26th Jul 2007 07:00
Legal & General Group PLC26 July 2007 International Financial Reporting Standards Page 39=========================================== Operating profit income statement---------------------------------Six months ended 30 June 2007----------------------------- Full year 30.06.07 30.06.06 31.12.06 Notes £m £m £m-----------------------------------------------------------------------------------------------------------------------From continuing operationsLife and pensions 4.01 290 252 592Investment management 4.02 73 65 133General insurance 4.03 (38) 2 9Other operational income 4.04 17 15 18-----------------------------------------------------------------------------------------------------------------------Operating profit 342 334 752Variation from longer term investment return 4.05 21 7 63Contribution from UK non profit business 4.06 119 39 1,136Property income attributable to minority interests 17 21 67-----------------------------------------------------------------------------------------------------------------------Profit from continuing operations before tax attributable toequity holders 499 401 2,018Tax attributable to equity holders 4.07 (170) (124) (387)-----------------------------------------------------------------------------------------------------------------------Profit from ordinary activities after tax 329 277 1,631Profit attributable to minority interests 4.14 (17) (21) (67)-----------------------------------------------------------------------------------------------------------------------Profit attributable to equity holders 312 256 1,564======================================================================================================================= p p p-----------------------------------------------------------------------------------------------------------------------Earnings per share 4.08Based on operating profit from continuing operations after tax attributable to equity holders 3.87 3.69 8.33Based on profit attributable to equity holders of the Company 4.80 3.95 24.12 Diluted earnings per share 4.08Based on operating profit from continuing operations after taxattributable to equity holders 3.84 3.67 8.27Based on profit attributable to equity holders of the Company 4.77 3.93 23.95======================================================================================================================= This supplementary operating profit information provides further analysis of the results reported under IFRS and webelieve gives shareholders a better understanding of the underlying performance of the business. For UK life and pensions business, operating profit in a full year represents:• the distribution of profit relating to non profit and shareholder net worth, grossed up for tax. The current distribution comprises; - 7% of the embedded value of the shareholder retained capital (SRC) and Sub-fund (shareholder net worth - SNW) adjusted to remove the effect of the contingent loan (between SRC and LGPL) and the SNW of LGPL; and - 5% of the embedded value of the non profit business adjusted to remove the effect of the contingent loan between SRC and LGPL;• the shareholders' share of the with-profits surplus recognised in the year, grossed up for tax;• the subordinated debt interest on the intra-group subordinated debt included within the SRC, until it was repaid in December 2006. An analysis of the distribution of profit relating to non profit and SNW is included in Note 5.04(a). Operating profit includes a longer term investment return on shareholders', General insurance and Netherlands' fundsheld outside a long term fund. It excludes investment variances and the contribution from UK non profit business.The income statement comprises returns to shareholders and excludes policyholders' returns. ======================================================================================================================= International Financial Reporting Standards Page 40=========================================== Consolidated income statement-----------------------------Six months ended 30 June 2007----------------------------- Full year 30.06.07 30.06.06 31.12.06 Notes £m £m £m-----------------------------------------------------------------------------------------------------------------------RevenueGross written premiums 4.09 2,289 2,053 4,286Outward reinsurance premiums (255) (247) (518)Net change in provision for unearned premiums (5) (2) 7-----------------------------------------------------------------------------------------------------------------------Net premiums earned 2,029 1,804 3,775Fees from fund management and investment contracts 313 248 535Investment return 6,588 2,730 16,572Operational income 28 23 84-----------------------------------------------------------------------------------------------------------------------Total revenue 8,958 4,805 20,966-----------------------------------------------------------------------------------------------------------------------ExpensesClaims and change in insurance liabilities 1,409 1,717 1,938Reinsurance recoveries (232) (514) 1,123-----------------------------------------------------------------------------------------------------------------------Net claims and change in insurance liabilities 1,177 1,203 3,061Change in provisions for investment contract liabilities 6,325 2,511 13,878Acquisition costs 346 232 987Finance costs 80 70 153Other expenses 431 336 674Transfers to unallocated divisible surplus 74 60 284-----------------------------------------------------------------------------------------------------------------------Total expenses 8,433 4,412 19,037-----------------------------------------------------------------------------------------------------------------------Profit before income tax 525 393 1,929Income tax attributable to policyholder returns (26) 8 89-----------------------------------------------------------------------------------------------------------------------Profit from continuing operations before income tax attributable toequity holders 499 401 2,018 --------------------------------Total income tax expense : (196) : (116) : (298):Income tax attributable to policyholder returns : 26 : (8) : (89): --------------------------------Income tax attributable to equity holders (170) (124) (387)-----------------------------------------------------------------------------------------------------------------------Profit from ordinary activities after income tax 329 277 1,631======================================================================================================================= Attributable to:Minority interests 17 21 67Equity holders of the Company 312 256 1,564======================================================================================================================= Dividend distributions to equity holders of theCompany during the period 248 236 349Dividend distributions to equity holders of the Company proposedafter the period end 122 113 248======================================================================================================================= p p p-----------------------------------------------------------------------------------------------------------------------Earnings per share Based on profit from continuing operations after income taxattributable to equity holders 4.80 3.95 24.12 Diluted earnings per share Based on profit from continuing operations after income taxattributable to equity holders 4.77 3.93 23.95======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 41=========================================== Consolidated balance sheet--------------------------As at 30 June 2007------------------ At 30.06.07 At 30.06.06 At 31.12.06 Notes £m £m £m-----------------------------------------------------------------------------------------------------------------------AssetsInvestment in associates 16 16 16Plant and equipment 78 34 43Investment property 6,992 6,625 6,852Financial investments 4.11 221,860 182,428 201,430Reinsurers'share of contract liabilities 1,642 3,194 1,481Purchased interest in long term businesses 22 29 23Deferred acquisition costs 1,587 1,542 1,456Income tax recoverable - 6 12Other assets 2,436 2,086 1,622Cash and cash equivalents 6,435 3,981 4,930-----------------------------------------------------------------------------------------------------------------------Total assets 241,068 199,941 217,865======================================================================================================================= EquityShare capital 163 163 163Share premium account 926 920 923Treasury shares (42) (44) (45)Other reserves 44 22 49Retained earnings 4,424 3,191 4,335-----------------------------------------------------------------------------------------------------------------------Capital and reserves attributable to equity holders of the Company 4.12 5,515 4,252 5,425Minority interests 4.14 456 318 414-----------------------------------------------------------------------------------------------------------------------Total equity 4.15 5,971 4,570 5,839======================================================================================================================= LiabilitiesSubordinated borrowings 4.13 1,371 813 818 -------------------------------------Participating insurance contracts : 12,251 : 12,727 : 12,660 :Participating investment contracts : 7,393 : 7,438 : 7,501 :Unallocated divisible surplus : 2,277 : 1,982 : 2,178 :Value of in-force non-participating contracts : (413) : (401) : (391): -------------------------------------Participating contract liabilities 21,508 21,746 21,948 -------------------------------------Non-participating insurance contracts : 21,330 : 23,439 : 21,602 :Non-participating investment contracts : 184,441 : 143,687 : 162,016 : -------------------------------------Non-participating contract liabilities 205,771 167,126 183,618 Senior borrowings 4.13 1,332 1,682 1,607Provisions 485 484 568Deferred income liabilities 461 373 422Deferred tax liabilities 595 461 472Income tax liabilities 51 87 106Other liabilities 2,652 1,869 1,663Net asset value attributable to unit holders 871 730 804-----------------------------------------------------------------------------------------------------------------------Total liabilities 235,097 195,371 212,026-----------------------------------------------------------------------------------------------------------------------Total equity and liabilities 241,068 199,941 217,865======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 42=========================================== Consolidated statement of recognised income and expense-------------------------------------------------------Six months ended 30 June 2007----------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Fair value losses on cash flow hedges - (3) (3)Exchange differences on translation of overseas operations (1) (26) (35)Actuarial gains on defined benefit pension schemes 62 64 3Actuarial gains on defined benefit pension schemes transferred to unallocated divisible surplus (25) (28) (1)Net change in financial investments designated as available-for-sale (4) (12) 7-----------------------------------------------------------------------------------------------------------------------Income / (expense) recognised directly in equity, net of tax 32 (5) (29)Profit from ordinary activities after income tax 329 277 1,631-----------------------------------------------------------------------------------------------------------------------Total recognised income and expense 361 272 1,602======================================================================================================================= Attributable to:Minority interests 17 21 67Equity holders of the Company 344 251 1,535======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 43=========================================== Consolidated cash flow statement--------------------------------For the six months ended 30 June 2007------------------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Profit from ordinary activities after income tax 329 277 1,631Adjustments for non cash movements in net profit for the periodRealised and unrealised (gains)/losses on financial investmentsand investment properties (2,448) 961 (9,505)Investment income (3,939) (3,525) (6,630)Interest expense 80 70 153Income tax payable 196 116 298Other adjustments 21 7 46Net (increase)/decrease in operational assetsInvestments designated as held for trading or fair value throughprofit or loss (5,372) (7,679) (9,599)Investments