27th Jul 2006 07:00
Legal & General Group PLC27 July 2006 Legal & General Group Plc 2006 Interim Results Stock Exchange Release - Part 1 27 July 2006 Continuing to build value • Worldwide new business APE(1) £896m: +37% • UK individual new business APE £754m: +46% • EEV(2) new life and pensions contribution £192m: +37% • £10.8bn new institutional funds under management: +56% • EEV operating profit £560m: +17% • IFRS(3) operating profit £334m: +12% • Interim dividend 1.74p: +5% Group Chief Executive, Tim Breedon, said: "Legal & General delivered another strong set of results in the first half of2006. Worldwide sales were up 37% in APE terms to £896m. In the UK, individualnew business rose by 46% and life and pensions sales increased by 16%, withstrong growth in savings, individual protection and bulk purchase annuities.Growth in our investment management business accelerated, with nearly £11bn ofnew institutional funds under management. New business growth was achieved whilst increasing profitability. Thecontribution from new life and pensions business was up 37% to £192m. Worldwide operating profit on the EEV basis grew by 17% to £560m. Given ouroperational strengths and the returns being driven from profitable businesswritten in the past, the Board has recommended a 5% increase in the interimdividend. Legal & General has been successful in seizing opportunities in a changing andgrowing marketplace. We continue to challenge the organisation to find newopportunities to improve the business model and to deliver further profitablegrowth. We believe that we have the expertise and breadth of product range tocontinue to outgrow the market." Notes: 1. Annual Premium Equivalent - comprises the new annual premiums together with 10% of single premiums 2. European Embedded Value 3. International Financial Reporting Standards Financial highlights EEV basis IFRS basis H1 2006 % change H1 2006 % change on on H1 2005 H1 2005 Operating profit £560m 17 £334m 12Profit from continuing operations before tax £676m (4) £401m (18)New life and pensions business (PVNBP(1)) £4,095m 14 N/A N/AContribution from new life and pensions business £192m 37 N/A N/AInterim dividend per share 1.74p 5 1.74p 5UK shareholder net worth/retained capital £1,714m 17 £2,591m 13Ordinary shareholders' equity £7,166m 16 £4,252m 12Ordinary shareholders' equity per share 110p 16 65p 12 Notes 1. Present value of new business premiums Overview of results Worldwide new business increased by 37% in APE terms to £896m (H1 2005: £652m).New UK life and pensions business was 16% higher at £496m (H1 2005: £426m),driven by growth in savings, individual protection and bulk purchase annuities.UK retail investments new business more than doubled from £169m to £342m APE,benefiting from a large institutional transfer, but also from good underlyingretail demand. Our investment management business attracted £10.8bn of newinstitutional funds under management. On an EEV basis, the Group's profit before tax decreased marginally to £676m (H12005: £705m) as a result of lower equity market performance in H1 2006 comparedwith H1 2005. EEV operating profit was up 17%, reflecting strong results in our UK life,pensions and investment management businesses. The PVNBP margin on sales of UKlife and pensions products increased from 4.6% for the full year 2005 to 4.9%,with higher margins in all non profit business categories. The internal rate ofreturn on new non profit business was 16% in H1 2006 (FY 2005: 15%). Thecontribution from new UK life and pensions business of £179m grew by 39% (H12005: £129m), benefiting from improved margins, sales and mix. Overall UK lifeand pensions operating profit was up 19% for the half year to £405m (H1 2005:£340m). Our overseas operations generated an increase of 13% in operatingprofit from £45m in H1 2005 to £51m in H1 2006. On an IFRS basis, operating profit increased by 12% from £298m in H1 2005 to£334m in H1 2006. Operating profit from our investment management business grewby 35% to £65m (H1 2005: £48m), demonstrating the benefits of scale and qualityof execution. General Insurance operating profit was £2m for the half year (H12005: £4m). This lower level of profit was the result of closure costsassociated with our decision to withdraw from our small position in the motorinsurance market and increased competition in the broker channel. UK distribution The Cofunds platform continues to play an important part in our distributionstrategy. At the end of January 2006, we made the Legal & General PortfolioBond available to IFAs via the platform. This provides investors with theopportunity to invest in over 200 funds, with all the additional administrativebenefits the platform technology offers. This was followed by the launch of ourSelf Invested Personal Pension in April. Both products have been well receivedby the IFA market. We are delighted with performance to date and will continueto invest in the integration of