legal & General Group UK Pension and Assurance Fund and the Legal & GeneralGroup UK Senior Pension Scheme are defined benefit pension arrangements andaccount for all UK and approximately 98% of worldwide assets and contributionsto such schemes. At 31 December 2004 the combined after tax deficit of thesearrangements has been estimated at £102m (2003: £65m). If these amounts had beenrecognised in the financial statements, £75m would have been charged againstshareholders' funds (2003: £49m) and £27m against the Fund for FutureAppropriations (2003: £16m) in accordance with the guidelines contained in theDecember 2003 ABI SORP.================================================================================ Legal & General Group Plc P8Notes to Financial Statements - Achieved Profits BasisYear ended 31 December 2004--------------------------------------------------------------------------------12. Earnings per share (EPS) Weighted average Earnings number Profit/ per of (loss) share shares £m p mYear ended 31.12.04Operating profit after tax on continuing operations 566 8.72 6,491Operating profit after tax on discontinuing operations 5 0.08Variation from longer term investment return 282 4.34Change in equalisation provision (5) (0.08)Effect of economic assumption changes 22 0.34 -------- -------- --------Profit for the period/EPS 870 13.40 6,491Net shares under options allocable for no further consideration - (0.03) 22Convertible bonds outstanding 12 (0.40) 285 -------- -------- --------Diluted profit for the period/EPS 882 12.97 6,798 ======== ======== ========Year ended 31.12.03Operating profit after tax on continuing operations 547 8.43 6,490Operating profit after tax on discontinuing operations 4 0.06Variation from longer term investment return 355 5.47Change in equalisation provision (5) (0.08)Effect of economic assumption changes (23) (0.35)Effect of UK tax changes (19) (0.29) -------- -------- --------Profit for the financial year/EPS 859 13.24 6,490Net shares under options allocable for no further consideration - - 15Convertible bonds outstanding 12 (0.41) 285 -------- -------- --------Diluted profit for the financial year/EPS 871 12.83 6,790================================================================================ Legal & General Group Plc P9Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------13. Funds under management At At 31.12.04 31.12.03 Restated £m £mLand and buildings 3,741 4,228Shares, variable yield securities and unit trusts 11,529 11,494Debt and other fixed income securities 21,677 18,277Loans secured by mortgages 260 183Other loans and investments 307 74Deposits with credit institutions 941 1,181 --------- ---------Total investments 38,455 35,437Less amounts payable under a margining arrangement (119) (169) --------- --------- 38,336 35,268Assets held to cover linked liabilities 108,297 84,308 --------- ---------Funds included in the consolidated balance sheet 146,633 119,576Segregated funds 11,098 11,235Unit trusts, ISAs and PEPs 7,949 6,975 --------- ---------Total funds under management 165,680 137,786 ========= =========representing:Managed in the UK - Active 50,221 42,214 - Index tracking 111,197 92,047 - For overseas subsidiaries 1,061 1,076 --------- --------- 162,479 135,337Other including managed overseas 3,201 2,449 --------- --------- 165,680 137,786 ========= =========including Institutional funds under management:Managed pension funds - Pooled 93,989 72,841 - Segregated 9,317 8,522 --------- --------- 103,306 81,363Other funds 1,781 2,713 --------- --------- 105,087 84,076================================================================================ Legal & General Group Plc P10Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------14. Embedded value Life and pensions Managed Intern pension UK -ational Total funds Total £m £m £m £m £mYear ended 31.12.04At 1 January 4,253 657 4,910 305 5,215Exchange rate movements - (29) (29) - (29) ------- ------- ------- ------- ------- 4,253 628 4,881 305 5,186Profit after tax 629 90 719 72 791Capital movements * - 25 25 - 25Distributions (274) (1) (275) (20) (295) ------- ------- ------- ------- -------At 31 December 4,608 742 5,350 357 5,707 ======= ======= ======= ======= =======comprising:Value of in-force business 3,007 499 3,506 194 3,700Shareholder net worth ** 1,601 243 1,844 163 2,007 ------- ------- ------- ------- ------- 4,608 742 5,350 357 5,707 ======= ======= ======= ======= =======Year