L&G Full Year Results 2015 Part 2

RNS Number : 0690S

Legal & General Group Plc

15 March 2016

 

Legal & General Group Plc

Full Year Results 2015 Part 2

IFRS and Cash                                                                                                                                  Page 27

Operating profit

For the year ended 31 December 2015

			2015	2014
		Notes	£m	£m
From continuing operations
Legal & General Retirement (LGR)		2.02	639	428
Legal & General Investment Management (LGIM)		2.03	355	321
Legal & General Capital (LGC)		2.05	233	203
Insurance		2.02	293	370
Savings		2.02	99	105
Legal & General America (LGA)			83	56
Operating profit from divisions			1,702	1,483
Group debt costs1			(153)	(142)
Group investment projects and expenses2		2.06	(94)	(66)
Operating profit			1,455	1,275
Investment and other variances		2.07	(119)	(44)
Gains on non-controlling interests			19	7
Profit before tax attributable to equity holders			1,355	1,238
Tax expense attributable to equity holders of the company		2.16	(261)	(246)
Profit for the year			1,094	992
Profit attributable to equity holders of the company			1,075	985
			p	p
Earnings per share3		2.10	18.16	16.70
Adjusted earnings per share3,4		2.10	18.58	16.70
Diluted earnings per share3		2.10	18.04	16.54
Adjusted diluted earnings per share3,4		2.10	18.46	16.54
1. Group debt costs exclude interest on non recourse financing.
2. Group investment projects and expenses include restructuring costs of £50m (2014: £31m).
3. All earnings per share calculations are based on profit attributable to equity holders of the company.
4. Adjusted earnings per share and adjusted diluted earnings per share have been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments during the year.

This supplementary operating profit information (one of the group's key performance indicators) provides further analysis of the results reported under IFRS and the group believes it provides shareholders with a better understanding of the underlying performance of the business in the year.

LGR represents worldwide annuities (both individual and bulk purchase), longevity insurance and lifetime mortgages.

The LGIM segment represents institutional and retail investment management and workplace savings businesses.

LGC represents the medium term investment return (less expenses) on group invested assets, using assumptions applied to the average balance of group invested assets (including interest bearing intra-group balances).

Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF) sold on 31 December 2015 and Legal & General Netherlands (LGN).

Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.

The LGA segment comprises protection business written in the USA.

Following changes to the organisational structure, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the workplace savings business is now included in the LGIM segment. Workplace savings had previously been recognised in the Savings (LGAS) segment. Comparatives have been amended accordingly in line with this reclassification. The impact of the workplace savings reclassification has been to reduce LGIM 2014 operating profit by £15m, with an offsetting increase in the Savings segment's operating profit.

Operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and exceptional items. Operating profit therefore reflects longer-term economic assumptions for the Group's insurance businesses and shareholder funds, except for LGA which excludes unrealised investment returns to align with the liability measurement under US GAAP. Variances between actual and smoothed investment return assumptions are reported below operating profit. Exceptional income and expenses which arise outside the normal course of business in the year, such as merger and acquisition, start-up and closure costs, are also excluded from operating profit.

IFRS and Cash                                                                                                                                  Page 28

2.01 Reconciliation of operational cash to operating profit before tax

The table below provides an analysis of the operational cash generation by each of the Group's business segments, together with a reconciliation to operating profit before tax.
	Opera-				Changes					Operating
	tional	New	Net		in			Operating		profit/
	cash	business	cash	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	gene-	surplus/	gene-	ience	assump-	items and	national	(loss)	expense/	before
For the year ended	ration1	(strain)	ration	variances	tions	other	and other2	after tax	(credit)	tax
31 December 2015	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGR	372	45	417	13	114	(20)	-	524	115	639
LGIM3	303	(22)	281	(1)	1	(2)	-	279	76	355
- LGIM excluding workplace
savings	282	-	282	-	-	-	-	282	77	359
- Workplace savings	21	(22)	(1)	(1)	1	(2)	-	(3)	(1)	(4)
LGC	187	-	187	-	-	-	-	187	46	233
Insurance	323	25	348	(14)	(45)	(46)	(10)	233	60	293
Savings3	119	(9)	110	(9)	-	(23)	1	79	20	99
LGA	54	-	54	-	-	-	(17)	37	46	83
Total from divisions	1,358	39	1,397	(11)	70	(91)	(26)	1,339	363	1,702
Group debt costs	(122)	-	(122)	-	-	-	-	(122)	(31)	(153)
Group investment projects
and expenses	(19)	-	(19)	-	-	-	(56)	(75)	(19)	(94)
Total	1,217	39	1,256	(11)	70	(91)	(82)	1,142	313	1,455
1. Operational cash generation includes dividends remitted from LGF of £1m (2014: £2m) and LGN of £28m (2014: £29m) within the Insurance line and LGA of £54m (2014: £46m).
2. International and other includes £40m (2014: £25m) of restructuring costs (£50m before tax) (2014: £31m before tax) within the Group investment projects and expenses line.
3. LGIM includes the workplace savings business which was previously reported in Savings. Prior year comparatives have been amended.
Operational cash generation for LGR, LGIM, Insurance and Savings represents the expected surplus generated in the year from the in-force non profit annuities, workplace savings, protection and savings businesses using best estimate assumptions. The LGIM operational cash generation also includes operating profit after tax from the institutional and retail investment management businesses. The Insurance operational cash generation also includes dividends remitted from LGF and LGN and operating profit after tax from general insurance and the remaining Insurance businesses. The Savings operational cash generation also includes the shareholders' share of bonuses on with-profits business and operating profit after tax from the remaining Savings businesses.
New business surplus/strain for LGR, LGIM, Insurance and Savings represents the cost of acquiring new business and setting up regulatory reserves in respect of the new business for UK non profit annuities, workplace savings, protection and savings, net of tax. The new business surplus and operational cash generation for LGR, LGIM, Insurance and Savings exclude the required solvency margin from the liability calculation.
Net cash generation for LGR, LGIM, Insurance and Savings is defined as operational cash generation less new business strain.
Operational cash generation and net cash for LGC represents the operating profit (net of tax).
The operational cash generation for LGA represents the dividends received.
See Note 2.02 for more detail on experience variances, assumption changes and non-cash items.

IFRS and Cash                                                                                                                                  Page 29

2.01 Reconciliation of operational cash to operating profit before tax (continued)

	Opera-				Changes					Operating
	tional	New	Net		in			Operating		profit/
	cash	business	cash	Exper-	valuation	Non-cash	Inter-	profit/	Tax	(loss)
	gene-	surplus/	gene-	ience	assump-	items and	national	(loss)	expense/	before
For the year ended	ration1	(strain)	ration	variances	tions	other	and other2	after tax	(credit)	tax
31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
LGR	292	51	343	(13)	48	(32)	-	346	82	428
LGIM3	275	(29)	246	(3)	5	2	-	250	71	321
- LGIM excluding workplace
savings	262	-	262	-	-	-	-	262	74	336
- Workplace savings	13	(29)	(16)	(3)	5	2	-	(12)	(3)	(15)
LGC	162	-	162	-	-	-	-	162	41	203
Insurance	332	(5)	327	(8)	24	(50)	(6)	287	83	370
Savings3	127	(14)	113	(7)	3	(22)	(1)	86	19	105
LGA	46	-	46	-	-	-	(14)	32	24	56
Total from divisions	1,234	3	1,237	(31)	80	(102)	(21)	1,163	320	1,483
Group debt costs	(112)	-	(112)	-	-	-	-	(112)	(30)	(142)
Group investment projects
and expenses	(21)	-	(21)	-	-	-	(32)	(53)	(13)	(66)
Total	1,101	3	1,104	(31)	80	(102)	(53)	998	277	1,275
1. Operational cash generation includes dividends remitted from LGF of £2m and LGN of £29m within the Insurance line and LGA of £46m.
2. International and other includes £25m of restructuring costs (£31m before tax) within the Group investment projects and expenses line.
3. LGIM includes the workplace savings business which was previously reported in Savings.