our products onto the Cofunds platform, in linewith our original business plan. Our business partnership with Connells, one of the UK's largest estate agencies,began trading in the first week of July and we have recently announced anagreement with Citibank to offer protection products to their UK customers. Wenow work with over 30 UK banks and building societies as business partners. The scale, breadth and efficiency of our distribution continue to underpin oursuccess in the savings, protection and investment markets in the UK. Dividend The Board has recommended an interim dividend of 1.74 pence per share, anincrease of 5% on the 2005 interim dividend of 1.65 pence per share. Outlook The UK market continues to offer significant opportunities. The public debatearound the future of pensions saving in the UK, as well as activity surroundingPensions A-Day, has increased awareness of the need to save. We expect this tocontinue to stimulate the savings and investment markets. We believe there are further opportunities for Legal & General arising fromevolution in the pensions arena. In the bulk purchase annuity market, wecontinue to see strong demand from pension funds seeking to manage mortality,investment and expense risk. Activity remains high and we believe there areearly signs of greater demand from larger schemes. Our investment managementbusiness continues to benefit from its reputation for excellence in managingpension fund assets. Open architecture is changing and improving the way we do business with IFAs,tied partners and customers. This technology, which provides a single point ofaccess to multiple funds and investment options, has already made a positiveimpact in our bond business and has the potential to do so in the pensionssegment. We continue to invest in our technology, our processes and our expertise toensure that we are able to take advantage of opportunities in our core UKmarkets going forward. Enquiries to: Investors: Jonathan Maddock, Head of Investor Relations 020 7528 6298 Nicola Marshall, Investor Relations Manager 020 7528 6263 Media: John Morgan, Media Relations Director 020 7528 6213 Anthony Carlisle, Citigate Dewe Rogerson 07973 611888 Notes: • Issued share capital at 30 June 2006 was 6,527,906,573 shares of 2.5p each. • A copy of this announcement can be found in the News and Results section of our shareholder web site at http://investor.legalandgeneral.com/releases.cfm • A presentation to analysts and fund managers will take place at 09.30 GMT today at Temple Court, 11 Queen Victoria Street, London EC4N 4TP. • There will be a live listen only teleconference link to the presentation. UK investors should dial 0845 245 3471 and overseas investors should dial +44 (0)1452 542 300. The conference ID number is 3533797. • The presentation slides will be available from 09.20 GMT at http://investor.legalandgeneral.com/results.cfm • An audio-cast of the presentation will be available later today at http:// investor.legalandgeneral.com/presentations.cfm The following financial information was approved by the Board on 26 July 2006. The results for the six months to 30 June 2006 and 30 June 2005 are unaudited,but have been subject to a review by the independent auditors and constitutenon-statutory accounts within the meaning of Section 240 of the Companies Act1985. The Group consolidated financial statements for the year ended 2005published on 16 March 2006 have been filed with the Registrar of Companies andinclude an independent auditors' report which is unqualified and does notcontain a statement under either Sections 237(2) or 237(3) of the Companies Act1985. Financial calendar 2006: Ex-dividend date for interim dividend 6 SeptemberRecord date for interim dividend 8 SeptemberPayment date for interim dividend 2 OctoberThird quarter new business results 18 October A Dividend Reinvestment Plan is available to shareholders. Forward-looking statements: This document may contain certain forward-looking statements with respect tocertain of Legal & General Group Plc's plans and its current goals andexpectations relating to future financial condition, performance and results.By their nature forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances which are beyond Legal & GeneralGroup Plc's control, including, among others, UK domestic and global economicand business conditions, market related risks such as fluctuations in interestrates and exchange rates, the policies and actions of governmental andregulatory authorities, the impact of competition, the timing, impact and otheruncertainties of future mergers or combinations within relevant industries. Asa result, Legal & General Group Plc's actual future condition, performance andresults may differ materially from the plans, goals and expectations set out inLegal & General Group Plc's forward-looking statements. Legal & General GroupPlc does not undertake to update forward-looking statements contained in thisdocument