FY 2006 New Business Results

Legal & General Group PLC 25 January 2007 LEGAL & GENERAL GROUP PLC Stock Exchange Release 25 January 2007 2006 Full year new business results Highlights: • £1.8bn APE(1) worldwide new business - up 42% • £1.7bn APE UK new business - up 46% • £11bn(2) new UK savings premiums • £1bn new Bulk Purchase Annuities premiums • £21bn new investment management business Tim Breedon, Group Chief Executive, said: 'Legal & General achieved impressive worldwide new business growth of 42% to £1.8bn APE in 2006. Our UK operations contributed £1.7bn APE - up 46% over the previous year - and finished the year strongly, with a fourth quarter increase of 79% on the corresponding period in 2005. 'Legal & General's UK Savings business attracted nearly £11bn in insurance bond, pension and unit trust new premiums during 2006 - £4bn of which was received in the final quarter alone. Individual protection sales grew by 22% during the year and by over 30% in the fourth quarter against the same period in 2005, supported by a healthy UK housing market and by the success of our Pensions Term Assurance product. Individual annuity sales improved strongly in the second half of 2006 and our Bulk Annuities business recorded its first ever £1bn year. 'Britain's financial services industry is in good shape and Legal & General is well positioned in a number of markets which have attractive long-term growth prospects. Demographics and increasing household wealth are driving growth in savings products. Our continued investment in systems and expertise enables us to gain further competitive advantage in our market- leading individual protection business. Developments in the corporate market favour Legal & General's positions in defined contribution pensions, bulk annuities and group risk, while our institutional pension fund management business continues to reap the rewards of a business model based on scalability, service quality and the provision of simple, value-for-money products delivering reliable investment performance. 'By working in partnership with other quality brands and leading independent intermediaries, we are harnessing the power of scale in the financial services arena. With scale comes the opportunity to continue to invest in infrastructure and people in a way which stimulates further profitable growth. We aim to ensure that our customers, our distribution partners and our shareholders all continue to benefit from our focus on building the leading UK savings, investment and life assurance group.' (1) 'Annual Premium Equivalent' comprises new annual premiums together with 10% of single premiums (2) Includes the sum of annual and single premiums New business (APE £m) 2006 Full year 2005 Full year % change Q4 2006 Q4 2005 % change ________________________________________________________________________________________________________________ UK new business Protection and annuities: - Individual protection 167 137 22 45 34 32 - Group risk 64 71 (10) 14 12 17 - Individual annuities 71 66 8 24 7 243 - Bulk purchase annuities 103 88 17 29 33 (12) ________________________________________________________________________________________________________________ 405 362 12 112 86 30 Savings: - Unit linked bonds 261 208 25 80 60 33 - Pensions - stakeholder and other non profit 190 152 25 51 39 31 - Retail investments* 664 315 111 231 67 245 ________________________________________________________________________________________________________________ 1,115 675 65 362 166 118 With-profits business: 217 150 45 50 40 25 ________________________________________________________________________________________________________________ Total UK new business 1,737 1,187 46 524 292 79 ________________________________________________________________________________________________________________ International new business 105 109 (4) 24 25 (4) ________________________________________________________________________________________________________________ Worldwide new business 1,842 1,296 42 548 317 73 ________________________________________________________________________________________________________________ Investment management (£m) 20,650 17,134 21 5,961 6,928 (14) ________________________________________________________________________________________________________________ * Includes wholesale transfers of £259m APE (FY 2006); £58m APE (FY 2005); £127m (Q4 2006); £0m APE (Q4 2005) UK new business - up 46% to £1,737m APE Protection and annuities - up 12% to £405m APE Protection In the individual protection market, our leading position was strengthened further in 2006 with a 22% increase in new business to £167m APE (2005: £137m APE). Fourth quarter volumes grew by 32% to £45m APE (Q4 2005: £34m APE). In 2006, we opened a new underwriting office in Edinburgh, deployed our latest generation of intelligent underwriting systems and extended our range of distribution partners. There was some slowdown in activity in the group risk market during the year as advisers and customers focused on issues surrounding Pensions Simplification and the new Age Discrimination legislation. Against this backdrop, 2006 volumes were lower at £64m APE (2005: £71m APE), although sales were up 17% in the fourth quarter at £14m APE (Q4 2005: £12m APE). Annuities Sales of individual annuities in the second half of the year of £50m APE significantly exceeded those in the first half of the year (H1 2006: £21m APE). As bond yields improved and competitor activity subsided, we were able to improve our market position whilst maintaining pricing discipline. Fourth quarter sales of individual annuities more than tripled to £24m APE (Q4 2005: £7m APE), bringing the