28th Jul 2005 07:03
Legal & General Group PLC28 July 2005 Part 2Legal & General Group Plc P1Consolidated Income Statement - European Embedded Value BasisSix months ended 30 June 2005================================================================================ Notes Full year 30.6.05 30.6.04 2004 Restated Restated £m £m £mProfit from continuing operationsLife and pensions 1 / 2 385 184 587Institutional fund management 66 51 104General insurance 3 4 17 32Other operational income 4 10 13 22 ------- ------- -------Operating profit 465 265 745Variation from longer term investment return 7 206 80 414Effect of economic assumption changes 1 11 (7) 34Property income attributable to minority interests 11 8 32 ------- ------- -------Profit from continuing operations before tax 693 346 1,225Tax 12 (182) (100) (349)Effect of UK tax changes 13 (276) - - ------- ------- -------Profit from continuing operations after tax 235 246 876Profit from discontinued operations 13 2 5 ------- ------- -------Profit on ordinary activities after tax 248 248 881Profit attributable to minority interests 8 (11) (8) (32) ------- ------- -------Profit attributable to equity holders 237 240 849================================================================================Earnings per share 14 p p pBased on operating profit from continuing operations after tax 5.10 3.01 8.27Based on profit attributable to equity holders 3.67 3.70 13.10Diluted earnings per share 14Based on operating profit from continuing operations after tax 4.98 3.00 8.12Based on profit attributable to equity holders 3.61 3.69 12.72================================================================================This financial information was approved by the Board on 27 July 2005. The results for the six months to 30 June 2005 and 30 June 2004 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. They have been prepared on a basis which is consistent with the restated financial information from Achieved Profits (AP) to European Embedded Value (EEV) for the year ended 31 December 2004 published on 24 May 2005. The published 31 December 2004 supplementary financial information includes an independent auditors' report which is unqualified. The original results for the year ended 2004 published on 24 February 2005 have been filed with the Registrarof Companies and include an independent auditors' report which is unqualified and does not contain a statement under either Sections 237(2) or 237(3) of the Companies Act 1985. These figures have been prepared for covered business using the EEV basis. TheInternational Financial Reporting Standards (IFRS) results are included in Part 3. ================================================================================ Legal & General Group Plc P2Consolidated Balance Sheet - European Embedded Value BasisSix months ended 30 June 2005-------------------------------------------------------------------------------- Notes At 30.6.05 At 30.6.04 At 31.12.04 Restated RestatedAssets £m £m £mInvestments 9 163,963 130,731 147,761Long term in-force business asset 15 2,404 2,324 2,535Other assets 6,080 6,306 5,088Non-current assets held for sale - 649 733 --------- --------- --------- 172,447 140,010 156,117 ========= ========= =========Equity and liabilitiesShareholders' equity 17 6,173 5,691 6,182Minority interests 215 167 214Subordinated borrowings 16 801 394 394Unallocated divisible surplus 1,938 1,396 1,559Participating contract liabilities 19,152 18,056 18,817Non-participating contract liabilities 138,687 109,523 124,193Senior borrowings 16 1,573 1,608 1,452Other creditors and provisions 3,908 2,612 2,672Non-current liabilities held for sale - 563 634 --------- --------- --------- 172,447 140,010 156,117 ========= ========= ========= ================================================================================ Legal & General Group Plc P3New businessSix months ended 30 June 2005--------------------------------------------------------------------------------New Annual Premium Equivalent Full year 30.6.05 30.6.04 2004 £m £m £mLife and pensions businessLife 213 197 400Pensions 213 142 322 ------- ------- -------UK 426 339 722 ------- ------- -------USA 19 27 51Netherlands 14 12 25France 23 17 29 ------- ------- ------- 56 56 105 ------- ------- -------Life and pensions total 482 395 827Retail investment businessUK 169 115 179France 1 1 2 ------- ------- -------Total new business 652 511 1,008 ======= ======= ======= International life and pensions new business expressed at 30 June 2005 averageexchange ratesUSA 26 50Netherlands 12 