or any other forward-looking statement it may make. Table of contents Page Business review 6 New business 13 European Embedded Value 19 - Consolidated income statement 19 - Consolidated balance sheet 20 - Consolidated statement of recognised income and expense 20 - Profit from continuing operations after tax from covered business 21 - Analysis of experience variances 23 - Analysis of operating assumption changes 24 - Variation from longer term investment return 24 - Time value of options and guarantees 25 - Investment management income statement 25 - Analysis of tax 26 - Earnings per share 27 - Embedded value reconciliation 29 - Analysis of ordinary shareholders' equity 32 - Segmental analysis of ordinary shareholders' equity 34 - Assumptions 35 International Financial Reporting Standards 39 - Operating profit income statement 39 - Consolidated income statement 40 - Consolidated balance sheet 41 - Consolidated statement of recognised income and expense 42 - Consolidated cash flow statement 43 - Shareholder retained capital movement 46 - Analysis of tax 47 - Earnings per share 48 - Analysis of gross written premiums 50 - Segmental analysis 51 - Segmental analysis of ordinary shareholders' equity 53 - Borrowings 54 - Non linked asset mix and investment return 55 - Contingent liabilities, guarantees and indemnities 56 Capital and cash flow 57 Appendices 63 Business review New business H1 2006 H1 2005£m APE PVNBP APE PVNBP UK life and pensions:Protection 111 555 109 478Annuities 71 708 79 787Savings: Unit linked bonds 121 1,213 94 939Savings: Pensions - Stakeholder and other non profit 91 535 72 471With-profits 102 602 72 466 Total UK life and pensions 496 3,613 426 3,141 International life and pensions 57 482 56 464 Total life and pensions 553 4,095 482 3,605 UK retail investments 342 N/A 169 N/AInternational retail investments 1 N/A 1 N/A Total retail investments 343 N/A 170 N/A Total new business 896 N/A 652 N/A Institutional fund management £10.8bn £6.9bn UK LIFE AND PENSIONS - H1 PVNBP up 15% to £3,613m Protection - H1 PVNBP up 16% to £555m Individual protection annual premiums grew by 16% to £78m (H1 2005: £67m),against a backdrop of an improved housing market. We successfully launched apension term assurance product in April this year and are encouraged byperformance to date, with the product recently accounting for over 30% of IFAlife insurance applications. Scale is critical in the individual protection segment, where we estimate thatwe have increased market share by three percentage points in Q1 2006 to nearly20% (Q4 2005: 17%). We continue to invest in our underwriting expertise andinfrastructure to improve further our competitive position. Group Risk annual premiums fell by 21% to £33m (H1 2005: £42m). 2004 and 2005new business figures benefited from the withdrawal of a competitor at the end of2003. We have seen broadly stable annual premiums in Q2 2006 of £16m against£17m in Q1 2006. Overall, protection volumes increased by 16% to £555m in the first half of 2006(H1 2005: £478m) on a PVNBP basis and by 2% on an APE basis. The PVNBP growthrate reflects the change in mix towards individual business, where, on average,we expect to receive premiums for longer than on group business. Annuities - H1 PVNBP down 10% to £708m The high level of competitive activity in the individual annuity market, whichwe noted during 2005, continued in the early part of 2006. Although singlepremium individual annuities decreased from £458m in H1 2005 to £209m in H12006, our competitive position improved significantly in the second quarter of2006. Single premiums nearly trebled from £56m in Q1 2006 to £153m in Q2 2006,as bond yields rose and as customers, who had delayed their purchase until theapplication of new pensions A-Day tax rules, entered the market. The resultinguplift in application volumes has yet to be fully reflected in completed sales.As announced earlier this year, we became the default annuity provider forSkandia's maturing pension customers in May. The bulk purchase annuity business saw high levels of sales and quotationactivity in the first half of this year. We completed more than 150 newpolicies, with an average case size of just over £3m. This lifted singlepremiums by 52% to £499m (H1 2005: £329m). We continue to focus on serviceexcellence and have substantial pricing and processing expertise, built up oversome 20 years, in managing high volumes of schemes. We believe that there isopportunity for significant additional growth in new products offering longevityrisk management to larger schemes and we have seen early signs of increasedactivity in this area. Savings: Unit linked bonds - H1 PVNBP up 29% to £1,213m Legal & General's Portfolio Bond was an important driver behind the 29% increasein premiums to £1,213m in the first half of 2006 (H1 2005: £939m). In the yearto date, over 25% of new bond business from IFAs came through the Cofundsplatform, which provides