total for the year to £71m APE (2005: £66m APE). Individual annuities accounted for 49% of total non profit annuity sales in the second half of the year (H1 2006: 30%; FY 2006: 41%; FY 2005: 43%). In 2006, for the first time, Legal & General wrote over £1bn of single premium bulk purchase annuity business (2005: £877m). The average policy size written during the year was under £4m of single premium, highlighting Legal & General's capabilities in administering large volumes of policies. Fourth quarter sales were £290m of single premium, representing a decrease of 12% against a very strong comparator (Q4 2005: £328m) but an increase of 19% over the third quarter (Q3 2006: £244m). Whilst we saw some evidence of increased competition in the latter stages of 2006, we continued to write good volumes of business at attractive levels of return. Savings(3) - up 65% to £1,115m APE Sales of unit linked bonds increased by 25% to £261m APE during 2006 (2005: £208m APE). Volumes in the fourth quarter of £80m APE (Q4 2005: £60m APE) were driven predominantly by strong sales of our Portfolio Bond. These were stimulated by the success of an additional unit allocation promotion for customers, aimed at encouraging bond applications processed on-platform. During 2006, activity in the pensions arena was stimulated by A-Day as individuals sought advice in the new tax environment. New non profit pensions business grew by 25% during 2006 to £190m APE (2005: £152m APE) and by 31% in the fourth quarter to £51m (Q4 2005: £39m APE). We continued to focus on opportunities in the pensions transfer and corporate schemes segments, and enhanced our wrap proposition with the launch of our SIPP in April. Taking into account pensions business written in the with-profits part of the fund (see below), total pensions sales for the full year 2006 were £391m APE, representing an increase of 40% against 2005 (£279m APE). Total sales of retail investment products more than doubled, from £315m APE in 2005 to £664m APE in 2006, including £259m APE of wholesale unit trust transfers (2005: £58m APE). In the fourth quarter, sales of £231m APE (Q4 2005: £67m APE) benefited from a £127m APE wholesale transfer. With-profits new business - up 45% to £217m APE Strong growth in sales of our pension products (see above) was the main driver behind the 45% increase in with-profits business during the year to £217m APE (2005: £150m APE). This includes those unit linked contracts which offer a with-profits option. With-profits bond sales continued to decline to £8m APE (2005: £17m APE). International new business - down 4% to £105m APE Total international new business sales in 2006 decreased by 4% in sterling terms to £105m APE (2005: £109m APE). In local currency terms, sales in our US business remained broadly stable at $77m APE (2005: $75m APE), as did sales in the Netherlands at €43m APE (2005: €42m APE). In France, total APE fell by 12% in 2006 to €50m (2005: €57m APE), mainly as a result of lower group protection sales, although fourth quarter volumes were 20% ahead of the prior year at €12m APE (Q4 2005: €10m APE). Investment management - new business up 21% to £21bn Legal & General Investment Management (LGIM) achieved a record £21bn of new business in 2006 (2005: £17bn) and £6bn in the fourth quarter (Q4 2005: £7bn). Over £10bn of new business was received from existing clients, underscoring the strength of LGIM's core franchise and its focus on excellence in customer service. £2bn was received from non pension fund institutions. During the year, we established a US presence in investment management, LGIM America, which will provide US fixed income expertise to complement LGIM's UK based fixed income skills. Significant progress was also made in developing our Structured Solutions capabilities. LGIM had over £4bn of Structured Solutions assets managed on behalf of third parties as at 31 December 2006. Total funds under management increased by 14% to £233bn (31 December 2005: £204bn), reflecting strong new business flows, rising market values and favourable persistency. (3) Savings business not written in the with-profits part of the fund Outlook We remain confident in the prospects for the UK market, with above trend economic growth and favourable demographics. Individuals are continuing to increase savings and we believe the pensions A-Day reforms will continue to support the market into 2007. The significant impact of investment platforms and the move to open architecture give us confidence in Legal & General's prospects in the UK savings market. Our strong product set, supported by our high quality infrastructure and broad distribution, positions us well for further success. The recent increase in interest rates may lead to some caution in the housing market. Coupled with the removal of Pensions Term Assurance at the end of 2006, this has the potential to dampen growth prospects in individual protection markets. However, we expect to build further on our already strong position in this segment. We believe that the underlying drivers of growth in the individual annuities markets are compelling. We continue to see opportunities for a significant expansion in the bulk annuities segment, driven by the regulatory, financial and accounting considerations of pension fund trustees and sponsoring companies. Our confidence in our core markets is reflected in our ongoing development plans in 2007, as we continue to drive the efficient, scalable, customer orientated business model which has proved so successful over many years. Enquiries to: Investors: Jonathan Maddock, Head of Investor Relations 020 7528 6298 Nicola Marshall, Investor Relations Manager 020 7528 6263 Media: John Morgan, Media