25France 17 29 ------- ------- 55 104 ======= =======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. Full year 30.6.05 30.6.04 2004Institutional fund management £m £m £mManaged pension funds *- Pooled funds 6,710 7,610 13,951- Segregated funds 105 1,063 1,228 -------- -------- -------- 6,815 8,673 15,179Other funds 60 70 368 -------- -------- -------- 6,875 8,743 15,547 ======== ======== ========* New monies from pension fund clients of Legal & General Assurance (Pensions Management) Ltd. excludes £1.8bn (1H04: £2.2bn; FY04: £5.0bn) which was held through the year on a temporary basis, generally as part of a portfolio reconstruction. ================================================================================ Legal & General Group Plc P4New businessSix months ended 30 June 2005 -------------------------------------------------------------------------------- 6 months 3 months 3 months 6 months 3 months 3 months 30.6.05 30.6.05 31.3.05 30.6.04 30.6.04 31.3.04 £m £m £m £m £m £mUK annual premiumsLife and pensions businessLife- Mortgage-related 43 23 20 53 28 25- Protection 24 12 12 25 13 12- Group risk 42 20 22 37 24 13Pensions- Individual pensions 83 46 37 61 33 28- Group pensions 2 1 1 2 1 1 ------ ------ ------ ------ ------ ------ 194 102 92 178 99 79Retail investment businessISAs 9 6 3 13 7 6Unit trusts 1 1 0 1 0 1 ------ ------ ------ ------ ------ ------Total 204 109 95 192 106 86================================================================================UK single premiumsLife and pensions business Bonds- With-profits 102 45 57 224 101 123- Unit linked 940 506 434 596 335 261Pensions- Individual pensions 460 248 212 179 92 87- Annuities - individual 481 298 183 366 184 182- Annuities - bulk purchase 329 65 264 230 139 91- Other group business 4 3 1 2 1 1- DWP rebates 7 2 5 17 13 4 ------ ------ ------ ------ ------ ------ 2,323 1,167 1,156 1,614 865 749Retail investment businessISAs 289 205 84 389 267 122Unit trusts 1,304 670 634 621 420 201 ------ ------ ------ ------ ------ ------Total 3,916 2,042 1,874 2,624 1,552 1,072================================================================================UK APEIndividual life and pensions 349 191 158 277 146 131Retail investments 169 94 75 115 76 39 ------ ------ ------ ------ ------ ------by channel- Independent financial advisers 317 180 137 234 133 101- Single tie 182 95 87 135 77 58- Direct 19 10 9 23 12 11 ------ ------ ------ ------ ------ ------Total UK individual 518 285 233 392 222 170Group 77 27 50 62 39 23 ------ ------ ------ ------ ------ ------Total 595 312 283 454 261 193 ================================================================================ Legal & General Group Plc P5New businessSix months ended 30 June 2005-------------------------------------------------------------------------------- 6 months 3 months 3 months 6 months 3 months 3 months 30.6.05 30.6.05 31.3.05 30.6.04 30.6.04 31.3.04 £m £m £m £m £m £mInternational annual premiumsLife and pensions businessUSA 19 9 10 27 15 12Netherlands 6 2 4 6 3 3France 14 13 1 10 10 0 ------ ------ ------ ------ ------ ------Total 39 24 15 43 28 15================================================================================International single premiumsLife and pensions businessUSA 0 0 0 0 0 0Netherlands 78 32 46 64 24 40France 91 44 47 68 38 30 ------ ------ ------ ------ ------ ------ 169 76 93 132 62 70Retail investment businessFrance 10 5 5 8 5 3 ------ ------ ------ ------ ------ ------Total 179 81 98 140 67 73 ================================================================================ Legal & General Group Plc P6New businessSix months ended 30 June 2005--------------------------------------------------------------------------------Present value of new business premiums (PVNBP) Single Annual Capitalisation New business premiums premiums factor PVNBP margin £m £m £m %Six months ended 30.6.05UK 2,323 194 4.2 3,141 4.1International 169 39 7.6 464 2.4 ------- ------ ------- ------ 2,492 233 3,605 3.9 ======= ====== ======= ====== Six months ended 30.6.04UK 1,614 178 4.3 2,388 5.0International 132 43 5.8 382 2.6 ------- ------ ------- ------ 1,746 221 2,770 4.7 ======= ======= ======= ====== Full year ended 31.12.04UK 3,740 348 4.3 5,255 4.6International 272 77 6.9 802 4.4 ------- ------ ------- ------ 4,012 425 6,057 4.6 ======= ====== ======= ====== The PVNBP on the EEV basis is defined as the present value of regular premiumsplus single premiums for any given year. It is calculated using the same assumptions as for the new business contribution but determined