advisors with the opportunity to simplify theiradministration while offering access to a wide range of funds. We believe thestrength of our open architecture offering will be an important factor indriving and shaping our bond business in the future. Savings: Pensions - H1 PVNBP up 14% to £535m We saw strong growth in pensions volumes in the first half of 2006 to £535m from£471m in H1 2005, driven primarily by our success in the corporate segment.Taking advantage of the open architecture model, we launched our Self InvestedPersonal Pension on the Cofunds platform in April this year. The public debateon the future of pensions saving in the UK has, we believe, helped to increaseawareness among consumers of the need to save for retirement. Additionally,pensions A-Day has stimulated the pensions transfer market, as investors seek toconsolidate their assets into a single pool. With-profits - H1 PVNBP up 29% to £602m The strength of the pensions market has also fed into sales of pensions productswritten in the with-profits part of the long term fund. This includes thoseunit linked contracts which offer a with-profits option. The historicallyhigher margin with-profits bond contracts continued to decline, decreasing by59% to £42m of single premiums in H1 2006 (H1 2005: £103m). INTERNATIONAL LIFE AND PENSIONS - H1 PVNBP up 4% to £482m Although market conditions remained difficult, sales in our US operationincreased by 6% to £145m (H1 2005: £137m). New business was little changed inFrance at £195m (H1 2005: £198m) and increased by 10% in the Netherlands to£142m (H1 2005: £129m), driven largely by strong single premium sales. Overall,new business from our overseas operations rose by 4% to £482m. INVESTMENT MANAGEMENT Retail investments - H1 up 102% to £343m APE UK retail investment sales of £342m APE in the first half of 2006 (H1 2005:£169m) benefited from a £1.3bn single premium institutional transfer. Fundsunder management stood at £19.3bn at 30 June 2006. Legal & General is currentlythe UK's third largest retail investments provider (Source: InvestmentManagement Association monthly rankings - May 2006). Institutional fund management - H1 new funds up 56% to £10.8bn Legal & General Investment Management achieved yet another outstanding newbusiness result in the first half of 2006, winning £10.8bn (H1 2005: £6.9bn) ofnew funds under management. £1.9bn of this was received from non-pension fundinstitutions. Profitability Consolidated income statement EEV IFRS£m H1 2006 H1 2005 H1 2006 H1 2005 From continuing operations:Life and pensions 456 385 252 228Investment management 87 70 65 48General insurance 2 4 2 4Other operational income 15 18 15 18 Total operating profit 560 477 334 298 Variation from longer term investment return 113 206 7 63Effect of economic assumption changes (18) 11 N/A N/AShareholder retained capital movement N/A N/A 39 116Property income attributable to minority interests 21 11 21 11 Profit from continuing operations before tax 676 705 401 488 Tax (198) (186) (124) (124)Effect of UK tax changes - (276) N/A N/A Profit from continuing operations after tax 478 243 277 364Profit from discontinued operations - 13 - 13 Profit from ordinary activities after tax 478 256 277 377Profit attributable to minority interests (21) (11) (21) (11) Profit attributable to equity holders of the Company 457 245 256 366 Life and pensions - EEV basis UK International Total£m H1 2006 H1 2005 H1 2006 H1 2005 H1 2006 H1 2005 Present value of new business premiums 3,613 3,141 482 464 4,095 3,605New business margin (%) 4.9 4.1 2.7 2.4 4.7 3.9 Contribution from new business (after cost of capital) 179 129 13 11 192 140Contribution from in-force business- Expected return 158 145 33 29 191 174- Experience variances 53 11 (6) - 47 11- Operating assumption changes (7) (4) 3 (3) (4) (7)Development costs (10) (5) - - (10) (5)Contribution from shareholder net worth 32 64 8 8 40 72 Operating profit 405 340 51 45 456 385 UK life and pensions The contribution from new business increased by 39% from £129m to £179m,benefiting from improved sales, mix and margins. The expected return from in-force business increased by 9% from £145m to £158m,reflecting the unwind of a lower opening discount rate of 7.1% (2005: 7.5%) on ahigher opening embedded value. Opening adjustments to reflect a revision of assessments of prior and future taxresulted in a broadly net neutral impact on EEV operating profit. These havebeen reported as a positive experience variance and a similar reduction in thereturn from the shareholder net worth. Excluding this, underlying variances andassumption changes were a small positive. The BPA data loading project onceagain had a positive impact, with £17m in experience variances and £15m inassumption changes. Persistency, mortality and morbidity experience on ouroverall book of business are subject to full annual investigations and operatingassumptions are normally fully reviewed during the second