Interim Results 2004 - Part 3

Legal & General Group PLC 29 July 2004 Part 3 Legal & General Group Plc P1 Consolidated Profit and Loss Account - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- Full Notes year 30.6.04 30.6.03 2003 restated restated Â£m Â£m Â£m Profit on continuing operations Life and pensions 1 215 211 443 Institutional fund management 32 25 55 General insurance 20 19 41 Other operational income 17 3 18 -------- -------- -------- Operating profit 284 258 557 Variation from longer term (26) 20 56 investment return Change in equalisation provision (4) (4) (7) Shareholder retained capital (SRC) movement 2 (170) (30) (137) -------- -------- -------- Profit on ordinary activities 84 244 469 before tax Tax charge 3 (26) (55) (65) -------- -------- -------- Profit for the financial period 58 189 404 Dividends (104) (102) (318) -------- -------- -------- Retained (loss)/profit (46) 87 86 =============================================================================== Earnings per share 4 p p p Based on operating profit after tax 3.14 2.79 6.10 Based on profit for the financial period 0.89 2.91 6.22 Diluted earnings per share 4 Based on operating profit after tax 3.08 2.75 6.00 Based on profit for the financial period 0.89 2.87 6.12 Dividend per share 1.61 1.57 4.90 =============================================================================== These financial statements were approved by the Board on 28 July 2004. The results for the six months to 30 June 2004 and 30 June 2003 are unaudited, but have been subject to a review by the auditors and constitute non statutory accounts within the meaning of Section 240 of the Companies Act 1985. They have been prepared on a basis which is consistent with the financial statements for the year ended 31 December 2003 except that the Urgent Issues Task Force abstract 38, 'Accounting for ESOP trusts' has been adopted and the shareholders' investment return of Institutional fund management has been reanalysed to provide a longer term rate of return within operating profit, 2003 comparatives have been restated accordingly. The results for year ended 2003 have been taken from the financial statements for the year ended 2003 which have been filed with the Registrar of Companies and include an 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 long term business using the Modified Statutory Solvency (MSS) basis. The Achieved Profits (AP) results are included in Part 2. =============================================================================== Legal & General Group Plc P2 Consolidated Balance Sheet - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- Notes At 30.6.04 At 30.6.03 At 31.12.03 Restated Restated Assets Â£m Â£m Â£m Investments 35,262 33,872 35,268 Assets held to cover linked 93,986 75,733 84,308 liabilities Other assets 5,931 5,575 5,349 -------- -------- -------- 135,179 115,180 124,925 ======== ======== ======== Liabilities Shareholders' funds 5 3,198 3,259 3,248 Fund for future appropriations 1,434 633 1,498 Technical provisions 126,392 107,015 117,341 Borrowings and other creditors 4,155 4,273 2,838 -------- -------- -------- 135,179 115,180 124,925 =============================================================================== Statement of Total Recognised Gains and Losses At 30.6.04 At 30.6.03 At 31.12.03 Â£m Â£m Â£m Profit for the financial period 58 189 404 Exchange losses (3) 0 (11) -------- -------- -------- Total recognised gains and losses 55 189 393 =============================================================================== Legal & General Group Plc P3 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- 1. Life and pensions operating profit Full year 30.6.04 30.6.03 2003 Â£m Â£m Â£m With-profits business 33 38 74 Non profit business 145 136 295 -------- -------- -------- UK 178 174 369 USA 26 28 57 Netherlands 10 9 17 France 1 0 0 -------- -------- -------- 215 211 443 ======== ======== ======== UK life and pensions operating profit is the accrued distributable transfer, grossed up at the corporate tax rate, and for non profit business is augmented by the distribution in respect of the intra-group subordinated debt capital held within the SRC. Profits for international life and pensions business are reported on bases consistent with MSS. 2. Change in SRC Full year 30.6.04 30.6.03 2003 Â£m Â£m Â£m Investment income 34 37 73 Interest expense and charges (1) (1) (2) Realised investment gains/(losses) 59 (13) 20 Unrealised investment (depreciation)/ (26) 93 230 appreciation -------- -------- ------- Investment return on SRC 66 116 321 Net capital invested in non profit business (91) (10) (163) Distribution of operating profit from (145) (136) (295) non