IFRS and Cash                                                                                                                                  Page 30

2.02 Analysis of LGR, Insurance and Savings operating profit

			LGR	Insurance	Savings1	LGR	Insurance	Savings1
			2015	2015	2015	2014	2014	2014
			£m	£m	£m	£m	£m	£m
Net cash generation			417	348	110	343	327	113
Experience variances
Persistency			4	5	(2)	(3)	(3)	1
Mortality/Morbidity			18	(16)	-	13	(7)	2
Expenses			-	2	3	(3)	1	(2)
Project and development costs			(20)	(2)	(2)	(19)	(6)	(3)
Other2			11	(3)	(8)	(1)	7	(5)
Total experience variances			13	(14)	(9)	(13)	(8)	(7)
Changes to valuation assumptions
Persistency3			-	48	-	-	43	(1)
Mortality/Morbidity4			97	(20)	-	61	37	-
Expenses5			17	27	(2)	(5)	11	3
Reinsurance modelling6			-	(93)	-	-	-	-
Other			-	(7)	2	(8)	(67)	1
Total valuation assumption changes			114	(45)	-	48	24	3
Movement in non-cash items
Deferred tax			-	-	2	(11)	(3)	6
Utilisation of brought forward trading losses			(25)	(6)	-	(62)	(11)	2
Acquisition expense tax relief 7			-	(30)	(4)	-	(36)	(6)
Deferred Acquisition Costs (DAC)8			-	-	(54)	-	-	(76)
Deferred Income Liabilities (DIL)8			-	-	39	-	-	50
Other			5	(10)	(6)	41	-	2
Total non-cash movement items			(20)	(46)	(23)	(32)	(50)	(22)
Other			-	(10)	1	-	(6)	(1)
Operating profit after tax			524	233	79	346	287	86
Tax gross up			115	60	20	82	83	19
Operating profit before tax			639	293	99	428	370	105
1. Savings excludes the workplace savings business which is now reported in LGIM. Prior period comparatives have been amended. The impact on the Savings comparatives is the increase of net cash generation by £16m and the increase of operating profit by £15m. Offsetting movements have been reflected in the LGIM segment.
2. The Other LGR experience variance reflects the benefit to profit of selective longevity and asset reinsurance related to bulk annuity transactions, offset by other smaller experience variances.
3. The Insurance persistency valuation assumption change reflects continued improvement in retail protection lapse rates.
4. The mortality/morbidity valuation assumption change in LGR primarily reflects late retirement factor assumption changes and a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants. The Insurance mortality/morbidity valuation assumption change has arisen on the strengthening of the reserving basis on the Whole Life Protection product to reflect the current expectation of future mortality improvement on this business.
5. The LGR and Insurance positive expense valuation assumption changes represents the continued operational efficiency reducing the existing business cost base.
6. The reinsurance modelling for our UK protection business has been enhanced. Recent reinsurance contracts have been written on a risk premium basis (as opposed to level premium) and the model change ensures that for these treaties, sufficient prudence is being held in later years. The one-off impact reduced operating profit by £93m in 2015. This also defers a higher proportion of cash generation into the later years of these reinsurance contracts.
7. Net cash for Insurance and Savings recognises tax relief from prior year acquisition expenses, which are spread evenly over seven years under relevant 'I-E' tax legislation in the period the cash flows actually occur. In contrast, operating profit typically recognises the value of these future cash flows in the same period as the underlying expense as deferred tax amounts. The reconciling amounts arising from these items are included in the table above. Following the removal of new retail protection business from the 'I-E' tax regime, and the removal of commission from new insured savings business under the Retail Distribution Review at the end of 2012, no material amount of deferred tax assets arise on new acquisition expenses and the value of these future cash flows for post-2013 acquisition expenses have been reflected within net cash. The residual prior year acquisition expenses will run off predictably to 2018.
8. The DAC in Savings represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.

IFRS and Cash                                                                                                                                  Page 31

2.03 LGIM

							2015	2014
							£m	£m
Investment management revenue							694	645
Investment management expenses							(335)	(309)
Workplace savings operating loss							(4)	(15)
Total LGIM operating profit							355	321

2.04 General insurance operating profit and combined operating ratio 

							2015	2014
							£m	£m
General insurance operating profit1							51	59
General insurance combined operating ratio (%)2							89	87
1. The general insurance operating profit includes the underwriting result and investment return.
2. The calculation of the general insurance combined operating ratio incorporates commission and expenses as a percentage of net earned premiums.

2.05 LGC

							2015	2014
							£m	£m
Investment return							251	219
Expenses							(18)	(16)
Total LGC operating profit							233	203

2.06 Group investment projects and expenses

							2015	2014
							£m	£m
Group investment projects and central expenses							(44)	(35)
Restructuring costs							(50)	(31)
Total Group investment projects and expenses							(94)	(66)

2.07 Investment and other variances

							2015	2014
							£m	£m
Investment variance1							(57)	(8)
M&A related2							(57)	(21)
Other3							(5)	(15)
Total Investment and other variances							(119)	(44)
1. 2015 investment variance is negative, primarily driven by below expected equity performance and a defined pension benefit scheme variance of £(15)m (2014: £40m), that reflects the actuarial losses and gains and valuation differences arising on annuity assets held by defined benefit pension schemes that have been purchased from Legal & General Assurance Society Limited (Society).
2. M&A related includes gains and losses, expenses and intangible amortisation relating to acquisitions and disposals. 2015 includes the £25m net loss resulting from the disposal of subsidiary and joint venture investments during the year.
3. Other includes new business start-up costs and other non-investment related variance items.

IFRS and Cash                                                                                                                                  Page 32

Consolidated Income Statement

For the year ended 31 December 2015

			2015	2014
		Notes	£m	£m
Revenue
Gross written premiums			6,321	10,168
Outward reinsurance premiums			(1,603)	(1,122)
Net change in provision for unearned premiums			21	1
Net premiums earned			4,739	9,047
Fees from fund management and investment contracts			1,139	1,085
Investment return			5,947	40,639
Operational income			876	746
Total revenue			12,701	51,517
Expenses
Claims and change in insurance liabilities			5,080	15,071
Reinsurance recoveries			(2,466)	(975)
Net claims and change in insurance liabilities			2,614	14,096
Change in provisions for investment contract liabilities			5,615	33,385
Acquisition costs			838	873
Finance costs			186	183
Other expenses			1,893	1,748
Transfers to/(from) unallocated divisible surplus			141	(181)
Total expenses			11,287	50,104
Profit before tax			1,414	1,413
Tax expense attributable to policyholder returns			(59)	(175)
Profit before tax attributable to equity holders			1,355	1,238
Total tax expense			(320)	(421)
Tax expense attributable to policyholder returns			59	175
Tax expense attributable to equity holders		2.16	(261)	(246)
Profit for the year			1,094	992
Attributable to:
Non-controlling interests			19	7
Equity holders of the company			1,075	985
Dividend distributions to equity holders of the company during the year		2.18	701	580
Dividend distributions to equity holders of the company proposed after the year end		2.18	592	496
			p	p
Earnings per share1		2.10	18.16	16.70
Adjusted earnings per share1,2		2.10	18.58	16.70
Diluted earnings per share1		2.10	18.04	16.54
Adjusted diluted earnings per share1,2		2.10	18.46	16.54
1. All earnings per share calculations are based on profit attributable to equity holders of the company.
2. Adjusted earnings per share and adjusted diluted earnings per share have been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments during the year. Adjusted EPS is a non IFRS reporting measure.