half. In the firsthalf of 2006, there were small negative persistency variances on with-profitsbonds and pensions, partly offset by positive mortality and morbidity experiencevariances from group protection business. In addition, there were minor expenseassumption changes, relating to a number of products and to future office rentalcosts. Development costs of £10m (H1 2005: £5m) relate primarily to the development ofthe Cofunds platform. International life and pensions EEV operating profit from our international operations grew by 13% to £51m (H12005: £45m), with increased results across our businesses. In the Netherlands,operating profit grew by 6% to £17m (H1 2005: £16m), reflecting higher sales andlower capital requirements on certain products. Operating profit in Franceincreased by 40% to £14m (H1 2005: £10m) with improved margins. On the in-forcebook, adverse mortality assumption changes were offset by favourablepersistency. In the USA, the decline in new business in 2005 increased the unitexpenses in the first half of this year, giving rise to a negative margin of1.9% on new business (H1 2005: positive 2.2%). The margin does not include anybenefit from Triple X financing, which we expect to complete in the second halfof 2006. Higher expected return from in-force business was partially offset bya small adverse mortality variance. Total operating profit in the USA grew by5% to £20m (H1 2005: £19m). Life and pensions - IFRS basis £m H1 2006 H1 2005UK operating profit:With-profits business 40 32Distribution relating to non profit and shareholder net worth 157 133 Subordinated debt interest 18 18 215 183International operating profit:USA 33 27Netherlands (3) 18France 7 - Operating profit 252 228 UK life and pensions The distribution relating to non profit and shareholder net worth in any year isbased on the formula which was agreed with our regulator. It is calculated as 7%of the embedded value of the shareholder retained capital (SRC) and Sub-fund and5% of the embedded value of the non profit business. At the interim stage, anestimate is made of the provisional half year transfer that would be availablefrom application of the formula based on half year results and after allowancefor the transfer from the non profit part of the fund to the SRC. Theshareholder net worth and the value of the non profit business both increased by17% from H1 2005 to H1 2006. Overall, the UK life and pensions operating profitincreased from £183m at H1 2005 to £215m at H1 2006. The with-profits transfergrew by 25% to £40m (H1 2005: £32m), reflecting increases in bonuses applied toa higher level of maturities and other claims. International life and pensions Higher results from our operations in the USA and France were offset by areduction in reported profits in our operation in the Netherlands due to theaccounting rules surrounding the valuation of assets and liabilities. On anIFRS basis, all assets but not all liabilities must be accounted for at fairvalue, giving rise to a £3m operating loss in H1 2006 against an £18m operatingprofit in H1 2005. Further volatility should be expected. Operating profitfrom our US operations increased by 22% to £33m (H1 2005: £27m), reflecting theincreased size of the book. In France, operating profit increased to £7m (H12005: £nil), largely as a result of gains made on a property sale. Investment management - IFRS basis £m H1 2006 H1 2005Investment management operating profits:Managed pension funds 45 33Ventures 2 2Property 4 3Retail investments 5 4Other external income 4 2Other operational income 5 4 Operating profit 65 48 Cost/income ratio 36% 36% Operating profits from our investment management business increased by 35% to£65m (H1 2005: £48m), demonstrating the scalability of the business andcontinued focus on cost control. The cost/income ratio remained stable at 36%(H1 2005: 36%). As a result of strong new business inflows, funds under management increasedfrom £204bn at 31 December 2005 to £211bn at 30 June 2006. £152bn of funds at30 June 2006 were managed on behalf of external clients. Our supplementary reporting also includes details of the results of our managedpension funds business on an EEV basis which can be found in notes 3.2 and 3.8of the EEV section of these results. These reflect growth in new businessvolumes and the continued benefit of strong persistency. General insurance - IFRS basis H1 2006 H1 2005 Operating Underwriting Operating Underwriting £m profit result profit result Household 2 (3) 2 (5) Other - (3) 2 - Operating profit 2 (6) 4 (5) Operating profit in our General Insurance business decreased from £4m in H1 2005to £2m in H1 2006. This is after providing for £4m in closure costs followingour decision to withdraw from our small position in the motor insurance marketand to focus on building the household insurance book. We will be ceasing towrite new motor insurance business or renew existing cover with effect from 1September 2006. The motor book generated an operating loss before closure costsof £1m in the first half of 2006 (H1 2005: operating loss of £3m). Our household insurance business offers greater synergies with our existingprotection businesses. 