designated as available-for-sale 29 (51) (251)Other assets (821) (1,382) 557Net increase/(decrease) in operational liabilitiesInsurance contracts (641) (86) (1,893)Transfer to unallocated divisible surplus 99 88 285Investment contracts 9,559 7,836 19,527Value of in-force non-participating contracts (22) (22) (12)Other liabilities 926 345 596-----------------------------------------------------------------------------------------------------------------------Cash used in operating activities (2,004) (3,045) (4,797)Interest paid (91) (73) (146)Interest received 1,946 1,653 3,478Income tax paid (141) (184) (315)Dividends received 1,756 1,843 3,095-----------------------------------------------------------------------------------------------------------------------Net cash flows from operating activities 1,466 194 1,315======================================================================================================================= Cash flows from investing activitiesNet acquisition of plant and equipment (43) (9) (24)Net proceeds from disposal of Ventures' investments - - 10Non-financial investments purchased - (2) (3)-----------------------------------------------------------------------------------------------------------------------Net cash flows from investing activities (43) (11) (17)=======================================================================================================================Cash flows from financing activitiesDividend distributions to equity holders of the Company during the year (248) (236) (349)Proceeds from issue of share capital 3 12 15Purchase of treasury shares (3) (9) (11)Proceeds from borrowings 1,627 367 1,062Repayment of borrowings (1,288) (322) (1,051)-----------------------------------------------------------------------------------------------------------------------Net cash flows from financing activities 91 (188) (334)----------------------------------------------------------------------------------------------------------------------- Net increase / (decrease) in cash and cash equivalents 1,514 (5) 964Exchange losses on cash and cash equivalents (9) (15) (35)Cash and cash equivalents at 1 January 4,930 4,001 4,001-----------------------------------------------------------------------------------------------------------------------Cash and cash equivalents at 30 June / 31 December 6,435 3,981 4,930======================================================================================================================= The Group's consolidated cash flow statement includes all cash and cash equivalent flows, including those relating tothe UK long term funds. ======================================================================================================================= International Financial Reporting Standards Page 44=========================================== Notes to the Financial Statements---------------------------------4.01 Life and pensions operating profit----------------------------------------- Full year 30.06.07 30.06.06 31.12.06 Notes £m £m £m-----------------------------------------------------------------------------------------------------------------------Distribution relating to non profit and SNW 5.04(a) 199 157 388Subordinated debt interest - 18 34-----------------------------------------------------------------------------------------------------------------------Non profit business 199 175 422With-profits business 50 40 95-----------------------------------------------------------------------------------------------------------------------UK 249 215 517USA 32 33 58Netherlands 4 (3) 7France 5 7 10----------------------------------------------------------------------------------------------------------------------- 290 252 592======================================================================================================================= 4.02 Investment management operating profit--------------------------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Managed pension funds 51 45 96Ventures - 2 4Property 5 4 6Retail investments 6 5 11Other income(1) 11 9 16----------------------------------------------------------------------------------------------------------------------- 73 65 133======================================================================================================================= 1.Other income in H1 07 includes £4m of profits arising from market referenced fees charged for the provision ofinvestment management services to business reinsured to LGPL. ======================================================================================================================= International Financial Reporting Standards Page 45=========================================== Notes to the Financial Statements---------------------------------4.03 General insurance operating profit, underwriting result and combined operating ratios-------------------------------------------------------------------------------------------- (a) Operating profit Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Household(1) (52) 2 (9)Other business(2) 14 - 18----------------------------------------------------------------------------------------------------------------------- (38) 2 9======================================================================================================================= 1. Household business in 2007 includes a loss of £40m as a result of flood related claims in June 2007.2. Other business in 2007 includes £6m profit following the withdrawal from the healthcare business in the firstquarter. (b) Underwriting result Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Household (59) (3) (21)Other business 11 (3) 13----------------------------------------------------------------------------------------------------------------------- (48) (6) (8)======================================================================================================================= (c) Combined operating ratio Full year 30.06.07 30.06.06 31.12.06 % % %-----------------------------------------------------------------------------------------------------------------------Household 153 104 111Other business(1) 68 110 89----------------------------------------------------------------------------------------------------------------------- 