IFRS and Cash                                                                                                                                  Page 33

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

			2015	2014
		Notes	£m	£m
Profit for the year			1,094	992
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes			47	(117)
Tax on actuarial losses on defined benefit pension schemes			(11)	23
Actuarial (losses)/gains on defined benefit pension schemes transferred to unallocated divisible surplus			(17)	47
Tax on actuarial (losses)/gains on defined benefit pension schemes transferred to unallocated divisible surplus			4	(9)
Total items that will not be reclassified to profit or loss subsequently			23	(56)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas operations			25	12
Net change in financial investments designated as available-for-sale			(64)	40
Tax on net change in financial investments designated as available-for-sale			22	(14)
Total items that may be reclassified to profit or loss subsequently			(17)	38
Other comprehensive income/(expense) after tax			6	(18)
Total comprehensive income for the year			1,100	974
Total comprehensive income attributable to:
Non-controlling interests			19	7
Equity holders of the company			1,081	967

IFRS and Cash                                                                                                                                  Page 34

Consolidated Balance Sheet

As at 31 December 2015

				2015	2014
			Notes	£m	£m
Assets
Goodwill				83	79
Purchased interest in long term businesses and other intangible assets				292	342
Deferred acquisition costs				1,887	1,936
Investment in associates and joint ventures				220	149
Property, plant and equipment				92	146
Investment property			2.15	8,082	8,152
Financial investments			2.15	354,063	360,614
Reinsurers' share of contract liabilities				4,120	2,906
UK deferred tax asset			2.16	20	54
Current tax recoverable				236	217
Other assets				3,618	2,249
Assets of operations classified as held for sale			2.13	3,409	-
Cash and cash equivalents				20,677	22,709
Total assets				396,799	399,553
Equity
Share capital			2.19	149	149
Share premium			2.19	976	969
Employee scheme treasury shares				(30)	(37)
Capital redemption and other reserves				89	117
Retained earnings				5,220	4,830
Shareholders' equity				6,404	6,028
Non-controlling interests				289	275
Total equity				6,693	6,303
Liabilities
Participating insurance contracts			2.22	5,618	6,579
Participating investment contracts			2.23	4,912	7,667
Unallocated divisible surplus				893	983
Value of in-force non-participating contracts				(184)	(208)
Participating contract liabilities				11,239	15,021
Non-participating insurance contracts			2.22	49,754	49,876
Non-participating investment contracts			2.23	278,554	288,558
Non-participating contract liabilities				328,308	338,434
Core borrowings			2.20	3,092	2,977
Operational borrowings			2.21	536	715
Provisions			2.27	1,171	1,247
UK deferred tax liabilities			2.16	137	180
Overseas deferred tax liabilities			2.16	436	434
Current tax liabilities				95	9
Payables and other financial liabilities			2.17	22,709	16,131
Other liabilities				737	963
Net asset value attributable to unit holders				18,277	17,139
Liabilities of operations classified as held for sale			2.13	3,369	-
Total liabilities				390,106	393,250
Total equity and liabilities				396,799	399,553

IFRS and Cash                                                                                                                                  Page 35

Consolidated Statement of Changes in Equity
			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the year ended 31 December 2015	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2015	149	969	(37)	117	4,830	6,028	275	6,303
Profit for the year	-	-	-	-	1,075	1,075	19	1,094
Exchange differences on translation of
overseas operations	-	-	-	25	-	25	-	25
Actuarial gains on defined benefit
pension schemes	-	-	-	-	36	36	-	36
Actuarial gains on defined benefit
pension schemes transferred to
unallocated divisible surplus	-	-	-	-	(13)	(13)	-	(13)
Net change in financial investments
designated as available-for-sale	-	-	-	(42)	-	(42)	-	(42)
Total comprehensive income/(expense)
for the year	-	-	-	(17)	1,098	1,081	19	1,100
Options exercised under
share option schemes:
- Savings related share option scheme	-	7	-	-	-	7	-	7
Shares purchased	-	-	(3)	-	-	(3)	-	(3)
Shares vested	-	-	10	(23)	-	(13)	-	(13)
Employee scheme treasury shares:
- Value of employee services	-	-	-	26	-	26	-	26
Share scheme transfers to
retained earnings	-	-	-	-	(21)	(21)	-	(21)
Dividends	-	-	-	-	(701)	(701)	-	(701)
Movement in third party interests	-	-	-	-	-	-	(5)	(5)
Currency translation differences	-	-	-	(14)	14	-	-	-
As at 31 December 2015	149	976	(30)	89	5,220	6,404	289	6,693

IFRS and Cash                                                                                                                                  Page 36

Consolidated Statement of Changes in Equity (continued)
			Employee	Capital
			scheme	redemption			Non-
	Share	Share	treasury	and other	Retained		controlling	Total
	capital	premium	shares	reserves	earnings	Total	interests	equity
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2014	148	959	(39)	57	4,517	5,642	265	5,907
Profit for the year	-	-	-	-	985	985	7	992
Exchange differences on translation of
overseas operations	-	-	-	12	-	12	-	12
Actuarial losses on defined benefit
pension schemes	-	-	-	-	(94)	(94)	-	(94)
Actuarial losses on defined benefit
pension schemes transferred to
unallocated divisible surplus	-	-	-	-	38	38	-	38
Net change in financial investments
designated as available-for-sale	-	-	-	26	-	26	-	26
Total comprehensive income
for the year	-	-	-	38	929	967	7	974
Options exercised under
share option schemes:
- Savings related share option scheme	1	10	-	-	-	11	-	11
Shares purchased	-	-	(7)	-	-	(7)	-	(7)
Shares vested	-	-	9	(17)	-	(8)	-	(8)
Employee scheme treasury shares:
- Value of employee services	-	-	-	20	-	20	-	20
Share scheme transfers
to retained earnings	-	-	-	-	(17)	(17)	-	(17)
Dividends	-	-	-	-	(580)	(580)	-	(580)
Movement in third party interests	-	-	-	-	-	-	3	3
Currency translation differences	-	-	-	19	(19)	-	-	-
As at 31 December 2014	149	969	(37)	117	4,830	6,028	275	6,303

IFRS and Cash                                                                                                                                  Page 37

Consolidated Cash Flow Statement

For the year ended 31 December 2015

			2015	2014
		Notes	£m	£m
Cash flows from operating activities
Profit for the year			1,094	992
Adjustments for non cash movements in net profit for the year
Realised and unrealised losses/(gains) on financial investments and investment properties			4,077	(30,851)
Investment income			(9,760)	(9,205)
Interest expense			186	183
Tax expense			320	421
Other adjustments			(70)	87
Net (increase)/decrease in operational assets
Investments held for trading or designated as fair value through profit or loss			1,007	5,931
Investments designated as available-for-sale			158	225
Other assets			(2,594)	(151)
Net increase/(decrease) in operational liabilities
Insurance contracts			(1,083)	9,228
Transfer to/(from) unallocated divisible surplus			(90)	(222)
Investment contracts			(9,524)	10,156
Value of in-force non-participating contracts			24	40
Other liabilities			6,645	9,811
Cash used in operations			(9,610)	(3,355)
Interest paid			(186)	(203)
Interest received			5,286	4,857
Tax paid1			(244)	(76)
Dividends received			3,931	4,264
Net cash flows (used in)/generated from operating activities			(823)	5,487
Cash flows from investing activities
Net acquisition of plant, equipment and intangibles			(24)	(80)
Acquisitions2		2.11	(5)	(38)
Disposal of subsidiaries3		2.12	(82)	56
Investment in joint ventures			(71)	(77)
Net cash flows from investing activities			(182)	(139)
Cash flows from financing activities
Dividend distributions to ordinary equity holders of the company during the year		2.18	(701)	(580)
Proceeds from issue of ordinary share capital			7	11
Purchase of employee scheme shares			(8)	(2)
Proceeds from borrowings			697	674
Repayment of borrowings			(527)	(181)
Net cash flows used in financing activities			(532)	(78)
Net (decrease)/increase in cash and cash equivalents			(1,537)	5,270
Exchange losses on cash and cash equivalents			(106)	(15)
Cash and cash equivalents at 1 January			22,709	17,454
Cash and cash equivalents (before reallocation of held for sale cash)			21,066	22,709
Cash and cash equivalents classified as held for sale		2.13	(389)	-
Cash and cash equivalents at 31 December			20,677	22,709
1. Tax comprises UK corporation tax paid of £128m (2014: £29m), overseas corporate taxes of £36m (2014: £24m) and withholding tax of £80m (2014: £23m).
2. Net cash flows from acquisitions includes cash paid of £5m (2014: £38m) less cash and cash equivalents acquired of £nil (2014: £nil).
3. Net cash flows from disposals includes cash received of £242m (2014: £56m) less cash and cash equivalents disposed of £324m (2014: £nil).
The group's Consolidated Cash Flow Statement includes all cash and cash equivalent flows, including £856m (2014: £1,082m) relating to the with-profit fund policyholders and £16,116m (2014: £18,895m) relating to unit linked policyholders.