38% of mortgages completed via our Legal & GeneralPartnership Services Ltd network in the first half of the year also included ourhousehold insurance. The business saw stable gross premium income of £115m inthe first half of this year (H1 2005: £115m). Operating profits were unchangedat £2m (H1 2005: £2m), as an improvement in weather claims was offset byincreased competition in the broker channel. Other operational income - IFRS basis £m H1 2006 H1 2005 restatedShareholders' other income:Investment return on ordinary shareholders' equity 69 55Interest expense (48) (30) 21 25 Other operations (1) (3)Unallocated corporate and development expenses (5) (4) 15 18 Interest expense has increased following the issuance of €600m of subordinateddebt in June 2005. This has been offset by the increased investment return of£69m (H1 2005: £55m), reflecting investment of the issue proceeds prior to theirbeing used to repay the convertible debt in December 2006. Profit attributable to equity holders EEV IFRS£m H1 2006 H1 2005 H1 2006 H1 2005 Operating profit 560 477 334 298Variation from longer term investment return 113 206 7 63Effect of economic assumption changes (18) 11 N/A N/AShareholder retained capital movement N/A N/A 39 116Property income attributable to minority interests 21 11 21 11 Profit from continuing operations before tax 676 705 401 488Tax (198) (186) (124) (124)Effect of UK tax changes - (276) N/A N/A Profit from continuing operations after tax 478 243 277 364Profit from discontinued operations - 13 - 13 Profit from ordinary activities after tax 478 256 277 377Profit attributable to minority interests (21) (11) (21) (11) Profit attributable to equity holders of the Company 457 245 256 366 EEV basis The Group's profit before tax decreased marginally to £676m (H1 2005: £705m),with lower equity market performance in the first half of this year comparedwith the prior period. The investment return on the equity and propertyportfolio of the UK long term fund was 2.1% above the assumption for the period(H1 2005: 3.7%) IFRS basis The pre-tax contribution from SRC reduced from £116m in H1 2005 to £39m in H12006 as a result of lower investment returns and a lower net capital releasefrom the non profit business of £110m pre-tax (H1 2005: £138m) and £77m net oftax (H1 2005: £97m). Within this net release, the new business strain of £279m before financing (H12005: £207m) was covered by the expected release from the in-force book of £290mbefore financing (H1 2005: £198m), all on a net of tax basis. A second trancheof term assurance financing had a benefit of £94m to support new businessstrain, offset by a £26m partial repayment of the financing put in place in2005. The overall impact of other movements on the net capital released aftertax was a negative £2m (H1 2005: positive £106m). Capital and financing The Group is required to measure and monitor its capital resources on aregulatory as well as an IFRS basis and to comply with the minimum capitalrequirements of regulators in each territory in which it operates. In general,the regulators require more prudent assumptions than IFRS. Legal & General'stotal capital resources are substantially in excess of both total regulatorycapital and the minimum regulatory capital it is required to hold. At Group level, the Insurance Groups Directive capital surplus was £2.3bn (31December 2005: £2.4bn) in excess of the required capital of £3.8bn (31 December2005: £4.4bn). The total regulatory capital resources available to Legal & General AssuranceSociety Limited, the Group's main UK operating subsidiary, amounted to £8.1bn at30 June 2006 (31 December 2005: £8.5bn) which included an implicit item of £425m(31 December 2005: £540m) in respect of non profit business, and exceeded thetotal capital requirements by £4.5bn (31 December 2005: £4.4bn). As at 30 June 2006, the value of the assets supporting the UK with-profitsbusiness was estimated to have exceeded realistic liabilities by £907m (31December 2005: £842m). The required Risk Capital Margin (RCM) for thewith-profits part of the fund, calculated by reassessing realistic assets andliabilities in financially stressed conditions, was £244m at 30 June 2006 (31December 2005: £327m). The RCM continued to benefit from management actions,which included refinements to our management of investment market risk. In March 2006, the £400m undated subordinated notes (upper tier 2 regulatorycapital) raised in March 2004 and required to be treated as equity at the end of2005, were reclassified as debt following the modification of terms to removethe discretionary nature of the interest. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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