profit business -------- -------- -------- SRC movement before tax (170) (30) (137) ======== ======== ======== SRC at 1 January 2,212 2,259 2,259 ******** ******** ******** SRC movement before tax : (170): : (30): : (137): Tax credit : 57 : : 15 : : 90 : ******** ******** ******** SRC movement after tax (113) (15) (47) Change in the net asset values of SRC subsidiaries 0 (1) 0 -------- -------- -------- SRC at end of period 2,099 2,243 2,212 ======== ======== ======== SRC includes intra-group subordinated debt capital of Â£602m. =============================================================================== Legal & General Group Plc P4 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- 3. Analysis of tax Full Full year year 30.6.04 30.6.04 30.6.03 30.6.03 2003 2003 Profit Tax Profit Tax Profit Tax before (charge)/ before (charge)/ before (charge)/ tax credit tax credit tax credit Profit on continuing Â£m Â£m Â£m Â£m Â£m Â£m operations UK life and pensions 178 (53) 174 (52) 369 (110) International life and pensions 37 (12) 37 (13) 74 (28) -------- -------- -------- -------- -------- -------- 215 (65) 211 (65) 443 (138) Institutional fund management 32 (10) 25 (7) 55 (16) General insurance 20 (6) 19 (6) 41 (13) Other operational income 17 1 3 1 18 6 -------- -------- -------- -------- -------- -------- Operating profit 284 (80) 258 (77) 557 (161) Variation from longer term investment return (26) (4) 20 6 56 4 Change in equalisation (4) 1 (4) 1 (7) 2 provision SRC movement (170) 57 (30) 15 (137) 90 -------- -------- -------- -------- -------- -------- Profit on ordinary activities and tax 84 (26) 244 (55) 469 (65) ======== ======== ======== ======== ======== ======== Although the SRC has been recognised as profit in these financial statements, there has been no corresponding recognition in the FSA regulatory returns, on which the taxation of life assurance business is currently based. As the payment of incremental tax on this profit depends upon a future event, the occurrence of which is under the company's control, no event giving rise to the need to provide deferred tax has occurred. Accordingly no additional deferred tax has been provided. The maximum amount of such deferred tax not provided at 30.6.04 was Â£634m (30.6.03: Â£676m; 31.12.03: Â£668m). =============================================================================== Legal & General Group Plc P5 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- 4. Earnings per share (EPS) Weighted Earnings average Profit/ per number (loss) share of shares Â£m p m Six months ended 30.6.04 Operating profit after tax on continuing operations 204 3.14 6,491 Variation from longer term investment return (30) (0.46) Change in equalisation provision (3) (0.05) Change in SRC (113) (1.74) -------- -------- -------- Profit for the period/EPS 58 0.89 6,491 Net shares under options allocable for no further consideration - - 22 Convertible bonds outstanding* - - 285 -------- -------- -------- Diluted profit for the period/EPS 58 0.89 6,798 ======== ======== ======== Six months ended 30.6.03 Operating profit after tax on continuing operations 181 2.79 6,489 Variation from longer term investment return 26 0.40 Change in equalisation provision (3) (0.05) Change in SRC (15) (0.23) -------- -------- -------- Profit for the period/EPS 189 2.91 6,489 Net shares under options allocable for no further consideration - - 9 Convertible bonds outstanding 6 (0.04) 285 -------- -------- -------- Diluted profit for the period/EPS 195 2.87 6,783 ======== ======== ======== Full year ended 31.12.03 Operating profit after tax on continuing operations 396 6.10 6,490 Variation from longer term investment return 60 0.92 Change in equalisation provision (5) (0.08) Change in SRC (47) (0.72) -------- -------- -------- Profit for the financial year/EPS 404 6.22 6,490 Net shares under options allocable for no further consideration - - 15 Convertible bonds outstanding 12 (0.10) 285 -------- -------- -------- Diluted profit for the financial year/EPS 416 6.12 6,790 ======== ======== ======== * These shares are antidilutive as they would increase the net profit per share, and are therefore ignored along with their associated revenue impact in the calculation of diluted earnings per share. =============================================================================== Legal & General Group Plc P6 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- 5. Shareholders' funds Full year 30.6.04 30.6.03 2003 Restated Restated Â£m Â£m Â£m At 1 January as originally 3,248 3,184 3,184 published Prior year adjustment in respect of UITF 38 - (13) (13) -------- -------- -------- At 1 January as restated 3,248 3,171 3,171 Total recognised