IFRS and Cash                                                                                                                                  Page 38

2.08 Basis of preparation

The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union, and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS. The group financial statements also comply with IFRS and interpretations by the IFRS Interpretations Committee as issued by the IASB and as adopted by the European Union. The group financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, available-for-sale financial assets and financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.

The group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The accounting policies have been consistently applied to all years presented.

Financial assets and financial liabilities are disclosed gross in the balance sheet unless a legally enforceable right of offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the income statement unless required or permitted by any accounting standard or interpretations by the IFRS Interpretations Committee.

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the group's foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the group's foreign operations are translated into sterling, the group's presentation currency, at the closing rate at the date of the balance sheet. The income and expenses for each income statement are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders' equity.

Use of estimates

The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the consolidated balance sheet and income statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current circumstances and future events and actions, actual results may differ from those estimates, possibly significantly. This is particularly relevant for the determination of fair values of investment property and unquoted and illiquid financial investments; the estimation of deferred acquisition costs; tax balances and the estimation of insurance and investment contract liabilities. The basis of accounting for these areas, and the significant judgements used in determining them, are outlined in the respective notes to the financial statements.

Key technical terms and definitions

The report refers to various key performance indicators, accounting standards and other technical terms. A comprehensive list of these definitions is contained within the glossary of the group's 2015 Annual Report and Accounts.

2.09 Segmental analysis

Reportable segments

The group has six reportable segments comprising LGR, LGIM, LGC, Insurance, Savings and LGA. Central group expenses and debt cost are reported separately.

LGR represents annuities (both individual and bulk purchase), longevity insurance and lifetime mortgages.

The LGIM segment represents institutional and retail investment management, and workplace savings businesses.

The LGC segment includes shareholders' equity supporting the non profit LGR, Insurance and Savings businesses held within Society, and capital held by the group's treasury function. LGC and group expenses also incorporate inter-segmental eliminations, consolidated unit trusts and property partnerships managed on behalf of clients, which do not constitute a separately reportable segment.

Following changes to the organisational structure, Insurance and Savings are now reported as separate segments. Previously, Insurance and Savings had been reported together as the LGAS segment. In addition, the workplace savings business is now included in the LGIM segment. Workplace savings had previously been recognised in the Savings segment. Comparatives have been amended in line with this reclassification. The impact of the workplace savings reclassification has been to reduce LGIM 2014 operating profit by £15m, with an offsetting increase in the Savings segment's operating profit.

Insurance represents business in retail protection, group protection, general insurance, networks, Legal & General France (LGF), sold on 31 December 2015, and Legal & General Netherlands (LGN).

Savings represents business in platforms, SIPPs, mature savings, with-profits and emerging markets.

The LGA segment represents protection business written in the USA.

Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.

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2.09 Segmental analysis (continued)
(a) Profit/(loss) for the year
							Group
							expenses
							and debt
	LGR	LGIM	LGC	Insurance	Savings	LGA	costs	Total
For the year ended 31 December 2015	£m	£m	£m	£m	£m	£m	£m	£m
Operating profit/(loss)	639	355	233	293	99	83	(247)	1,455
Investment and other variances1	79	(20)	(116)	(40)	3	(13)	(12)	(119)
Gains attributable to non-controlling
interests	-	-	-	-	-	-	19	19
Profit/(loss) before tax attributable to
equity holders	718	335	117	253	102	70	(240)	1,355
Tax (expense)/credit attributable to equity
holders of the company	(131)	(74)	(9)	(61)	(15)	(41)	70	(261)
Profit/(loss) for the year	587	261	108	192	87	29	(170)	1,094
							Group
							expenses
							and debt
	LGR	LGIM2	LGC	Insurance	Savings2	LGA	costs	Total
For the year ended 31 December 2014	£m	£m	£m	£m	£m	£m	£m	£m
Operating profit/(loss)	428	321	203	370	105	56	(208)	1,275
Investment and other variances	67	(7)	(37)	12	(24)	(13)	(42)	(44)
Gains attributable to non-controlling
interests	-	-	-	-	-	-	7	7
Profit/(loss) before tax attributable to
equity holders	495	314	166	382	81	43	(243)	1,238
Tax (expense)/credit attributable to equity
holders of the company	(97)	(68)	(9)	(90)	(14)	(19)	51	(246)
Profit/(loss) for the year	398	246	157	292	67	24	(192)	992
1. 2015 Investment and other variances - Insurance and Savings include the gain/(loss) resulting from the disposal of subsidiary and joint venture investments during the year.
2. LGIM includes the workplace savings business which was previously reported in Savings. Prior period comparatives have been amended. At 2014, the impact includes the reduction of operating profit by £15m and profit before tax by £10m. Offsetting movements have been reflected in the Savings segment.

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2.10 Earnings per share

(a) Earnings per share

					Adjusted	Adjusted
			Profit	Earnings	profit	earnings	Profit	Earnings
			after tax	per share1	after tax	per share1,2	after tax	per share1
			2015	2015	2015	2015	2014	2014
			£m	p	£m	p	£m	p
Operating profit after tax			1,142	19.29	1,142	19.29	998	16.92
Investment and other variances			(67)	(1.13)	(42)	(0.71)	(13)	(0.22)
Earnings per share based on profit
attributable to equity holders			1,075	18.16	1,100	18.58	985	16.70
1. Earnings per share is calculated by dividing profit after tax derived from continuing operations by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares.
2. Adjusted earnings per share has been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments.

(b) Diluted earnings per share

				Adjusted	Adjusted
	Number	Profit	Earnings	profit	earnings	Number	Profit	Earnings
	of shares1	after tax	per share	after tax	per share1, 2	of shares1	after tax	per share
	2015	2015	2015	2015	2015	2014	2014	2014
	m	£m	p	£m	p	m	£m	p
Profit attributable to equity holders of the Company	5,920	1,075	18.16	1,100	18.58	5,897	985	16.70
Net shares under options allocable for no further consideration	38	-	(0.12)	-	(0.12)	59	-	(0.16)
Diluted earnings per share	5,958	1,075	18.04	1,100	18.46	5,956	985	16.54
1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees.
2. Adjusted earnings per share has been calculated excluding the net loss, £25m, resulting from the disposal of subsidiary and joint venture investments.

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2.11 Acquisition

On 1 April 2015, the group acquired 100% of New Life Home Finance Limited, a UK based lifetime mortgage provider for a consideration of £5m. The acquisition gave rise to an increase in the group's goodwill of £2m and an increase in purchased interest in long term businesses (PILTB) and other intangibles of £2m. This enables the group to offer lifetime mortgages as part of the retirement solutions suite of products.

2.12 Disposals

During 2015, the Group made the following disposals:  - Snow + Rock Group Holding Limited was sold to Cotswold Outdoor Limited for £34m. The carrying value of the investment was £6m, realising a profit on disposal of £28m reported in operational income in the Consolidated Income Statement. The majority of the profit on disposal is allocated to the with-profits fund.  - Legal & General International (Ireland) Limited (LGII), the group's Dublin based offshore bond provider was sold to Canada Life for £16m. The carrying value of the business was £14m, and disposal costs totalled £1m, realising a profit on disposal of £1m reported in operational income in the Consolidated Income Statement.  - Commercial International Life Insurance Company SAE (CIL), the group's Egypt based life insurance joint venture, was sold to AXA for £33m. The carrying value of the business was £14m, realising a profit on disposal of £19m reported in operational income in the Consolidated Income Statement.  - The group's interest in Legal & General Gulf BSC (LGG), the group's Bahrain based life insurance joint venture, was sold to a third party for £1. The carrying value of the business was £2m, realising a loss on disposal of £2m reported in operational income in the Consolidated Income Statement.  - Legal & General Holdings (France) S.A. (LGF), the group's French insurance business, was sold to APICIL Prévoyance.  A loss on disposal of £43m is reported in operational income in the Consolidated Income Statement. None of the disposals completed during 2015 are discontinued operations as they do not represent major lines of business or geographical segments of the group.