as at the pointof sale. The capitalisation factor represents the PVNBP minus single premiums divided bythe annualised amount of new regular premiums. The new business margin is defined as the contribution from new business dividedby the PVNBP. ================================================================================ Legal & General Group Plc P7Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------1. Profit from continuing operations after tax from covered business Life and Managed Inter- pensions pension UK national Total funds* TotalSix months ended 30.6.05 £m £m £m £m £mContribution from:New business after cost of capital 129 11 140 21 161In-force business- expected return 145 29 174 10 184- experience variances 11 0 11 12 23- operating assumption changes (4) (3) (7) 13 6Development costs (5) - (5) 0 (5)Shareholder net worth 64 8 72 3 75 ------ ------ ------ ------ ------Operating profit 340 45 385 59 444Variation from longer term investment return 135 10 145 11 156Effect of economic assumption changes 21 (11) 10 1 11 ------ ------ ------ ------ ------Profit from continuing operations before tax 496 44 540 71 611Tax (131) (15) (146) (21) (167)Effect of UK tax changes (276) - (276) - (276) ------ ------ ------ ------ ------Profit from continuing operations after tax 89 29 118 50 168 ====== ====== ====== ====== ======Six months ended 30.6.04 (Restated)Contribution from:New business after cost of capital 120 10 130 17 147In-force business- expected return 138 24 162 9 171- experience variances 43 (9) 34 8 42- operating assumption changes** (219) (1) (220) 8 (212)Development costs - - - 0 0Shareholder net worth 71 7 78 3 81 ------ ------ ------ ------ ------Operating profit 153 31 184 45 229Variation from longer term investment return 111 (5) 106 0 106Effect of economic assumption changes (6) 0 (6) (1) (7) ------ ------ ------ ------ ------Profit from continuing operations before tax 258 26 284 44 328Tax (70) (9) (79) (13) (92) ------ ------ ------ ------ ------Profit from continuing operations after tax 188 17 205 31 236 ====== ====== ====== ====== ====== * Included in the Institutional fund management result of £66m (1H04: £51m; FY04: £104m).** The largest impact on UK life and pensions business in 2004 was from the strengthening of assumptions for annuitant longevity. ================================================================================ Legal & General Group Plc P8Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------1. Profit from continuing operations after tax from covered business (continued) Life and Managed Inter- pensions pension UK national Total funds* TotalFull year ended 31.12.04 (Restated) £m £m £m £m £mContribution from:New business after cost of capital 241 35 276 36 312In-force business- expected return 273 49 322 18 340- experience variances 46 17 63 15 78- operating assumption changes** (221) 1 (220) 18 (202)Development costs - - - (1) (1)Shareholder net worth 135 11 146 6 152 ------ ------ ------ ------ ------Operating profit 474 113 587 92 679Variation from longer term investment return 363 3 366 11 377Effect of economic assumption changes 15 19 34 0 34 ------ ------ ------ ------ ------Profit from continuing operations before tax 852 135 987 103 1,090Tax (238) (46) (284) (31) (315) ------ ------ ------ ------ ------Profit from continuing operations after tax 614 89 703 72 775 ====== ====== ====== ====== ====== * Included in the Institutional fund management result of £66m (1H04: £51m; FY04: £104m).** The largest impact on UK life and pensions business in 2004 was from the strengthening of assumptions for annuitant longevity. ================================================================================ 2. Life and pensions operating profit Full year 30.6.05 30.6.04 2004 Restated Restated £m £m £mUK 340 153 474USA 19 11 72Netherlands 16 14 30France 10 6 11 ------ ------ ------ 385 184 587 ====== ====== ===== There are no significant differences in the prior period reported numbers if theinternational life and pensions operating profits were expressed at 30 June 2005average exchange rates. ================================================================================ Legal & General Group Plc P9Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------3. General insurance gross premiums and operating profit Full year Full year 30.6.05 30.6.05 30.6.04 30.6.04 2004 2004 Restated Restated Restated Restated Premiums Operating Premiums Operating Premiums Operating written profit written profit written profit £m £m £m £m £m £mContinuing