ended 31.12.03At 1 January 3,876 641 4,517 262 4,779Exchange rate movements - (37) (37) - (37) ------- ------- ------- ------- ------- 3,876 604 4,480 262 4,742Profit after tax 636 47 683 61 744Capital movements* - 6 6 - 6Distributions (259) - (259) (18) (277) ------- ------- ------- ------- -------At 31 December 4,253 657 4,910 305 5,215 ======= ======= ======= ======= =======comprising:Value of in-force business 2,668 429 3,097 162 3,259Shareholder net worth ** 1,585 228 1,813 143 1,956 ------- ------- ------- ------- ------- 4,253 657 4,910 305 5,215 ======= ======= ======= ======= =======* Capital movements for 2004 relate to capital injected into Legal & GeneralAmerica; the 2003 increase is for Legal & General France.** For the UK life and pensions business, shareholder net worth comprises theshareholder retained capital (SRC) on the MSS basis, adjusted for deferredacquisition costs, and the sub-fund, both net of an appropriate allowance fortax. It also includes intra-group subordinated debt capital of £602m.================================================================================ Legal & General Group Plc P11Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------14. Embedded value (continued) Reconciliation of in-force business At At 31.12.04 31.12.03 £m £mLong term in-force business asset included in the balance sheet 2,764 2,365Sub-fund (245) (223)Deferred acquisition costs 742 709Deferred tax * 397 366Other miscellaneous adjustments 42 42 -------- --------Value of in-force business 3,700 3,259 ======== ========Reconciliation of shareholder net worth of long term business operations- UK (SRC) 2,233 2,212- USA 475 443- Netherlands 48 36- France 48 45- Managed pension funds 163 143 -------- --------Shareholder net worth on the MSS basis 2,967 2,879Purchased interests in long term business (24) (29)Sub-fund 245 223Deferred acquisition costs (742) (709)Deferred tax * (397) (366)Other miscellaneous adjustments (42) (42) -------- --------Shareholder net worth on the AP basis 2,007 1,956 ======== ========* Deferred tax represents all tax which is expected to be paid under currentlegislation, including tax which would arise if shareholders' backing assetswere eventually distributed.** Including £602m of intra-group subordinated debt capital attributed to theSRC.================================================================================ Legal & General Group Plc P12Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------15. Shareholders' funds Segmental analysis At At 31.12.04 31.12.03 Restated £m £mEmbedded value of life and pensions businesses:- UK* 4,608 4,253- USA 504 460- Netherlands 144 112- France 94 85 -------- -------- 5,350 4,910Institutional fund management** 393 338 -------- -------- 5,743 5,248General insurance 149 120Corporate funds*** 224 216 -------- -------- 6,116 5,584 ======== ========MovementAt 1 January as originally published 5,584 5,061Prior year adjustment in respect of UITF 38**** - (13) -------- -------- 5,584 5,048Profit for the financial period 870 859Exchange movements (9) (7)Dividends (329) (318)Increase in share capital/share premium 1 1Allocation of ESOT shares (1) 1 -------- --------At 31 December 6,116 5,584 ======== ========* Includes £602m of intra-group subordinated debt capital attributed to theSRC.** Includes £357m (2003: £305m) embedded value of managed pension fundsbusiness.*** Stated after deducting £521m (2003: £518m) of convertible debt, £602m ofsenior debt which has beenonlent to the Long Term Fund (LTF), and including assets of £788mrepresenting the net proceeds from the 2002 Rights Issue and £188m (2003:£139m) representing the aggregated investment returns.**** UITF abstract 38 'Accounting for ESOP trusts' requires that own sharesheld within the Employee Share Ownership Trust (ESOT) should be accountedfor as a deduction from shareholders' funds rather than be disclosed as aninvestment as was previously required. The 2003 amounts have been restatedaccordingly.