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2.13 Held for sale

On 15 January 2016, the group sold Suffolk Life Group Limited (SLG) to Curtis Banks Group plc for £45m (excluding transaction costs), subject to regulatory approval. The assets and liabilities of SLG have accordingly been assessed as a disposal group and have been classified as held for sale as at 31 December 2015. SLG formed part of the Savings segment in Note 2.09. SLG is not a discontinued operation as it does not represent a major line of business or geographical segment of the group.
								Total
								2015
								£m
Assets classified as held for sale
Purchased interest in long term business and other intangible assets								28
Property, plant and equipment								1
Investment property								1,140
Financial investments								1,801
Reinsurers' share of contract liabilities								39
Cash and cash equivalents								389
Other assets								11
Total assets of the disposal group								3,409
Liabilities classified as held for sale
Investment contract liabilities								(3,235)
Operational borrowings								(102)
Tax liabilities								(5)
Payables and other financial liabilities								(10)
Other liabilities								(17)
Total liabilities of the disposal group								(3,369)
Total net assets of the disposal group								40

2.14 Post balance sheet events

On 15 January 2016, the group sold Suffolk Life Group Limited (SLG) to Curtis Banks Group Plc for £45m, subject to regulatory approval. The assets and liabilities of SLG have accordingly been assessed as a disposal group and have been classified as held for sale as at 31 December 2015. For held for sale details refer to Note 2.13.

On 21 January 2016, the group made a formal decision to close an office located in Kingswood, Surrey, UK. The group plans to close the office in 2018. The net cost associated with this closure (including write-off of previously capitalised property, plant and equipment and expenditure relating to redundancy and rent and rates), is estimated to be £50m, which is expected to be recognised in the 2016 Consolidated Income Statement. These costs will be treated as restructuring costs and as such will not be included in operational and net cash generation.

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2.15 Financial investments and investment property

							2015	2014
							£m	£m
Equities							166,892	162,177
Unit trusts							6,021	7,529
Debt securities1							169,720	178,766
Accrued interest							1,456	1,604
Derivative assets2							9,509	10,035
Loans and receivables							465	503
Financial investments							354,063	360,614
Investment property							8,082	8,152
Total financial investments and investment property							362,145	368,766
1. Detailed analysis of debt securities which shareholders are directly exposed to is disclosed in Note 4.06.
2. Derivatives are used to ensure efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities and include £5,795m (2014: £6,011m) held on behalf of unit linked policyholders.

2.16 Tax
(a) Tax charge in the Consolidated Income Statement
The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows:
							2015	2014
							£m	£m
Profit before tax attributable to equity holders							1,355	1,238
Tax calculated at 20.25% (2014: 21.5%)							274	266
Effects of:
Adjustments in respect of prior years							(5)	8
Income not subject to tax, such as dividends							(11)	(9)
Change in valuation of tax losses							-	(6)
Higher rate of tax on profits taxed overseas							16	8
Additional allowances/non-deductible expenses							(4)	(7)
Impact of reduction in UK corporate tax rate to 18% from 2020 on deferred tax balances1							1	-
Differences between taxable and accounting investment gains							(10)	(15)
Other							-	1
Tax attributable to equity holders							261	246
Equity holders' effective tax rate2							19.3%	19.9%
1. Following the 2015 Finance Act, the rate of corporation tax will reduce to 19% from 1 April 2017. There will be a further 1% reduction to 18% from 1 April 2020. The enacted rates of 20 - 18% have been used in the calculation of UK's deferred tax assets and liabilities.
2. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.

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2.16 Tax (continued)
(b) Deferred Tax
							2015	2014
(i) UK deferred tax assets/(liabilities)							£m	£m
Realised and unrealised gains on investments							(146)	(168)
Excess of depreciation over capital allowances							18	19
Excess expenses1							74	105
Deferred acquisition expenses							(51)	(61)
Difference between the tax and accounting value of insurance contracts							(83)	(143)
Accounting provisions							8	3
Trading losses2							6	45
Pension fund deficit							72	98
Purchased interest in long term business							(15)	(24)
Net UK deferred tax liabilities							(117)	(126)
Presented on the Consolidated Balance Sheet as:
UK deferred tax asset							20	54
UK deferred tax liability							(137)	(180)
Net UK deferred liabilities3							(117)	(126)
(ii) Overseas deferred tax assets/(liabilities)
Realised and unrealised gains on investments							(8)	(53)
Deferred acquisition expenses							(308)	(295)
Difference between the tax and accounting value of insurance contracts							(241)	(242)
Accounting provisions							(27)	(20)
Trading losses							159	186
Purchased interest in long term business							(11)	(10)
Net Overseas deferred tax liabilities							(436)	(434)
1. The reduction in the deferred tax asset on excess expenses reflects the unwind of the spread acquisition expenses.
2. LGR and Insurance utilised their remaining losses against profits that arose during the first half of the year. The remaining losses mainly relate to Cofunds.
3. On the Consolidated Balance Sheet the net UK deferred tax liability has been split between an asset of £20m and a liability of £137m where the relevant items cannot be offset.

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2.17 Payables and other financial liabilities

							2015	2014
							£m	£m
Derivative liabilities							8,047	6,877
Repurchase agreements1							13,343	7,016
Other2							1,319	2,238
Payables and other financial liabilities							22,709	16,131
Due within 12 months							20,027	11,887
Due after 12 months							2,682	4,244
1. The repurchase agreements are presented gross, however they and their related assets are subject to master netting arrangements.
2. Other financial liabilities include net variation margins on derivative contracts, which are maintained daily. Included within the variation margins are collateral held and pledged of £94m and £50m respectively (2014: £107m and £235m respectively). Other also includes the present value of future commission costs which have contingent settlement provisions of £175m (2014: £186m).
Fair value hierarchy
								Amortised
				Total	Level 1	Level 2	Level 3	cost
As at 31 December 2015				£m	£m	£m	£m	£m
Derivative liabilities				8,047	1,451	6,596	-	-
Repurchase agreements				13,343	-	-	-	13,343
Other				1,319	5	12	175	1,127
Payables and other financial liabilities				22,709	1,456	6,608	175	14,470
								Amortised
				Total	Level 1	Level 2	Level 3	cost
As at 31 December 2014				£m	£m	£m	£m	£m
Derivative liabilities				6,877	593	6,284	-	-
Repurchase agreements				7,016	-	-	-	7,016
Other				2,238	869	29	186	1,154
Payables and other financial liabilities				16,131	1,462	6,313	186	8,170
Future commission costs are modelled using expected cash flows, incorporating expected future persistency. They have therefore been classified as level 3 liabilities. The entire movement in the balance has been reflected in the Consolidated Income Statement during the period. A reasonably possible alternative persistency assumption would have the effect of increasing the liability by £6m (2014: £6m).
Significant transfers between levels There have been no significant transfers between levels 1, 2 and 3 for the period ended 31 December 2015 (2014: No significant transfers between levels 1, 2 and 3).

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2.18 Dividends 

						Per		Per
					Dividend	share1	Dividend	share1
					2015	2015	2014	2014
					£m	p	£m	p
Ordinary share dividends paid in the period:
- Prior year final dividend					496	8.35	408	6.90
- Current year interim dividend					205	3.45	172	2.90
					701	11.80	580	9.80
Ordinary share dividend proposed2					592	9.95	496	8.35
1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
2. The dividend proposed is not included as a liability on the Consolidated Balance Sheet.