operationsHousehold 115 2 107 11 222 22Other 55 2 51 6 103 10 ------ ------ ------ ------ ------ ------ 170 4 158 17 325 32================================================================================4. Other operational income Full year 30.6.05 30.6.04 2004 Restated Restated £m £m £mShareholders' other incomeInvestment return on shareholders' equity 55 55 109Interest expense (42) (34) (74) ------ ------ ------ 13 21 35Retail investments 4 (1) 4Other operations (3) 1 (4)Unallocated corporate and development expenses (4) (8) (13) ------ ------ ------ 10 13 22================================================================================5. Exchange rates Period end exchange rates 30.6.05 30.6.04 31.12.04United States Dollar 1.79 1.81 1.92Euro 1.48 1.49 1.41 Average exchange rates 1.1.05 - 1.1.04 - 1.7.04 - 30.6.05 30.6.04 31.12.04 United States Dollar 1.87 1.82 1.84Euro 1.46 1.48 1.46 ================================================================================ Legal & General Group Plc P10Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------6. General insurance and shareholders' investment return Full year 30.6.05 30.6.04 2004 Restated Restated £m £m £mInvestment income 61 50 106Interest expense and charges (43) (34) (76)Realised investment gains 8 8 8Unrealised investment gains/(losses) 51 (15) 64 ------ ------ ------ 77 9 102 ====== ====== ======reported within:Institutional fund management 4 4 8General insurance 10 10 22Other operational income 13 21 35Variation from longer term investment return 50 (26) 37 ------ ------ ------ 77 9 102 ====== ====== ======Shareholders' other income, reported within other operational income, has beendetermined based on a longer term rate of investment return with the difference between this and the actual return being reported as variation from longerterm investment return. ================================================================================7. Variation from longer term investment return Full year 30.6.05 30.6.04 2004 Restated Restated £m £m £mTotal covered business 156 106 377 Institutional fund management 0 (2) 0General insurance (2) (6) (3)Other operational income 52 (18) 40 ------ ------ ------ 50 (26) 37 ------ ------ ------ 206 80 414 ====== ====== ====== For covered business, the variation from longer term investment returnrepresents the effect of the investment performance and changes to investment policy in respect of shareholder net worth and in-force business, compared withembedded value assumptions at the beginning of the period. ================================================================================ Legal & General Group Plc P11Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------8. Minority interests In 2005 minority interests represent third party interests in propertyinvestment vehicles which are consolidated in the Group's results. The 2004 minority interests also include interests in venture capital subsidiaries. ================================================================================9. Investments At 30.6.05 At 30.6.04 At 31.12.04 Restated Restated £m £m £mInvestment property 5,322 5,349 4,903Equities 85,109 69,916 78,322Unit trusts 2,117 1,015 1,875Debt securities 65,855 50,933 58,604Accrued interest 817 692 753Derivative assets 60 38 23Loans and receivables 273 347 289Cash and cash equivalents 4,410 2,441 2,992 --------- --------- --------- 163,963 130,731 147,761================================================================================10. Time value of options and guarantees Full year 30.6.05 30.6.04 2004 £m £m £m Life and pensions: UK with-profits 4 7 8UK non profit 25 24 24International 8 8 8 ------ ------ ----- 37 39 40================================================================================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 and account for all UK and the majority of worldwide assets and contributions to such schemes. At 30 June 2005 the combined after tax deficit of these arrangements has been estimated at £132m (1H04: £68m; FY04: £109m). These amounts have been recognised in the financial information with £78m charged against shareholder equity (1H04: £40m; FY04: £65m) and £54m against the unallocated divisible surplus (1H04: £28m; FY04: £44m). ================================================================================ Legal & General Group Plc P12Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------12. Analysis of tax Full year Full year 30.6.05 30.6.05 30.6.04 30.6.04 2004 2004 Restated Restated Restated Restated Profit Tax Profit Tax Profit Tax