gains and losses 55 189 393 Dividends (104) (102) (318) Increase in share capital/premium 0 0 1 Allocation of ESOT shares (1) 1 1 -------- -------- -------- At end of period 3,198 3,259 3,248 ======== ======== ======== Comprising: Share capital 163 163 163 Share premium 906 905 906 ESOT reserve (13) (12) (12) Profit and loss account 2,142 2,203 2,191 -------- -------- -------- 3,198 3,259 3,248 ======== ======== ======== The number of fully paid ordinary shares of 2.5p in issue at the period end was 6,505m (1H03: 6,503m; FY03: 6,504m). UITF abstract 38 'Accounting for ESOP trusts' requires that own shares held within the Employee Share Ownership Trust (ESOT) should be accounted for as a deduction from shareholders' funds rather than be disclosed as an investment as was previously required. The 2003 amounts have been restated accordingly. =============================================================================== Legal & General Group Plc P7 Notes to Financial Statements - Modified Statutory Solvency Basis Six months ended 30 June 2004 ------------------------------------------------------------------------------- 6. Segmental analysis of shareholders' funds At 30.6.04 At 30.6.03 At 31.12.03 Restated Restated Â£m Â£m Â£m UK solvency capital ******** ******** ******** SRC* : 2,099: : 2,243: : 2,212: Society shareholder capital (SSC)** : 1,892: : 1,830: : 1,905: -------- -------- -------- Society solvency capital : 3,991: : 4,073: : 4,117: General insurance : 136: : 108: : 120: ******** ******** ******** UK solvency capital 4,127 4,181 4,237 International shareholders' funds - USA 458 460 443 - Netherlands 40 31 36 - France 46 38 45 -------- -------- -------- 4,671 4,710 4,761 Institutional fund management 196 179 176 Corporate funds*** (1,669) (1,630) (1,689) -------- -------- -------- Shareholders' funds on the MSS basis 3,198 3,259 3,248 Less: Purchased interests in long term business included in above (31) (27) (29) AP long term in-force business asset 2,556 2,028 2,365 -------- -------- -------- Shareholders' funds on the AP basis 5,723 5,260 5,584 ======== ======== ======== * Includes Â£602m of intra-group subordinated debt capital attributed to the SRC. ** Includes Â£788m from the 2002 rights issue and aggregated investment returns of Â£122m (1H03: Â£65m; FY03: Â£139m). *** Includes the convertible debt of Â£519m (1H03: Â£517m; FY03: Â£518m) and Â£602m of senior debt which has been onlent to the UK Long Term Fund. =============================================================================== 7. UK Long Term Fund At 30.6.04 At 30.6.03 At 31.12.03 Â£bn Â£bn Â£bn With-profits business 25.4 24.0 25.3 Non profit business 15.4 12.9 14.3 ******** ******** ******** Sub-fund : 0.2: : 0.2: : 0.2: SRC : 2.1: : 2.2: : 2.2: ******** ******** ******** 2.3 2.4 2.4 -------- -------- -------- Value of fund 43.1 39.3 42.0 =============================================================================== Legal & General Group Plc P8 Consolidated Cash Flow Statement (excluding long term business) Six months ended 30 June 2004 ------------------------------------------------------------------------------- Full year 30.6.04 30.6.03 2003 restated restated Â£m Â£m Â£m Net cash inflow from operating activities 348 493 407 Interest paid (29) (30) (58) Tax (paid)/received (6) 6 (2) Capital expenditure - net payments - 1 - Dividends paid (216) (211) (313) ******** ******** ******** Issue of share capital : 0 : : 0 : : 1 : (Increase)/decrease in : (1): : 1 : : 1 : shares held by the ESOT : : : : : : Increase/(decrease) in borrowing : 41 : : (165): : (76): ******** ******** ******** Financing 40 (164) (74) -------- -------- -------- 137 95 (40) ======== ======== ======== Cash flows (not including long term business) were invested/(divested) as follows: Increase in cash holdings 8 8 2 Net purchase/(sale) of investments 129 87 (42) -------- -------- -------- Net investment/(divestment) 137 95 (40) ======== ======== ======== Reconciliation of profit before tax to operating cash flow Profit on ordinary activities before tax 84 244 469 Profit relating to life and pensions business (45) (181) (308) Long term business profit included in Institutional fund management (23) (18) (40) Cash received from life and pensions business 232 275 275 Cash received from Institutional fund management 28 24 24 Increase in other operating creditors 25 246 19 Other items 47 (97) (32) -------- -------- -------- Net cash inflow from operating activities 348 493 407 =============================================================================== This information is provided by RNS The company news service from the London Stock Exchange

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