2.19 Share capital and share premium

				2015			2014
				Number of	2015		Number of	2014
Authorised share capital				shares	£m		shares	£m
At 31 December: ordinary shares of 2.5p each			9,200,000,000		230	9,200,000,000		230
							Share	Share
						Number of	capital	premium
Issued share capital, fully paid						shares	£m	£m
As at 1 January 2015					5,942,070,229		149	969
Options exercised under share option schemes:
- Savings related share option scheme					6,718,251		-	7
As at 31 December 2015					5,948,788,480		149	976
							Share	Share
						Number of	capital	premium
Issued share capital, fully paid						shares	£m	£m
As at 1 January 2014					5,917,066,636		148	959
Options exercised under share option schemes:
- Savings related share option scheme					25,003,593		1	10
As at 31 December 2014					5,942,070,229		149	969
There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.
The holders of the company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company.

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2.20 Core Borrowings
				Carrying	Fair	Carrying	Fair
				amount	value	amount	value
				2015	2015	2014	2014
				£m	£m	£m	£m
Subordinated borrowings
6.385% Sterling perpetual capital securities (Tier 1)				637	631	658	642
5.875% Sterling undated subordinated notes (Tier 2)				413	426	416	431
4.0% Euro subordinated notes 2025 (Tier 2)				-	-	472	482
10% Sterling subordinated notes 2041 (Tier 2)				310	398	310	424
5.5% Sterling subordinated notes 2064 (Tier 2)				589	570	588	666
5.375% Sterling subordinated notes 2045 (Tier 2)				602	611	-	-
Client fund holdings of group debt1				(26)	(27)	(28)	(31)
Total subordinated borrowings				2,525	2,609	2,416	2,614
Senior borrowings
Sterling medium term notes 2031-2041				609	779	609	800
Client fund holdings of group debt1				(42)	(54)	(48)	(62)
Total senior borrowings				567	725	561	738
Total core borrowings				3,092	3,334	2,977	3,352
1. £68m (2014: £76m) of the group's subordinated and senior borrowings are currently held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.
All of the group's core borrowings are measured using amortised cost. The presented fair values of the group's core borrowings reflect quoted prices in active markets and they are classified as level 1 in the fair value hierarchy.

Subordinated borrowings

6.385% Sterling perpetual capital securities

In 2007, Legal & General Group Plc issued £600m of 6.385% Sterling perpetual capital securities. These securities are callable at par on 2 May 2017 and every three months thereafter. If not called, the coupon from 2 May 2017 will be reset to three month LIBOR plus 1.93% pa. For Solvency I purposes these securities are treated as tier 1 capital and for Solvency II purposes these securities are treated as tier 1 own funds.

5.875% Sterling undated subordinated notes

In 2004, Legal & General Group Plc issued £400m of 5.875% Sterling undated subordinated notes. These notes are callable at par on 1 April 2019 and every five years thereafter. If not called, the coupon from 1 April 2019 will be reset to the prevailing five year benchmark gilt yield plus 2.33% pa. These notes are treated as lower tier 2 capital for Solvency I purposes and tier 2 own funds for Solvency II purposes.

4.0% Euro subordinated notes 2025

In 2005, Legal & General Group Plc issued €600m of 4.0% Euro dated subordinated notes. The proceeds were swapped into Sterling. On 8 June 2015, the group redeemed these notes at par. Prior to redemption, these notes were treated as lower tier 2 capital for Solvency I purposes and tier 2 own funds for Solvency II purposes.

10% Sterling subordinated notes 2041

In 2009, Legal & General Group Plc issued £300m of 10% dated subordinated notes. The notes are callable at par on 23 July 2021 and every five years thereafter. If not called, the coupon from 23 July 2021 will be reset to the prevailing five year benchmark gilt yield plus 9.325% pa. These notes mature on 23 July 2041. They are treated as lower tier 2 capital for Solvency I purposes and tier 2 own funds for Solvency II purposes.

5.5% Sterling subordinated notes 2064

In 2014, Legal & General Group Plc issued £600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June 2044 and every five years thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% pa. These notes mature on 27 June 2064. They are treated as lower tier 2 capital for Solvency I purposes and tier 2 own funds for Solvency II purposes.

5.375% Sterling subordinated notes 2045

On 27 October 2015, Legal & General Group Plc issued £600m of 5.375% dated subordinated notes. The notes are callable at par on 27 October 2025 and every five years thereafter. If not called, the coupon from 27 October 2025 will be reset to the prevailing five year benchmark gilt yield plus 4.58% pa. These notes mature on 27 October 2045. They are treated as lower tier 2 capital for Solvency I purposes and tier 2 own funds for Solvency II purposes.

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2.21 Operational Borrowings
				Carrying	Fair	Carrying	Fair
				amount	value	amount	value
				2015	2015	2014	2014
				£m	£m	£m	£m
Short term operational borrowings
Euro Commercial paper				15	15	73	73
Bank loans/other				2	2	13	13
Total short term operational borrowings				17	17	86	86
Non recourse borrowings
US Dollar Triple X securitisation 2037				302	258	286	240
Suffolk Life unit linked borrowings1				-	-	120	120
LGV 6/LGV 7 Private Equity Fund Limited Partnership				98	98	136	136
Consolidated Property Limited Partnerships				184	184	148	148
Total non recourse borrowings				584	540	690	644
Group holding of operational borrowings2				(65)	(56)	(61)	(52)
Total operational borrowings				536	501	715	678
1. In January 2016, the group announced that Suffolk Life Group Limited had been sold to Curtis Banks Group. As at 31 December 2015, the Suffolk Life unit linked borrowings have been transferred to held for sale, refer to Note 2.13.
2. Group investments in operational borrowings have been eliminated from the Consolidated Balance Sheet.

The presented fair values of the group's operational borrowings reflect observable market information and have been classified as level 2 in the fair value hierarchy.

Short term operational borrowings

Short term assets available at the holding company level exceeded the amount of short term operational borrowings of £17m (2014: £86m). Short term operational borrowings comprise Euro Commercial paper, bank loans and overdrafts.

Non recourse borrowings

US Dollar Triple X securitisation 2037

In 2006, a subsidiary of LGA issued US$450m of non recourse debt in the US capital markets to meet the Triple X reserve requirements of part of the US term insurance written in 2005 and 2006. It is secured on the cash flows related to that tranche of business.

Suffolk Life unit linked borrowings

All of these non recourse borrowings are in relation to commercial properties held within SIPP plans and the borrowings solely relate to client investments.

LGV 6/LGV 7 Private Equity Fund Limited Partnerships

These borrowings are non recourse bank borrowings.

Consolidated Property Limited Partnerships

These borrowings are non recourse bank borrowings.

Syndicated credit facility

As at 31 December 2015, the group had in place a £1.00bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2020. This facility replaced the syndicated facility totalling £1.00bn, of which £0.04bn was due to mature in October 2017 and £0.96bn was due to mature in October 2018. No drawings were made under either facility during 2015.

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2.22 Insurance contract liabilities

(a) Analysis of insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2015	2015	2014	2014
				Notes	£m	£m	£m	£m
Participating insurance contracts				2.22(b)	5,618	(1)	6,579	(1)
Non-participating insurance contracts				2.22(c)	49,470	(3,861)	49,589	(2,587)
General insurance contracts					284	(8)	287	(8)
Insurance contract liabilities					55,372	(3,870)	56,455	(2,596)
During the year, the group continued utilising prospective reinsurance arrangements which resulted in a profit of £503m (2014: £298m). This profit has been reflected in the Consolidated Income Statement for the year and arises from new reinsurance arrangements or the reinsurance of new business under existing arrangements.

(b) Movement in participating insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2015	2015	2014	2014
					£m	£m	£m	£m
As at 1 January					6,579	(1)	6,972	(1)
New liabilities in the year					52	-	61	-
Liabilities discharged in the year					(977)	-	(1,159)	-
Unwinding of discount rates					40	-	54	-
Effect of change in non-economic assumptions					5	-	(5)	-
Effect of change in economic assumptions					81	-	561	-
Disposals1					(171)	-	-	-
Other					9	-	95	-
As at 31 December					5,618	(1)	6,579	(1)
1. Reflects the disposal of LGF and LGII during the year.