Relations Director 020 7528 6213 Anthony Carlisle, Citigate Dewe Rogerson 07973 611888 Notes: A copy of this announcement can be found in the News and Results section of our shareholder web site at http://investor.legalandgeneral.com/releases.cfm Issued share capital at 31 December 2006 was 6,532,319,378 shares of 2.5p each. Financial Calendar: ________________________________________________________________________________ 2006 Preliminary results 14 March 2007 ________________________________________________________________________________ Q1 2007 New business results 25 April 2007 ________________________________________________________________________________ Annual General Meeting 16 May 2007 ________________________________________________________________________________ 2007 Interim results and Q2 2007 New business results 26 July 2007 ________________________________________________________________________________ Q3 2007 New business results 17 October 2007 ________________________________________________________________________________ Q4 2007 New business results 24 January 2008 ________________________________________________________________________________ Forward-looking statements: This document may contain certain forward-looking statements with respect to certain of Legal & General Group Plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Legal & General Group Plc's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the impact of competition, the timing impact and other uncertainties of future mergers or combinations within relevant industries. As a result, Legal & General Group Plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Legal & General Group Plc's forward-looking statements. Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make. Legal & General Group Plc Unaudited New Business Premiums Twelve months to 31 December 2006 WORLDWIDE NEW BUSINESS Twelve months to 31 December Twelve months to 31 December 2005 2006 Annual Single APE Annual Single APE Increase/ premiums premiums premiums premiums (decrease) £m £m £m £m £m £m % __________________________________________________________________________________________________________________ Protection - Individual protection 167 - 167 137 - 137 22% - Group risk 64 - 64 71 - 71 (10%) __________________________________________________________________________________________________________________ 231 - 231 208 - 208 11% Annuities - Individual - 702 71 - 662 66 8% - Bulk purchase - 1,033 103 - 877 88 17% __________________________________________________________________________________________________________________ - 1,735 174 - 1,539 154 13% Savings - Unit linked bonds - 2,612 261 - 2,082 208 25% - Individual pensions - stakeholder and other non profit 123 663 189 97 547 152 24% - DWP rebates - 5 1 - 2 - N/A __________________________________________________________________________________________________________________ 123 3,280 451 97 2,631 360 25% With-profits - Annuities - 83 8 - 60 6 33% - Individual pensions 118 651 183 73 379 110 66% - DWP rebates - 155 16 - 116 12 33% - Group pensions 2 4 2 4 5 5 (60%) - Bonds - 83 8 - 169 17 (53%) __________________________________________________________________________________________________________________ 120 976 217 77 729 150 45% __________________________________________________________________________________________________________________ 474 5,991 1,073 382 4,899 872 23% __________________________________________________________________________________________________________________ UK retail investment business - Unit trusts 2 5,945 596 1 2,577 259 130% - ISAs 18 498 68 14 422 56 21% __________________________________________________________________________________________________________________ 20 6,443 664 15 2,999 315 111% __________________________________________________________________________________________________________________ Total UK new business 494 12,434 1,737 397 7,898 1,187 46% __________________________________________________________________________________________________________________ - USA 42 - 42 42 - 42 0% - Netherlands 12 170 29 13 158 29 0% - France 12 195 32 17 191 36 (11%) __________________________________________________________________________________________________________________ 66 365 103 72 349 107 (4%) France retail investment business - 25 2 - 25 2 0% __________________________________________________________________________________________________________________ Total international new business 66 390 105 72 374 109 (4%) __________________________________________________________________________________________________________________ Total worldwide new business 560 12,824 1,842 469 8,272 1,296 42% __________________________________________________________________________________________________________________ Legal & General Group Plc Unaudited New Business Premiums Twelve months to 31 December 2006 WORLDWIDE NEW BUSINESS APE QUARTERLY PROGRESSION 3 months 3 months 3 months 3 months 3 months 3 months 3 months 3 months to to to to to to to to 31.12.06 30.09.06 30.06.06 31.03.06 31.12.05 30.09.05 30.06.05 31.03.05 £m £m £m £m £m £m £m £m __________________________________________________________________________________________________________________ Protection - Individual protection 45 44 39 39 34 36 35 32 - Group risk 14 17 16 17 12 18 19 22 __________________________________________________________________________________________________________________ 59 61 55 56 46 54 54 54 Annuities - Individual 24 26 16 5 7 13 29 17 - Bulk purchase 29 24 22 28 33 22 6 27 __________________________________________________________________________________________________________________ 