================================================================================ Legal & General Group Plc P13Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------16. Borrowings At At 31.12.04 31.12.03 £m £m2.75% Convertible bond 2006 521 518Undated subordinated notes 394 -Medium Term Notes 2031-2041 597 597Medium Term Notes 2004 - 6Euro commercial paper 2004 - 352Bank loans 2005 1 2 -------- --------Core debt 1,513 1,475Non recourse financing - Triple X 2025 275 - -------- --------Total borrowings 1,788 1,475 ======== ========The convertible bond matures in 2006 and is convertible into ordinary shares ofthe Company at 184p per share. If converted, this bond would give rise to theissue of 285.3m new ordinary shares which represents approximately 4.4% of thecurrent issued share capital.In November 2004 a subsidiary of Legal & General America issued US$550m ofnon-recourse debt in the US domestic capital markets as floating rate DutchAuction Market Securities due 2025. The transaction provides capital to meet theRegulation Triple X reserve requirements on the US term insurance businesswithout affecting the Group's debt capacity or financial gearing.================================================================================ 17. Other creditors Other creditors includes £3,295m (2003: £369m) of pension fund monies held on atemporary basis on behalf of corporate pension fund clients, generally as partof a portfolio reconstruction.================================================================================ Legal & General Group Plc P14Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------18. Embedded value assumptions UK life and pensionsi) The assumed future pre-tax returns on fixed interest and RPI linkedsecurities are set by reference to redemption yields available in the market atthe end of the reporting period. The corresponding return on equities andproperty and the risk discount rate have been set by reference to the fixedinterest gilt assumption. The economic assumptions were: At 31.12.04 At 31.12.03 % p.a. % p.a.Investment return- Gilts- Fixed interest 4.5 4.7- RPI linked 4.5 4.6- Non-gilts- Fixed interest 4.9 - 5.3 5.1 - 5.5- RPI linked 4.7 - 5.1 5.1 - 5.4- Equities and property 7.1 7.3 Risk discount rate (after tax) 7.0 7.2 Inflation- Expenses/earnings 3.8 3.8- Indexation 2.8 2.8 The assumed returns on non-gilt securities are net of an allowance for defaultrisk of 0.20% p.a.(2003: 0.20% p.a.), other than for certain government-supported securities whereno such allowance is made. ii) Assets are valued at market value. For the projection of fixed interest andRPI linked investment returns, asset values are adjusted to reflect the assumedinterest and inflation rates. iii) Capital reported as transferred into the LTF since 1996, in the form ofsubordinated debt and any remaining excess consideration over the net assetvalue of subsidiaries transferred from the LTF in December 2001, is treated asresidual. iv) The value of the sub-fund is the discounted value of projected investmentreturns for a period of 20 years (2003: 20 years). v) Development costs relate primarily to the development of strategicadministration systems. vi) Future bonus rates have been set at levels which would fully utilise theassets supporting with-profits business. The proportion of profits derived fromwith-profits business allocated to shareholders has been assumed to be 10%throughout.================================================================================ Legal & General Group Plc P15Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------18. Embedded value assumptions (continued) vii) The value of in-force business reflects the cost of providing for benefitenhancement or compensation in relation to certain products includingadministration expenses. viii) Other actuarial assumptions have been set at levels commensurate withrecent operating experience, including those for mortality, persistency andmaintenance expenses (excluding the development costs referred to above). Theseassumptions are reviewed annually. An allowance is made for future improvementsin annuitant mortality based on externally published data. For end 2004, maleannuitant mortality is assumed to improve in accordance with CMI Working Paper1, projection MC for experience and the average of projections MC and LC forstatutory reserving. Female annuitant mortality is assumed to improve inaccordance with the MC projection from CMI Working Paper 1 for statutoryreserving and at 70% of this rate for experience. ix) Business in force comprises previously written single premium, regularpremium and recurrent single premium contracts. For this purpose, DWP rebateshave not been treated as recurrent and their value is included as premiums arereceived. x) Projected tax has been determined assuming current tax legislation and rates. xi) AP results are computed on an after