(c) Movement in non-participating insurance contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2015	2015	2014	2014
					£m	£m	£m	£m
As at 1 January					49,589	(2,587)	39,975	(2,596)
New liabilities in the year					2,866	(768)	7,325	(446)
Liabilities discharged in the year					(2,744)	(39)	(2,469)	259
Unwinding of discount rates					1,451	(93)	1,493	(145)
Effect of change in non-economic assumptions					(384)	157	(569)	362
Effect of change in economic assumptions					(1,335)	(513)	3,844	(3)
Foreign exchange adjustments					27	(18)	(10)	(18)
As at 31 December					49,470	(3,861)	49,589	(2,587)

IFRS and Cash                                                                                                                                  Page 50

2.23 Investment contract liabilities

(a) Analysis of investment contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2015	2015	2014	2014
			Note		£m	£m	£m	£m
Participating investment contracts					4,912	-	7,667	14
Non-participating investment contracts					278,554	(250)	288,558	(324)
Investment contract liabilities			2.23(b)		283,466	(250)	296,225	(310)

(b) Movement in investment contract liabilities

						Re-		Re-
					Gross	insurance	Gross	insurance
					2015	2015	2014	2014
					£m	£m	£m	£m
As at 1 January					296,225	(310)	286,247	(295)
Reserves in respect of new business					37,639	(598)	30,645	(334)
Amounts paid on surrenders and maturities during the year					(46,557)	164	(53,311)	60
Investment return and related benefits					5,160	455	33,126	259
Management charges					(303)	-	(309)	-
Foreign exchange adjustments					(162)	-	(177)	-
Disposals1					(5,321)	-	-	-
Transfer to held for sale					(3,235)	39	-	-
Other					20	-	4	-
As at 31 December					283,466	(250)	296,225	(310)
1. Reflects the disposal of LGF and LGII during the year.

IFRS and Cash                                                                                                                                  Page 51

2.24 IFRS sensitivity analysis

							Impact on
							pre-tax	Impact on
							group profit	group equity
							net of re-	net of re-
							insurance	insurance
							2015	2015
							£m	£m
Economic sensitivity
Long-term insurance
1% increase in interest rates							48	(36)
1% decrease in interest rates							(168)	(49)
1% increase in long term inflation expectations							(38)	(31)
Credit spread widens by 100bps with no change in expected defaults							(102)	(138)
10% decrease in listed equities							(124)	(103)
10% fall in property values							(81)	(65)
10bps increase in credit default assumption							(324)	(258)
10bps decrease in credit default assumption							366	292
Non-economic sensitivity
Long-term insurance
1% decrease in annuitant mortality							(132)	(105)
5% increase in assurance mortality							(64)	(49)
Default of largest external reinsurer							(835)	(666)
General insurance
Single storm event with 1 in 200 year probability							(67)	(54)
Subsidence event - worst claims ratio in last 30 years							(72)	(57)

The table shows the impacts on group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario for the group. The participating funds have been excluded in the above sensitivity analysis as the impact of the sensitivities on IFRS profit and equity is offset by the movement in the unallocated divisible surplus (UDS). The shareholders' share of with-profit bonus declared in the year is relatively insensitive to market movements due to the smoothing policies applied.

The interest rate sensitivity assumes a 100bps change in the gross redemption yield on fixed interest securities together with a 100bps change in the real yields on variable securities. For the UK with-profit funds, valuation interest rates are assumed to move in line with market yields adjusted to allow for the impact of PRA regulations. The interest rate sensitivities reflect the impact of the regulatory restrictions on the reinvestment rate used to value the liabilities of the long term business. Modelling improvements have been made in the year which more accurately isolate the impacts of discrete assumptions changes. No yield floors have been applied in the estimation of the stresses, despite the current low interest rate environment.

Interest rate and inflation expectation have historically shown positive correlation and have therefore been presented next to each other.

The inflation stress adopted is a 1% pa increase in inflation resulting in a 1% pa reduction in real yield and no change to the nominal yield. In addition the expense inflation rate is increased by 1% pa.

In the sensitivity for credit spreads, corporate bond yields have increased by 100bps, gilt and approved security yields are unchanged, and there has been no adjustment to the default assumptions.

The equity stress is a 10% fall in listed equity market values. The property stress adopted is a 10% fall in property market value. Rental income is assumed to be unchanged; however the vacant possession value is stressed down by 10% in line with the market value stress. Where property is being used to back liabilities, the valuation interest rate used to place a value on the liabilities moves with the implied change in property yields.

The annuitant mortality stress is a 1% reduction in the mortality rates for immediate and deferred annuitants with no change to the mortality improvement rates. The assurance mortality stress represents an increase in mortality/morbidity rates for assurance contracts by 5%.

The credit default stress assumes a +/-10bps stress to the current credit default assumption for unapproved corporate bonds which will have an impact on the valuation interest rates used to discount liabilities. The credit default assumption is set based on the credit rating of the individual bonds in the asset portfolio and their outstanding term using Moody's global credit default rates.

For the sensitivity to the default of the group's largest external reinsurer, the reinsurer stress shown is equal to the technical provisions ceded to the external reinsurer and represents the impact of the default of largest external reinsurer at an entity level.

The above sensitivity analyses do not reflect management actions which could be taken to reduce the impacts. The group seeks to actively manage its asset and liability position. A change in market conditions may lead to changes in the asset allocation or charging structure which may have a more, or less, significant impact on the value of the liabilities. The analyses also ignore any second order effects of the assumption change, including the potential impact on the group asset and liability position and any second order tax effects. In calculating the alternative values, all other assumptions are left unchanged, though in practice, items of the group's experience may be correlated. The sensitivity of the profit and equity to changes in assumptions may not be linear. These results should not be extrapolated to changes of a much larger order, which could be significantly more or less than the amounts shown above.

IFRS and Cash                                                                                                                                  Page 52

2.25 Foreign exchange rates

Principal rates of exchange used for translation are:
Period end exchange rates							At 31.12.15	At 31.12.14
United States Dollar							1.47	1.56
Euro							1.36	1.29
							01.01.15 -	01.01.14 -
Average exchange rates							31.12.15	31.12.14
United States Dollar							1.53	1.65
Euro							1.38	1.24

2.26  Related party transactions
There were no material transactions between key management and the Legal & General group of companies during the period. All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. Contributions to the post-employment defined benefit plans were £93m (2014: £69m) for all employees.
At 31 December 2015 and 31 December 2014 there were no loans outstanding to officers of the company.
Key management personnel compensation
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:
							2015	2014
							£m	£m
Salaries							10	8
Social security costs							2	2
Post-employment benefits							1	2
Share-based incentive awards							5	4
Key management personnel compensation							18	16
Number of key management personnel							16	16

IFRS and Cash                                                                                                                                  Page 53

2.27 Provisions

(a) Analysis of provisions

							2015	2014
							£m	£m
Retirement benefit obligations							1,131	1,217
Other provisions							40	30
							1,171	1,247
(b) Retirement benefit obligations
					Fund and		Fund and
					Scheme	Overseas	Scheme	Overseas
					2015	2015	2014	2014
					£m	£m	£m	£m
Gross pension obligations included in provisions					(1,126)	(5)	(1,215)	(2)
Annuity obligations insured by Society					746	-	723	-
Gross defined benefit pension deficit					(380)	(5)	(492)	(2)
Deferred tax on defined benefit pension deficit					72	-	98	-
Net defined benefit pension deficit					(308)	(5)	(394)	(2)

The Legal & General Group UK Pension and Assurance Fund and the Legal & General Group UK Senior Pension Scheme are defined benefit pension arrangements and account for all UK and the majority of worldwide assets of, and contributions to, such arrangements. The schemes were closed to future accrual on 1 January 2016. At 31 December 2015, the combined after tax deficit arising from these arrangements (net of annuity obligations insured by Society) has been estimated at £308m (2014: £394m). These amounts have been recognised in the financial statements with £194m charged against shareholder equity (2014: £248m) and £114m against the unallocated divisible surplus (2014: £146m).