134 106 105======================================================================================================================= 1. Other business combined ratio in 2007 includes the £6m profit on the withdrawal from the healthcare business in thefirst quarter. The combined operating ratio is: -- -- : Net incurred claims Expenses + Net commission : :------------------------ + --------------------------- : x 100 : Net earned premiums Net written premiums : -- -- 4.04 Other operational income------------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Shareholders' other incomeInvestment return on ordinary shareholders' equity 90 69 139Interest expense (55) (48) (106)----------------------------------------------------------------------------------------------------------------------- 35 21 33Other operations(1) - (1) (2)Unallocated corporate and development expenses (18) (5) (13)----------------------------------------------------------------------------------------------------------------------- 17 15 18======================================================================================================================= 1. Principally the regulated mortgage network and Cofunds. ======================================================================================================================= International Financial Reporting Standards Page 46=========================================== Notes to the Financial Statements---------------------------------4.05 Variation from longer term investment return--------------------------------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Netherlands (12) (20) (18)Investment management (1) - (1)General insurance (9) (1) (7)Other operational income 43 28 89----------------------------------------------------------------------------------------------------------------------- 21 7 63======================================================================================================================= Investment return is allocated to operating profit by reference to a longer term rate of investment return for therespective invested funds. The difference between the amount allocated to operating profit and actual investment returnis the variation from longer term investment return analysed above. 4.06 Contribution from UK non profit business----------------------------------------------- Full year 30.06.07 30.06.06 31.12.06 Notes £m £m £m-----------------------------------------------------------------------------------------------------------------------Investment income 62 45 75Interest expense and charges (2) (1) (3)Realised investment gains 114 95 215Unrealised investment (losses)/gains (9) (35) 16-----------------------------------------------------------------------------------------------------------------------Investment return on SRC 165 104 303Net capital released from non profit business 5.02 153 110 1,255Distribution of operating profit from non profit business (199) (175) (422)-----------------------------------------------------------------------------------------------------------------------Contribution from UK non profit business before tax 119 39 1,136======================================================================================================================= 4.07 Analysis of tax---------------------- Profit Profit Profit before tax Tax before tax Tax before tax Tax Full year Full year 30.06.07 30.06.07 30.06.06 30.06.06 31.12.06 31.12.06 £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------From continuing operationsUK life and pensions 249 (75) 215 (65) 517 (154)International life and pensions 41 (13) 37 (14) 75 (24)----------------------------------------------------------------------------------------------------------------------- 290 (88) 252 (79) 592 (178)Investment management 73 (23) 65 (19) 133 (40)General insurance (38) 12 2 - 9 (2)Other operational income 17 8 15 3 18 8-----------------------------------------------------------------------------------------------------------------------Operating profit 342 (91) 334 (95) 752 (212)Variation from longer term investment return 21 (9) 7 4 63 (11)Contribution from UK non profit business 119 (70) 39 (33) 1,136 (164)Property income attributable to minority interests 17 - 21 - 67 ------------------------------------------------------------------------------------------------------------------------Profit from continuing operations before tax / Tax 499 (170) 401 (124) 2,018 (387)======================================================================================================================= Only the element of total tax attributable to equity holders' profit is shown explicitly in the analysis above; the taxattributable to policyholder returns is included within expenses in the operating profit income statement. In accordance with the Group's policy for attributing tax to equity holders and policyholders, the IFRS profit beforeequity holder tax from the net capital released from UK non profit business is determined by grossing up after taxamounts at the standard rate of UK corporation tax (30%). In the period to 30 June 2007, there was no current ordeferred tax charge on these profits. No deferred tax is provided at the incremental rate on the undeclared surplus in the Society LTF represented by theSRC on the grounds that, at the balance sheet date, no obligation to make a declaration of surplus actually exists andthere is no expectation that such a declaration will occur. The maximum amount of incremental tax which wouldcrystallise on such a declaration of surplus is estimated to be £295m (H1 06: £475m; FY 06: £717m). The reduction isdue to new tax legislation in the Finance Act 2007. This would charge the additional taxable profit arising from arelease of SRC, over the existing tax base, at the current corporation tax rate (30%), but would permit the excess tobe carried forward for relief in future years at the policyholders' rate (20%). ======================================================================================================================= International Financial Reporting Standards Page 47=========================================== Notes to the Financial Statements---------------------------------4.08 Earnings per