53 50 38 33 40 35 35 44 Savings - Unit linked bonds 80 60 60 61 60 54 51 43 - Individual pensions - stakeholder and other non profit 50 48 50 41 39 41 41 31 - DWP rebates 1 - - - - - - - __________________________________________________________________________________________________________________ 131 108 110 102 99 95 92 74 __________________________________________________________________________________________________________________ With-profits - Annuities 1 3 2 2 2 2 1 1 - Individual pensions 45 49 48 41 26 27 30 27 - DWP rebates 2 10 2 2 8 3 - 1 - Group pensions - 1 - 1 1 2 1 1 - Bonds 2 2 2 2 3 4 4 6 __________________________________________________________________________________________________________________ 50 65 54 48 40 38 36 36 __________________________________________________________________________________________________________________ 293 284 257 239 225 222 217 208 UK retail investment business - Unit trusts 217 78 191 110 58 69 68 64 - ISAs 14 13 27 14 9 9 27 11 __________________________________________________________________________________________________________________ 231 91 218 124 67 78 95 75 __________________________________________________________________________________________________________________ Total UK new business 524 375 475 363 292 300 312 283 __________________________________________________________________________________________________________________ - USA 10 11 10 11 12 11 9 10 - Netherlands 7 6 7 9 7 8 6 8 - France 7 5 13 7 6 7 17 6 __________________________________________________________________________________________________________________ 24 22 30 27 25 26 32 24 France retail investment business - 1 1 - - 1 1 - __________________________________________________________________________________________________________________ Total international new business 24 23 31 27 25 27 33 24 __________________________________________________________________________________________________________________ Total worldwide new business 548 398 506 390 317 327 345 307 __________________________________________________________________________________________________________________ Legal & General Group Plc Unaudited New Business Premiums Twelve months to 31 December 2006 INVESTMENT MANAGEMENT Twelve months to 31 December Increase/ 2006 2005 (decrease) £m £m % __________________________________________________________________________________________________________________ UK Managed Funds - Pooled funds 17,878 14,778 21% - Segregated funds 608 240 153% __________________________________________________________________________________________________________________ 18,486 15,018 23% UK Other 2,164 2,116 2% __________________________________________________________________________________________________________________ Total new funds 20,650 17,134 21% __________________________________________________________________________________________________________________ INVESTMENT MANAGEMENT QUARTERLY PROGRESSION 3 months 3 months 3 months 3 months 3 months 3 months 3 months 3 months to to to to to to to to 31.12.06 30.09.06 30.06.06 31.03.06 31.12.05 30.09.05 30.06.05 31.03.05 £m £m £m £m £m £m £m £m __________________________________________________________________________________________________________________ UK Managed Funds - Pooled funds 5,801 3,814 4,500 3,763 5,129 2,939 3,396 3,314 - Segregated funds 1 8 538 61 94 41 63 42 __________________________________________________________________________________________________________________ 5,802 3,822 5,038 3,824 5,223 2,980 3,459 3,356 UK Other 159 109 157 1,739 1,705 351 3 57 __________________________________________________________________________________________________________________ Total new funds 5,961 3,931 5,195 5,563 6,928 3,331 3,462 3,413 __________________________________________________________________________________________________________________ INTERNATIONAL OPERATIONS IN LOCAL CURRENCY Twelve months to 31 December Twelve months to 31 December 2005 Increase/ 2006 Annual Single APE Annual Single APE (decrease) premiums premiums premiums premiums % __________________________________________________________________________________________________________________ USA ($m): 77 - 77 75 - 75 3% Netherlands (€m): 18 249 43 19 231 42 2% France (€m): - Life and pensions 17 288 46 25 278 53 (13%) - Unit trusts - 36 4 - 37 4 0% __________________________________________________________________________________________________________________ UK INDIVIDUAL APE BY CHANNEL Twelve months to 31 December 2006 Annual Single Total APE % of £m £m £m total __________________________________________________________________________________________________________________ Independent financial advisers 289 6,368 926 59% Tied 119 4,843 603 39% Direct 20 186 39 2% __________________________________________________________________________________________________________________ Total 428 11,397 1,568 100% __________________________________________________________________________________________________________________ Twelve months to 31 December 2005 Annual Single Total APE % of £m £m £m total __________________________________________________________________________________________________________________ Independent financial advisers 205 4,624 667 65% Tied 103 2,237 327 32% Direct 15 155 31 3% __________________________________________________________________________________________________________________ Total 323 7,016 1,025 100% __________________________________________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock Exchange

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