tax basis and are grossed up to thepre-tax level for presentation in the profit and loss account. The tax rate usedfor grossing up is the corporation tax rate of 30% (2003: 30%), except for theprofit attributable to shareholder net worth, where the rate used is derivedfrom the tax attributed to the contribution from shareholder net worth in theMSS accounts. To arrive at operating profit, the contribution from shareholdernet worth is grossed up at a rate to reflect the tax associated with a longerterm investment return. UK managed pension fundsThe UK life and pensions economic assumptions are used. All contracts areassumed to lapse after 10 years. Fees are projected on a basis which reflectscurrent charges or, if less, anticipated charges. New business consists ofmonies received from new clients and incremental receipts from existing clients,and excludes the roll-up of the investment returns. Development costs relate tostrategic systems. InternationalKey assumptions are: At At 31.12.04 31.12.03 % p.a. % p.a.USAReinvestment rate 4.9 4.8Risk discount rate (after tax) 6.8 6.8 EuropeGovernment bond return 3.8 4.5Risk discount rate (after tax) 7.3 8.0================================================================================ Legal & General Group Plc P16Notes to Financial Statements - Achieved Profits basisYear ended 31 December 2004--------------------------------------------------------------------------------19. Alternative assumptions The discount rate appropriate to any investor will depend on the investor's ownrequirements, tax and perception of the risks associated with the anticipatedcash flows to shareholders. The table below shows the effect of alternativediscount rates and equity and property yields on the UK life and pensionsembedded value and new business contribution for the period. 1% 1% 1% lower higher higher risk risk equities/ As discount discount property published rate rate yields £m £m £m £mEffect on embedded value at 31 December 2004 4,608 +290 -250 +220Effect on new business contribution for the period 272 +44 -39 +24 It should be noted that in calculating the alternative values all otherassumptions are left unchanged.================================================================================ Legal & General Group Plc P17Notes to Financial Statements - Achieved Profits BasisYear ended 31 December 2004--------------------------------------------------------------------------------20. Contingent liabilities, guarantees and indemnities Provision for the liabilities arising under contracts with policyholders isbased on certain assumptions. The variance of actual experience from thatassumed may result in such liabilities differing from the provisions made forthem. Liabilities may also arise in respect of claims relating to theinterpretation of such contracts, or the circumstances in which policyholdershave entered into them (together in this paragraph "liabilities"). The extent ofsuch liabilities is influenced by a number of factors including the actions andrequirements of the FSA, by ombudsman rulings, by industry compensation schemesand by court judgements. The continuing general profile and emphasis being givenby the FSA and other bodies to the suitability of the past sales of endowmentpolicies in the context of some mortgage transactions has led to the continuingreceipt of claims from holders of endowment policies. Provision for liabilities continues to be made and is regularly reviewed.However, it is not possible to predict, with certainty, the extent and thetiming of the financial impact to which these liabilities may give rise. Therelevant members of the Group nevertheless consider that each makes prudentprovision for such liabilities, as and when circumstances calling for suchprovision become clear, and that each has adequate capital and reserves to meetall reasonably foreseeable eventualities. In 1975 the Society was required by the Institute of London Underwriters (ILU)to execute the ILU form of guarantee in respect of policies issued through theILU'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 whichhave since been assumed by Nederlandse Reassurantie Groep NV under a statutorymerger in the Netherlands) acquired Victory and provided an indemnity to theSociety against any liability the Society may have as a result of the ILU'srequirement, and the ILU agreed that its requirement of the Society would notapply to policies written or renewed after the acquisition. Whether the Societyhas any liability as a result of the ILU's requirement and, if so, the amount ofits potential liability is uncertain. The Society has made no payment orprovision in respect of this matter.