share------------------------- (a) Earnings per share Profit Tax Profit Earnings Profit Tax Profit Earnings before tax charge after tax per share before tax (charge)/ after tax per share credit 30.06.07 30.06.07 30.06.07 30.06.07 30.06.06 30.06.06 30.06.06 30.06.06 £m £m £m p £m £m £m p-----------------------------------------------------------------------------------------------------------------------Operating profit fromcontinuing operations 342 (91) 251 3.87 334 (95) 239 3.69Variation from longer terminvestment return 21 (9) 12 0.18 7 4 11 0.17Contribution from UK nonprofit business 119 (70) 49 0.75 39 (33) 6 0.09-----------------------------------------------------------------------------------------------------------------------Earnings per share based on profitattributable to equity holders 482 (170) 312 4.80 380 (124) 256 3.95======================================================================================================================= Profit Tax Profit Earnings before tax charge after tax per share Full year Full year Full year Full year 31.12.06 31.12.06 31.12.06 31.12.06 £m £m £m p-----------------------------------------------------------------------------------------------------------------------Operating profit fromcontinuing operations 752 (212) 540 8.33Variation from longer terminvestment return 63 (11) 52 0.80Contribution from UK nonprofit business 1,136 (164) 972 14.99-----------------------------------------------------------------------------------------------------------------------Earnings per share based on profitattributable to equity holders 1,951 (387) 1,564 24.12======================================================================================================================= (b) Diluted earnings per share(i) Based on operating profit from continuing operations after tax Profit Number Earnings Profit Number Earnings after tax of shares(1) per share after tax of shares(1) per share 30.06.07 30.06.07 30.06.07 30.06.06 30.06.06 30.06.06 £m m p £m m p-----------------------------------------------------------------------------------------------------------------------Operating profit from continuingoperations after tax 251 6,493 3.87 239 6,478 3.69Net shares under options allocable for no further consideration - 37 (0.03) - 41 (0.02)Convertible bonds outstanding - - - 12 285 ------------------------------------------------------------------------------------------------------------------------Diluted earnings per share 251 6,530 3.84 251 6,804 3.67======================================================================================================================= Profit Number Earnings after tax of shares(1) per share Full year Full year Full year 31.12.06 31.12.06 31.12.06 £m m p-----------------------------------------------------------------------------------------------------------------------Operating profit from continuingoperations after tax 540 6,483 8.33Net shares under options allocable forno further consideration - 46 (0.06)Convertible bonds outstanding - - ------------------------------------------------------------------------------------------------------------------------Diluted earnings per share 540 6,529 8.27======================================================================================================================= (ii) Based on profit attributable to equity holders of the Company Profit Number Earnings Profit Number Earnings after tax of shares(1) per share after tax of shares(1) per share 30.06.07 30.06.07 30.06.07 30.06.06 30.06.06 30.06.06 £m m p £m m p-----------------------------------------------------------------------------------------------------------------------Profit attributable to equityholders of the Company 312 6,493 4.80 256 6,478 3.95Net shares under options allocable forno further consideration - 37 (0.03) - 41 (0.02)Convertible bonds outstanding - - - 12 285 ------------------------------------------------------------------------------------------------------------------------Diluted earnings per share 312 6,530 4.77 268 6,804 3.93======================================================================================================================= Profit Number Earnings after tax of shares(1) per share 31.12.06 31.12.06 31.12.06 £m m p-----------------------------------------------------------------------------------------------------------------------Profit attributable to equityholders of the Company 1,564 6,483 24.12Net shares under options allocable forno further consideration - 46 (0.17)Convertible bonds outstanding - - ------------------------------------------------------------------------------------------------------------------------Diluted earnings per share 1,564 6,529 23.95======================================================================================================================= The number of shares in issue at 30 June 2007 was 6,535,517,371 (H1 06: 6,527,906,573; FY 06: 6,532,261,961). 1. Weighted average number of shares. ======================================================================================================================= International Financial Reporting Standards Page 48=========================================== Notes to the Financial Statements---------------------------------4.09 Gross written premiums----------------------------- Full year 30.06.07 30.06.06 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------From continuing operationsUK life and pensions participating business 193 203 376UK life and pensions non-participating business 1,421 1,216 2,691-----------------------------------------------------------------------------------------------------------------------Total UK life and pensions 1,614 1,419 3,067USA 169 174 347Netherlands 143 147 266France 205 152 283-----------------------------------------------------------------------------------------------------------------------Total life and pensions 2,131 1,892 3,963General insuranceHousehold 122 115 240Other business 36 46 83-----------------------------------------------------------------------------------------------------------------------Total General insurance 158 161 323-----------------------------------------------------------------------------------------------------------------------Total gross written