8th Nov 2007 09:20
Legal & General Group PLC08 November 2007 Legal & General - Policyholder Communication As part of its ongoing capital review, Legal & General has initiated a mailingprogramme to its 880,000 with-profits policyholders to explain proposals for therestructuring of shareholder assets within the long term fund of Legal & GeneralAssurance Society Limited ("Society"). In summary, it is proposed: • To merge the 1996 Sub-Fund, which wholly comprises shareholder assets(£316m at 30 June 2007), with shareholder retained capital ("SRC") within thelong term fund. • To establish alternative capital support for the with-profits fund.This will initially comprise £500m of shareholders' assets within Society andwill gradually reduce to zero over a period not exceeding ten years. • To remove the formula which currently determines distributions toshareholders from the non profit part of the long term fund, including SRC.This would provide greater flexibility on the timing and amount of thesedistributions. To ensure our policyholders' interests are properly protected, we have discussedthese proposed changes with the FSA and have also obtained an independentreview. The expected date for implementation is 31 December 2007. Notes to Editors Policyholder documentation can be found on our website atwww.legalandgeneral.com/with-profits. Legal & General's with-profits business Legal & General's with-profits fund is one of the strongest in the UK market andhas delivered excellent performance for customers over recent years. We investsome £18 billion (as at 30 June 2007) for our with-profits customers. A further£1 billion of assets (as at 30 June 2007), known as the with-profits estate,provide additional security for with-profits customers. The fund is managedwith the objective of ensuring that it does not need additional capital fromoutside the with-profits fund. The with-profits estate covered the publishedregulatory capital requirement five times at 30 June 2007. Why are these changes being made? Following recent regulatory changes, it is no longer necessary to maintain thecurrent capital structure of Society in order to protect our customers'interests. We believe that the proposed changes ensure that our customers'interests are protected whilst putting in place a more efficient capitalstructure. What is the "1996 Sub-Fund"? The 1996 Sub-Fund is a part of the capital structure of Society which comprisesshareholder assets. Society's Directors have the ability in certaincircumstances to use some of the investment return on these assets to supportwith-profits bonuses. Although Society's Directors had the ability to use 1996Sub-Fund assets in this way, this has not been necessary in the past and we donot expect that it would have been needed in future. Is this an estate attribution exercise? No. The proposed changes relate to the restructuring of shareholder assetsonly. Do these proposals affect the with-profits estate? The protection provided for our with-profits customers by the with-profitsestate would not be changed as a result of these proposals. What is the impact on your capital position? The merger of the 1996 sub-fund with other shareholder assets and theinstitution of the new capital support for the with-profits business areexpected to have no impact on Society's regulatory surplus capital or theGroup's IGD surplus capital. How is the "formula" currently calculated? The formula is based on the value of the UK non profit life and pensionsbusiness. It is described in detail on pages 66 and 67 of our 2006 AnnualReport & Accounts. In 2006, the transfer to shareholders' funds made under thisbasis was £272m net of tax. Capital review - progress to date November 2006: • Set out the framework for the capital review. • Introduced balanced scorecard measures for capital management toenable analysts and investors to monitor Legal & General's financial strength. December 2006: • Ceded the non-linked non profit pensions and annuity business ofSociety to a new, wholly owned, reinsurance subsidiary, LGPL. • Implemented the FSA's Policy Statement 06/14 across its UK individualprotection business. • Reviewed the asset liability matching policy for annuity businessduring 2006 and made a number of investment changes to achieve a closer assetliability match. March 2007: • Updated the market on our balanced scorecard. May 2007: • Issued £600m Innovative tier 1 perpetual capital securities. July 2007: • Updated the market on our balanced scorecard. • Announced and began a £1billion on-market share buyback. November 2007: • Converted Legal & General Pensions Limited to an Insurance SpecialPurpose Vehicle. About Legal & General Legal & General Group Plc is a leading UK risk, wealth and investment company.Founded over 170 years ago, Legal & General today provides life assurance andother financial protection products, annuities and long-term savings productsincluding ISA's and pensions. With over £250 billion in funds under management,it is also the largest investor for UK pension funds. Legal & General has over5.5 million UK customers. Our products are sold through over 30 bank andbuilding society relationships, through Independent Financial Advisers and alsodirectly to customers. Legal & General Assurance Society Limited, our principaloperating company, is one of Europe's top rated life companies for financialstrength, with an AA+ rating from Standard & Poor's and Aa1 from Moody's. Enquiries to: Investors:Jonathan Maddock, Head of Investor Relations 020 3124 2150Nicola Marshall, Investor Relations Manager 020 3124 2151 Media:John Godfrey, Group Communications Director 020 3124 2090Anthony Carlisle, Citigate Dewe Rogerson 07973 611888 Financial Calendar: Q4 2007 New business results 24 January 20082007 Preliminary results 18 March 2008Q1 2008 New business results 24 April 20082008 AGM 14 May 20082008 Interim and new business results 5 August 2008Q3 2008 New business results 23 October 2008Q4 2008 New business results 29 January 2009 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. Bytheir 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. As aresult, 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Legal & General