before (charge)/ before (charge)/ before (charge)/ tax credit tax credit tax credit £m £m £m £m £m £mProfit from continuing operations UK life and pensions 340 (98) 153 (41) 474 (134)International life and pensions 45 (15) 31 (11) 113 (38) ------ ------ ------ ------ ------ ------ 385 (113) 184 (52) 587 (172)Institutional fund management 66 (20) 51 (15) 104 (32)General insurance 4 (1) 17 (5) 32 (9)Other operational income 10 (1) 13 2 22 4 ------ ------ ------ ------ ------ ------Operating profit 465 (135) 265 (70) 745 (209)Variation from longer term investment return 206 (43) 80 (32) 414 (129)Effect of economic assumption changes 11 (4) (7) 2 34 (11)Property income attributable to minorities 11 - 8 - 32 - ------- ----- ------ ------ ------ ------Profit from continuing operations before tax / Tax 693 (182) 346 (100) 1,225 (349)================================================================================13. Effect of UK tax changes This tax charge represents a one-off reduction in the embedded value arisingfrom changes in tax law. The Finance (No. 2) Act 2005, enacted on 20 July 2005, includes provisions which change the way in which investment return isapportioned between categories of business for the purposes of computing taxableprofits earned from writing pensions business. These changes will result in significantly larger taxable pensions business profits in the non profit part of the fund from 2005 onwards.================================================================================ Legal & General Group Plc P13Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------14. Earnings per share (EPS) Weighted average Earnings number Profit/ per of (loss) share shares £m p mSix months ended 30.6.05Operating profit from continuing operations after tax 330 5.10 6,477Variation from longer term investment return 163 2.52Effect of economic assumption changes 7 0.11Profit from discontinued operations 13 0.20Effect of UK tax changes (276) (4.26) ------ ------ -------Profit attributable to equity holders/EPS 237 3.67 6,477Net shares under options allocable for no further consideration - (0.02) 35Convertible bonds outstanding 8 (0.04) 285 ------ ------ -------Diluted profit attributable to equity holders/EPS 245 3.61 6,797 ====== ====== =======Six months ended 30.6.04 (Restated)Operating profit from continuing operations after tax 195 3.01 6,478Variation from longer term investment return 48 0.74Effect of economic assumption changes (5) (0.08)Profit from discontinued operations 2 0.03 ------ ------ -------Profit attributable to equity holders/EPS 240 3.70 6,478Net shares under options allocable for no further consideration - (0.01) 24Convertible bonds outstanding * 12 - 285 ------ ------ -------Diluted profit attributable to equity holders/EPS 252 3.69 6,787 ====== ====== =======Full year ended 31.12.04 (Restated)Operating profit from continuing operations after tax 536 8.27 6,479Variation from longer term investment return 285 4.40Effect of economic assumption changes 23 0.35Profit from discontinued operations 5 0.08 ------ ------ -------Profit attributable to equity holders/EPS 849 13.10 6,479Net shares under options allocable for no further consideration - (0.06) 33Convertible bonds outstanding 16 (0.32) 285 ------ ------ -------Diluted profit attributable to equity holders/EPS 865 12.72 6,797 ====== ====== ======= * The shares associated with the convertible bond were antidilutive as they would have increased the net earnings per share and were therefore ignored, along with their associated revenue impact, when calculating the diluted earnings per share. ================================================================================ Legal & General Group Plc P14Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------15. Embedded value Inter- Share- UK national Life and Managed Value of holder Life and Life and pensions pension in-force net worth pensions pensions total funds Total £m £m £m £m £m £m £mSix months ended 30.6.05At 1 JanuaryValue of in-force business * 2,885 - 2,885 431 3,316 191 3,507Shareholder net worth ** - 1,560 1,560 276 1,836 162 1,998 ------- ------- ------- ------- ------- ----- ------ 2,885 1,560 4,445 707 5,152 353 5,505Exchange rate movements - - - 25 25 - 25 ------- ------- ------- ------- ------- ----- ------ 2,885 1,560 4,445 732 5,177 353 5,530Profit for the period 138 (49) 89 29 118 50 168Capital movements - - - 5 5 0 5Distributions (23) (105) (128) 0 (128) - (128)Movement in pension deficit - (7) (7) - (7) - (7)Inter-fund transfer (65) 65 - - - - - ------- ------- ------- ------- ------- ----- ------ 2,935 1,464 4,399 766 5,165 403 5,568 ======= ======= ======= ======= ======= ===== ======Represented by:Value of in-force business * 2,935 - 2,935 476 3,411 215 3,626Shareholder net worth ** - 1,464 1,464 290 1,754 188 1,942 ------- ------- ------- ------- ------- ----- ------At end of period 2,935 1,464 4,399 766 5,165 403 5,568 ======= ======= ======= ======= ======= ===== ======Six months ended 30.6.04 (Restated)At 1 JanuaryValue of in-force business * 2,552 - 2,552 377 2,929 158 3,087Shareholder net worth ** - 1,569 1,569 245 1,814 143 1,957 ------- ------- ------- ------- ------- ----- ------ 2,552 1,569 4,121 622 4,743 301 5,044Exchange rate movements - - - (13) (13) - (13) ------- ------- ------- ------- ------- ----- ------ 2,552 1,569 4,121 609 4,730 301 5,031Profit for the period 124 64 188 17 205 31 236Capital movements - - - 1 1 - 1Distributions (22) (102) (124) 0 (124) - (124)Movement in pension deficit - 0 0 - 0 - 0Inter-fund transfer 80 (80) - - - - - ------- ------- ------- ------- ------- ----- ------ 2,734 1,451 4,185 627 4,812 332 5,144 ======= ======= ======= ======= ======= ===== ======Represented by:Value of in-force business * 2,734 - 2,734 420 3,154 171 3,325Shareholder net worth ** - 1,451 1,451 207 1,658 161 1,819 ------- ------- ------- ------- ------- ----- ------At end of period 2,734 1,451 4,185 627 4,812 332 5,144 ======= ======= ======= ======= ======= ===== ====== * See Page 15** See Page 15================================================================================ Legal & General Group Plc P15Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------15. Embedded value (continued) Inter- Share- UK national Life and Managed Value of holder Life and Life and pensions pension in-force net worth pensions pensions total funds Total £m £m £m £m £m £m £mFull year ended 31.12.04 (Restated)At 1 JanuaryValue of in-force business * 2,552 - 2,552 377 2,929 158 3,087Shareholder net worth ** - 1,569 1,569 245 1,814 143 1,957 ------- ------- ------- ------- ------- ----- ------ 2,552 1,569 4,121 622 4,743 301 5,044Exchange rate movements - - - (28) (28) - (28) ------- ------- ------- ------- ------- ----- ------ 2,552 1,569 4,121 594 4,715 301 5,016Profit for the period 423 191 614 89 703 72 775Capital movements - - - 25 25 - 25Distributions (47) (227) (274) (1) (275) (20) (295)Movement in pension deficit - (16) (16) - (16) - (16)Inter-fund transfer (43) 43 - - - - - ------- ------- ------- ------- ------- ----- ------ 2,885 1,560 4,445 707 5,152 353 5,505Represented by:Value of in-force business * 2,885 - 2,885 431 3,316 191 3,507Shareholder net worth ** - 1,560 1,560 276 1,836 162 1,998 ------- ------- ------- ------- ------- ----- ------At end of period 2,885 1,560 4,445 707 5,152 353 5,505 ======= ======= ======= ======= ======= ===== ====== For the UK life and pensions business, shareholder net worth comprises theshareholder retained capital (SRC) and the sub fund both net of an appropriate allowance for tax. The principal adjustments to the SRC for EEV purposes arethe removal of deferred acquisition costs, deferred income liabilities anddeferred tax and the addition of sterling reserves. It also includes intra-groupsubordinated debt capital at its face value of £602m. * Value of in-force business reflects the cost of holding capital of: Inter- UK national Life and Managed Life and Life and pensions pension pensions pensions total funds Total £m £m £m £m £mSix months ended 30.6.05 5 50 55 2 57Six months ended 30.6.04 (Restated) 7 47 54 2 56Full year ended 31.12.04 (Restated) 8 48 56 2 58 ** Shareholder net worth comprises both required capital and free surplus. Freesurplus was as follows: Inter- UK national Life and Managed Life and Life and pensions pension pensions pensions total funds Total £m £m £m £m £mSix months ended 30.6.05 0 174 174 170 344Six months ended 30.6.04 (Restated) 0 95 95 143 238Full year ended 31.12.04 (Restated) 0 166 166 144 310 ================================================================================ Legal & General Group Plc P16Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------15. Embedded value (continued)Reconciliations UK Life and UK Life and UK Life and pensions Total pensions Total pensions Total At 30.6.05 At 30.6.05 At 30.6.04 At 30.6.04 At 31.12.04 At 31.12.04 Restated Restated Restated Restated £m £m £m £m £m £mShareholder net worth (SNW)SNW of long term operations (IFRS basis) 2,301 3,188 2,112 2,851 2,196 2,994Other assets (IFRS basis) - 605 - 547 - 677 ------- ------- ------- ------- ------- -------Shareholders' equity on the IFRS basis 2,301 3,793 2,112 3,398 2,196 3,671Purchased interests in long term business (11) (24) (15) (31) (13) (24)Sub-fund 258 258 227 227 245 245Deferred acquisition costs / income liabilities (228) (780) (267) (746) (242) (731)Deferred tax * (698) (546) (441) (333) (480) (358)Other ** (158) (154) (165) (149) (146) (128) ------- ------- ------- ------- ------- -------Shareholder net worth on the EEV basis 1,464 2,547 1,451 2,366 1,560 2,675 ======= ======= ======= ======= ======= =======Represented by:SNW of long term operations (EEV basis) 1,464 1,942 1,451 1,819 1,560 1,998Other assets (IFRS basis) - 605 - 547 - 677 ------- ------- ------- ------- ------- ------- 1,464 2,547 1,451 2,366 1,560 2,675 ======= ======= ======= ======= ======= ======= Long term in-force business asset 2,404 2,324 2,535Sub-fund (258) (227) (245)Deferred acquisition costs / income liabilities 780 746 731Deferred tax * 546 333 358Other ** 154 149 128 ------- ------- -------Value of in-force business 3,626 3,325 3,507 ======= ======= ======= Shareholders' equityShareholders' equity on the IFRS basis 3,793 3,398 3,671Purchased interests in long term business (24) (31) (24)Long term in-force business asset 2,404 2,324 2,535 ------- ------- -------Shareholders' equity on the EEV basis 6,173 5,691 6,182 ======= ======= ======= * Deferred tax represents all tax which is expected to be paid under current legislation, including tax which would arise if shareholders' assets were eventually distributed.** Other relates primarily to the different treatment of sterling reserves and other long term reserves under EEV compared with IFRS.================================================================================ Legal & General Group Plc P17Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------16. Borrowings At 30.6.05 At 30.6.04 At 31.12.04 Restated Restated £m £m £mSubordinated borrowingsUndated subordinated notes (upper tier 2) 395 394 394Dated subordinated notes 2025 (lower tier 2) 406 - - ------- ------- -------Total subordinated borrowings 801 394 394 ======= ======= =======Senior borrowings2.75% Convertible bond 2006 501 486 493Medium term notes 2031-2041 597 597 597Euro commercial paper 2005 71 - -Bank loans 2005 4 2 2Accrued interest 12 11 17Non-recourse financing- Triple X 2025 295 - 275- Property partnership loans 2011 93 512 68 ------- ------- -------Total senior borrowings 1,573 1,608 1,452 ======= ======= =======Total borrowings 2,374 2,002 1,846 ======= ======= =======Total borrowings (excluding non-recourse financing) 1,986 1,490 1,503 ======= ======= ======= 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 the issue of 285.3m new ordinary shares which represents approximately 4.4% of the current issued share capital. In June 2005 the Group issued €600m of dated subordinated debt which was swappedinto sterling and the proceeds of which are intended to be used to repay part ofthe convertible bond which matures in 2006. In November 2004 a subsidiary of Legal & General America issued US$550m ofnon-recourse debt in the US domestic capital markets to meet the Regulation Triple X reserve requirements on the US term insurance business. The property partnership borrowings relate to loans secured on specificproperties. The decrease in these loans since 30 June 2004 is due to theconversion of certain property partnership interests into unit trusts which theGroup does not control. Consequently there is no longer a requirement toconsolidate these borrowings in the Group's results. ================================================================================ Legal & General Group Plc P18Notes to Financial Information - European Embedded Value BasisSix months ended 30 June 2005--------------------------------------------------------------------------------17. Shareholders' equity segmental analysis At 30.6.05 At 30.6.04 At 31.12.04 Restated Restated £m £m £mUK* 4,399 4,185 4,445Society shareholder capital** 2,049 1,877 1,973 ------- ------- -------Society shareholders' equity on an EEV basis 6,448 6,062 6,418Embedded value of international life and pensions business- USA 543 444 489- Netherlands 138 112 139- France 85 71 79 ------- ------- ------- 7,214 6,689 7,125Institutional fund management*** 445 367 390 ------- ------- ------- 7,659 7,056 7,515General insurance 161 227 247Corporate funds**** (1,647) (1,592) (1,580) ======= ======= ======= 6,173 5,691 6,182 ======= ======= =======MovementAt 1 January 6,182 5,680 5,680Related Shares:
Legal & General