premiums 2,289 2,053 4,286======================================================================================================================= 4.10 Segmental analysis------------------------- The Group is organised into three main business segments:- Long term business (includes insurance and investment business)- Investment management- General insuranceOther operations comprise shareholders' assets, regulated mortgage network, estate agencies and corporate expenses,none of which constitute a separately reportable segment. (i) Income statement analysed by business segments Long term Investment General Other Elimination Total business manage- insurance operations of inter ment segment amountsSix months ended 30 June 2007 £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 3,234 5,443 149 242 (110) 8,958Total expenses from continuing operations 2,842 5,342 196 163 (110) 8,433Profit from continuing operations after income tax 241 50 (33) 71 - 329=======================================================================================================================Inter segment revenue (14) (30) - (66) 110 -======================================================================================================================= Six months ended 30 June 2006-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 2,469 2,067 154 225 (110) 4,805Total expenses from continuing operations 2,245 1,984 158 135 (110) 4,412Profit from continuing operations after income tax 151 45 (3) 84 - 277=======================================================================================================================Inter segment revenue - (34) - (76) 110 -======================================================================================================================= Full year ended 31 December 2006-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 8,355 12,013 315 526 (243) 20,966Total expenses from continuing operations 6,802 11,849 314 315 (243) 19,037Profit from continuing operations after income tax 1,344 93 1 193 - 1,631=======================================================================================================================Inter segment revenue (26) (40) (2) (175) 243 -======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 49=========================================== Notes to the Financial Statements---------------------------------4.10 Segmental analysis (continued)------------------------------------- (ii) Balance sheet analysed by business segments Long term Investment General Other Elimination Total business manage- insurance operations of inter ment segment amountsAs at 30 June 2007 £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------Total assets 71,901 165,220 554 4,942 (1,549) 241,068Total liabilities 68,228 164,445 418 3,555 (1,549) 235,097Total equity 3,673 775 136 1,387 - 5,971======================================================================================================================= As at 30 June 2006-----------------------------------------------------------------------------------------------------------------------Total assets 67,021 129,559 520 4,443 (1,602) 199,941Total liabilities 64,713 128,831 356 3,073 (1,602) 195,371Total equity 2,308 728 164 1,370 - 4,570======================================================================================================================= As at 31 December 2006-----------------------------------------------------------------------------------------------------------------------Total assets 69,729 144,725 534 4,519 (1,642) 217,865Total liabilities 66,053 144,000 365 3,250 (1,642) 212,026Total equity 3,676 725 169 1,269 - 5,839======================================================================================================================= (iii) Revenue and assets by geographic segments UK USA Netherlands France Elimination Total of inter segment amounts30 June 2007 £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 8,416 163 173 207 (1) 8,958Total assets 235,254 2,486 1,495 1,880 (47) 241,068======================================================================================================================= 30 June 2006-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 4,410 157 116 122 - 4,805Total assets 195,033 1,910 1,309 1,710 (21) 199,941======================================================================================================================= 31 December 2006-----------------------------------------------------------------------------------------------------------------------Total revenue from continuing operations 20,020 329 300 319 (2) 20,966Total assets 212,185 2,478 1,415 1,807 (20) 217,865======================================================================================================================= 4.11 Financial investments---------------------------- At 30.06.07 At 30.06.06 At 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Equities 125,932 101,907 112,589Unit trusts 5,147 3,166 4,190Debt securities 88,465 75,700 82,685Accrued interest 1,187 970 1,079Derivative assets 271 46 77Loans and receivables 858 639 810----------------------------------------------------------------------------------------------------------------------- 221,860 182,428 201,430======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 50=========================================== Notes to the Financial Statements---------------------------------4.12 Segmental analysis of ordinary shareholders' equity---------------------------------------------------------- At 30.06.07 At 30.06.06 At 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------SRC(1) 3,285 2,591 3,263 ------------------------------------Society shareholder capital (excluding LGPL)(2) : 501 : 2,042 : 1,307 :LGPL shareholder capital : 1,044 : - : 950 : ------------------------------------Society shareholder capital(3) 1,545 2,042 2,257----------------------------------------------------------------------------------------------------------------------- 4,830 4,633 5,520General insurance 136 164 169Netherlands 93 88 97France(4) 112 69 82-----------------------------------------------------------------------------------------------------------------------Total Society shareholders' equity 5,171 4,954 5,868USA(4) 598 