================================================================================ Legal & General Group Plc P18New businessYear ended 31 December 2004--------------------------------------------------------------------------------Life and pensions 2004 2003 Annual Single Annual Single £m £m £m £mInsurance businessLife 219 1,808 183 1,126Pensions 129 1,932 118 1,783 ------- ------- ------- -------UK 348 3,740 301 2,909 ####### ####### ####### #######USA : 51 : : 1 : : 47 : : 10 :Europe : 27 : : 269 : : 19 : : 220 : ####### ####### ####### ####### 78 270 66 230 ------- ------- ------- -------Insurance total 426 4,010 367 3,139Retail investment businessUK 22 1,565 33 1,689Europe - 23 - 25 ------- ------- ------- -------Total new business 448 5,598 400 4,853 ======= ======= ======= =======International insurance new business for 2003 expressed at 31 December 2004exchange rates Annual Single £m £mUSA 44 9Europe 19 222 ------- ------- 63 231 ======= =======Annual Premium Equivalent (APE) is calculated for total new business, includingunit trusts and ISAs but excluding institutional fund management, and comprisesthe new annual premiums together with 10% of single premiums.APE from insurance business was £827m (2003: £681m); APE from total new businessin the same period has increased to £1,008m (2003: £886m). 2004 2003 £m £mInstitutional fund managementManaged pension funds *- Pooled funds 13,951 11,066- Segregated funds 1,228 1,504 -------- -------- 15,179 12,570Other funds 368 482 -------- -------- 15,547 13,052 ======== ========* New monies from pension fund clients of Legal & General Assurance (PensionsManagement) Ltd.Corporate pensions gross new business excludes £5.0bn (2003: £4.0bn) which washeld through the year on a temporary basis, generally as part of portfolioreconstruction.================================================================================ Legal & General Group Plc P19New businessYear ended 31 December 2004-------------------------------------------------------------------------------- 2004 2003 Full Second First Full Second First year half half year half halfUK annual premiums £m £m £m £m £m £mInsurance businessLife- Mortgage-related 109 56 53 103 55 48- Protection 51 26 25 46 23 23- Group risk 59 22 37 34 21 13Pensions- Individual pensions 126 65 61 114 57 57- Group pensions 3 1 2 4 2 2 ------- ------- ------- ------- ------- ------- 348 170 178 301 158 143Retail investment businessISAs 20 7 13 27 12 15Unit trusts 2 1 1 6 2 4 ------- ------- ------- ------- ------- -------Total 370 178 192 334 172 162================================================================================UK single premiumsInsurance businessBonds- With-profits 390 166 224 593 264 329- Other 1,418 822 596 533 347 186Pensions- Individual pensions 452 273 179 274 109 165- Annuities - individual 859 493 366 727 413 314- Annuities - bulk purchase 449 219 230 598 231 367- Other group business 7 5 2 5 2 3- DWP rebates 165 148 17 179 142 37 ------- ------- ------- ------- ------- ------- 3,740 2,126 1,614 2,909 1,508 1,401Retail investment businessISAs 499 110 389 572 179 393Unit trusts 1,066 445 621 1,117 485 632 ------- ------- ------- ------- ------- -------Total 5,305 2,681 2,624 4,598 2,172 2,426================================================================================UK APEIndividual life and pensions 614 337 277 494 263 231Retail investments by channel 179 64 115 202 80 122 ####### ####### ####### ####### ####### #######- Independent : : : : : : : : : : : : financial advisers : 505 : : 271 : : 234 : : 382 : : 194 : : 188 :- Business : : : : : : : : : : : : partnerships : 235 : : 117 : : 118 : : 252 : : 129 : : 123 :- Business : : : : : : : : : : : : partnerships : : : : : : : : : : : : direct : 18 : : 1 : : 17 : : 27 : : 8 : : 19 :- Direct : 35 : : 12 : : 23 : : 35 : : 12 : : 23 : ####### ####### ####### ####### ####### ####### Total UK individual 793 401 392 696 343 353Group 108 46 62 98 46 52 ------- ------- ------- ------- ------- -------Total 901 447 454 794 389 405================================================================================ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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