556 552Investment management 361 314 311Corporate funds(5) (615) (1,572) (1,306)-----------------------------------------------------------------------------------------------------------------------Ordinary shareholders' equity 5,515 4,252 5,425======================================================================================================================= 1. At 30 June 2006, Legal & General Group Plc (Group Plc) had lent £602m of subordinated debt capital to the SRC. InH2 06, the debt capital was repaid, then re-lent to Society shareholder capital, £400m of this was lent to LGPL onsimilar terms.2. As part of ongoing capital restructuring work, Society repaid the subordinated debt capital to Group Plc in H1 07,reducing Society shareholder capital by £602m. In addition, a dividend of £400m was paid from Society to Corporatefunds. The amount lent to LGPL remains in place.3. Represents capital held outside Society's Long Term Fund and LGPL shareholder capital.4. Capital movements comprise £46m ($90m) of capital injected into the US operation and £27m (€40m) injected into theFrench operation.5. Corporate funds include investments, subordinated borrowings and senior borrowings. 4.13 Analysis of borrowings----------------------------- At 30.06.07 At 30.06.06 At 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------Subordinated borrowings6.385% Sterling perpetual capital securities 580 - -5.875% Sterling undated subordinated notes 428 429 4294.0% Euro subordinated notes 2025 363 384 389-----------------------------------------------------------------------------------------------------------------------Total subordinated borrowings 1,371 813 818=======================================================================================================================Senior borrowings2.75% Sterling convertible bond 2006 - 518 -Sterling medium term notes 2031-2041 602 602 608Euro commercial paper 114 111 370Bank loans 18 25 3Non recourse financing - US Dollar Triple X securitisation 2025 264 286 270 - US Dollar Triple X securitisation 2037 220 - 226 - Sterling property partnership loans 2011 114 140 130-----------------------------------------------------------------------------------------------------------------------Total senior borrowings 1,332 1,682 1,607=======================================================================================================================Total borrowings 2,703 2,495 2,425=======================================================================================================================Total borrowings (excluding non recourse financing) 2,105 2,069 1,799======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 51=========================================== Notes to the Financial Statements---------------------------------4.13 Analysis of borrowings (continued)----------------------------------------- Subordinated borrowingsFor regulatory purposes the sterling perpetual capital securities are treated as innovative tier I capital, thesterling undated subordinated notes as upper tier II capital and the Euro subordinated notes as lower tier II capital. 6.385% Sterling perpetual capital securitiesIn 2007, Legal & General Group Plc issued £600m of 6.385% sterling perpetual capital securities. These securities arecallable on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset tothree month LIBOR plus 1.93% per annum. Simultaneous with the issuance, the fixed coupon was swapped into six monthLIBOR plus 0.94% per annum. 5.875% Sterling undated subordinated notesThese notes are callable on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019will be reset to the prevailing five year benchmark gilt yield plus 2.33% per annum. 4.0% Euro subordinated notes 2025These notes are callable on 8 June 2015 and each year thereafter. If not called, the coupon from 8 June 2015 will be reset to a floating rate of interest based on prevailing three month Euribor plus 1.7% per annum. The proceeds wereswapped into sterling. Non recourse financingUS Dollar Triple X securitisationsThis non-recourse debt was issued by a subsidiary of Legal & General America Inc in the US capital markets to meet theTriple X reserve requirements on the US term insurance business. They are secured on the cash flows related to thisbusiness. Sterling property partnership loans 2011These loans are secured on specific properties. Convertible bondThe convertible bond matured in 2006 and was redeemed at par without being converted into ordinary shares. 4.14 Minority interests------------------------- Minority interests represent third party interests in property investment vehicles which are consolidated in theGroup's results. 4.15 Total equity------------------- Full year At 30.06.07 At 30.06.06 At 31.12.06 £m £m £m-----------------------------------------------------------------------------------------------------------------------At 1 January 5,839 4,936 4,936Total recognised income and expense 361 272 1,602Issue of ordinary share capital 3 12 15Net movements in employee share schemes and treasury shares (9) (4) (5)Dividend distributions to equity holders of the Company during the period (248) (236) (349)Movements in minority interests including disposals 25 12 62Reclassification of subordinated borrowings from equity to debt - (394) (394)Fair value loss after tax on reclassification of subordinated borrowings as debt - (28) (28)-----------------------------------------------------------------------------------------------------------------------At 30 June / 31 December 5,971 4,570 5,839======================================================================================================================= ======================================================================================================================= International Financial Reporting Standards Page 52=========================================== Notes to the Financial Statements---------------------------------4.16 Value of assets in the UK long term funds------------------------------------------------ At 30.06.07 At 30.06.06 At 31.12.06 £bn £bn £bn-----------------------------------------------------------------------------------------------------------------------With-profits business 30.1 29.4 30.1Non profit business 28.1 24.3 26.6Sub-fund 0.3 0.3 0.3SRC 3.3 2.6 3.3----------------------------------------------------------------------------------------------------------------------- 61.8 56.6 60.3======================================================================================================================= 4.17 Non-linked invested asset mix and investment return---------------------------------------------------------- : With- With- : : profits profits With- : Investment : asset non profits Non Sub- : SSC LGPL return : share par other profit SRC fund : exc. LGPL shareholderAt 30 June 2007 2007 % : % % % % % % : % %-----------------------------------------------------------------------------------------------------------------------Equities 9 : 50 5 (50) - 63 81 : 90 69Bonds (4): 28 81 127 99 3 - : - 27Property 4 : 19 2 1 - 22 15 : - -Cash 3 : 3 12 22 1 12 4 : 10 4----------------------------------------------------------------------------------------------------------------------- : 100 100 100 100 100 100 : 100 100======================================================================================================================= :Investment return (%) 4 (2) (9) (4) 6 8 : 5 4======================================================================================================================= :Invested assets (£bn) 18.1 2.4 1.6 15.0 2.4 0.3 : 0.3 1.3======================================================================================================================= All investment return percentages reflect average returns for the period. ======================================================================================================================= International Financial Reporting Standards Page 53=========================================== Notes to the Financial Statements---------------------------------4.18 Pension cost------------------- The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme aredefined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributionsto, such arrangements. At 30 June 2007, the combined after tax deficit arising from these arrangements (net of annuityobligations insured by Society) has been estimated at £75m (H1 06: £79m; FY 06: £122m). These amounts have beenrecognised in the financial statements with £45m charged against shareholder equity (H1 06: £49m; FY 06: £72m) and£30m against unallocated divisible surplus (H1 06: £30m; FY 06: £50m). 4.19 Contingent liabilities, guarantees and indemnities--------------------------------------------------------- Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The varianceof actual experience from that assumed may result in such liabilities differing from the provisions made for them.Liabilities may also arise in respect of claims relating to the interpretation of such contracts, or the circumstancesin which policyholders have entered into them (together in this paragraph "liabilities"). The extent of such liabilitiesis influenced by a number of factors including the actions and requirements of the FSA, by ombudsman rulings, byindustry compensation schemes and by court judgements. The continuing general profile and emphasis being givenby the FSA and other bodies to the suitability of the past sales of endowment policies in the context of some mortgagetransactions has led to the continuing receipt of claims from holders of endowment policies. Various Group companies receive claims and become involved in actual or threatened litigation and regulatory issues fromtime to time. Provision for liabilities continues to be made and is regularly reviewed. However, it is not possible topredict, with certainty, the extent and the timing of the financial impact to which these claims, litigation or issuesmay give rise. The relevant members of the Group nevertheless consider that each makes prudent provision, as and whencircumstances calling for such provision become clear, and that each has adequate capital and reserves to meet allreasonably foreseeable eventualities. In 1975 the Society was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee inrespect of policies issued through the ILU's Policy Signing Office on behalf of NRG Victory Reinsurance Company Ltd(Victory), a company which was then a subsidiary of the Society. In 1990, Nederlandse Reassurantie Groep Holding NV(the assets and liabilities of which have since been assumed by Nederlandse Reassurantie Groep NV under a statutorymerger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Societymay have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would notapply to policies written or renewed after the acquisition. Whether the Society has any liability as a result of theILU's requirement and, if so, the amount of its potential liability is uncertain. The Society has made no payment orprovision in respect of this matter. Group companies have given indemnities and guarantees, including interest rate guarantees, as a normal part of theiroperating activities or in relation to capital market transactions. 4.20 Foreign exchange rates----------------------------- Period end exchange rates At 30.06.07 At 30.06.06 At 31.12.06-----------------------------------------------------------------------------------------------------------------------United States Dollar 2.01 1.85 1.96Euro 1.49 1.45 1.48======================================================================================================================= 01.01.07- 01.01.06- 01.01.06-Average exchange rates 30.06.07 30.06.06 31.12.06-----------------------------------------------------------------------------------------------------------------------United States Dollar 1.97 1.79 1.84Euro 1.48 1.46 1.47======================================================================================================================= 4.21 Corporate restructure---------------------------- On 31 December 2006, the non-linked non profit pensions and annuity business of Society was ceded to a new, whollyowned, reinsurance company, LGPL. Full details of the restructuring are included in the 2006 Annual Report and Accounts. ======================================================================================================================= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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