IFRS and Cash                                                                                                                                  Page 54

2.28 Contingent liabilities, guarantees and indemnities

Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance between actual experience from that assumed may result in those liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the interpretation of policyholder contracts, or the circumstances in which policyholders have entered into them. The extent of these liabilities is influenced by a number of factors including the actions and requirements of the PRA, FCA, ombudsman rulings, industry compensation schemes and court judgments.

Various group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant members of the group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with certainty, the extent and the timing of the financial impact of these claims, litigations or issues. Legal & General (Portfolio Management Services) Limited (PMS) is currently cooperating with an investigation by FCA into Structured Deposits products issued by PMS between 2006 and 2014.  PMS has responded to FCA's requests for information and awaits FCA's feedback. This matter is at an early stage, management and legal advisers will evaluate on an ongoing basis whether any provision should be recognised.

In 1975, Society was required by the Institute of London Underwriters (ILU) to execute the ILU form of guarantee in respect 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 statutory merger in the Netherlands) acquired Victory and provided an indemnity to the Society against any liability the Society may have as a result of the ILU's requirement, and the ILU agreed that its requirement of the Society would not apply to policies written or renewed after the acquisition. Nederlandse Reassurantie Groep NV is now owned by Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. Whether the Society has any liability as a result of the ILU's requirement and, if so, the amount of its potential liability is uncertain. The Society has made no payment or provision in respect of this matter.

Group companies have given warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of group companies in support of their business activities including Pension Protection Fund compliant guarantees in respect of certain group companies' liabilities under the group pension fund and scheme. LGAS has provided indemnities, a liquidity and expense risk agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group's matching adjustment reorganisation pursuant to Solvency II.

Asset and premium flows                                                                                                                 Page 55

3.01 Legal & General investment management total assets
			Active
			fixed	Solu-			Active		Total		Advisory		Total
For the year		Index	income1	tions2	Real assets1		equities		AUM		assets		assets
ended 31 December 2015		£bn	£bn	£bn	£bn		£bn		£bn		£bn		£bn
At 1 January 2015		274.8	102.9	293.3	14.5		8.2		693.7		14.8		708.5
External inflows3		33.4	11.1	16.3	1.4		-		62.2				62.2
External outflows		(30.9)	(4.3)	(6.6)	(0.9)		-		(42.7)				(42.7)
Overlay/ advisory net flows		-	-	18.2	-		-		18.2		(4.6)		13.6
External net flows4		2.5	6.8	27.9	0.5		-		37.7		(4.6)		33.1
Internal net flows		(0.7)	(1.9)	-	0.9		(0.4)		(2.1)		-		(2.1)
Disposal of LGF5		-	(2.3)	-	-		-		(2.3)		-		(2.3)
Total net flows		1.8	2.6	27.9	1.4		(0.4)		33.3		(4.6)		28.7
Cash management movements6		-	0.8	-	-		-		0.8		-		0.8
Market and other movements4		(2.3)	0.5	17.0	2.4		0.7		18.3		0.3		18.6
At 31 December 2015		274.3	106.8	338.2	18.3		8.5		746.1		10.5		756.6
Assets attributable to:
External									661.0		10.5		671.5
Internal									85.1		-		85.1
Assets attributable to:
UK									623.7		-		623.7
International									122.4		10.5		132.9
			Active
			fixed	Solu-		Active		Total		Advisory		Total
For the year ended		Index	income1	tions2	Real assets1	equities		AUM		assets		assets
31 December 2014		£bn	£bn	£bn	£bn	£bn		£bn		£bn		£bn
As at 1 January 2014		269.8	88.7	232.5	12.0	8.6		611.6		-		611.6
External inflows		23.7	5.5	8.5	1.4	0.1		39.2				39.2
External outflows		(39.5)	(3.8)	(6.6)	(0.5)	(0.1)		(50.5)				(50.5)
Overlay/ advisory net flows		-	-	18.8	-	-		18.8		(0.2)		18.6
External net flows4		(15.8)	1.7	20.7	0.9	-		7.5		(0.2)		7.3
Internal net flows		(0.2)	(0.7)	0.4	1.5	(0.1)		0.9		-		0.9
Total net flows		(16.0)	1.0	21.1	2.4	(0.1)		8.4		(0.2)		8.2
Acquisition of GIA assets		-	-	-	-	-		-		13.4		13.4
Cash management movements6		-	(1.6)	-	-	-		(1.6)		-		(1.6)
Market and other movements4		21.0	14.8	39.7	0.1	(0.3)		75.3		1.6		76.9
As at 31 December 2014		274.8	102.9	293.3	14.5	8.2		693.7		14.8		708.5
Assets attributable to:
External								603.7		14.8		618.5
Internal								90.0		-		90.0
Assets attributable to:
UK								579.7		-		579.7
International								114.0		14.8		128.8
1. Infrastructure debt investment has been reclassified from Active Fixed Income to Real Assets in 2015.  2014 has therefore been restated (1 January 2014 AUM: £0.7bn; internal net flows: £0.2bn; 31 December 2014 AUM: £0.9bn).  The commercial loans business has also been reclassified and is now included in Real Assets (2014: £0.6bn).
2. Solutions include liability driven investments, multi-asset funds and included £226.2bn at 31 December 2015 (31 December 2014: £194.6bn) of derivative notionals associated with the Solutions business.
3. Solutions external inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.
4. External net flows exclude movements in short term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2015 was £59.9bn (31 December 2014: £46.5bn) and the movement in these assets is included in market and other movements for Solutions assets.
5. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prévoyance.
6. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows                                                                                                                 Page 56

3.02 Legal & General investment management total assets quarterly progression
			Active
			fixed	Solu-		Active	Total	Advisory	Total
For the year ended		Index	income1	tions2	Real assets1	equities	AUM	assets	assets
31 December 2015		£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2015		274.8	102.9	293.3	14.5	8.2	693.7	14.8	708.5
External inflows		6.8	2.3	1.4	0.3	-	10.8		10.8
External outflows		(8.3)	(1.6)	(1.6)	(0.1)	-	(11.6)		(11.6)
Overlay/ advisory net flows		-	-	5.1	-	-	5.1	(1.2)	3.9
External net flows4		(1.5)	0.7	4.9	0.2	-	4.3	(1.2)	3.1
Internal net flows		-	(0.6)	-	0.3	(0.1)	(0.4)	-	(0.4)
Total net flows		(1.5)	0.1	4.9	0.5	(0.1)	3.9	(1.2)	2.7
Cash management movements5		-	1.7	-	-	-	1.7	-	1.7
Market and other movements		11.3	4.8	5.8	1.2	0.1	23.2	0.7	23.9
At 31 March 2015		284.6	109.5	304.0	16.2	8.2	722.5	14.3	736.8
External inflows		9.1	2.5	2.5	0.4	-	14.5		14.5
External outflows		(8.8)	(0.9)	(1.8)	(0.2)	-	(11.7)		(11.7)
Overlay/ advisory net flows		-	-	6.7	-	-	6.7	(2.3)	4.4
External net flows4		0.3	1.6	7.4	0.2	-	9.5	(2.3)	7.2
Internal net flows		(0.3)	(0.2)	-	0.1	(0.2)	(0.6)	-	(0.6)
Total net flows		-	1.4	7.4	0.3	(0.2)	8.9	(2.3)	6.6
Cash management movements5		-	-	-	-	-	-	-	-
Market and other movements		(9.9)	(4.5)	(3.2)	0.2	0.6	(16.8)	(0.7)	(17.5)
At 30 June 2015		274.7	106.4	308.2	16.7	8.6	714.6	11.3	725.9
External inflows		9.3	1.0	1.6	0.4	-	12.3		12.3
External outflows		(6.6)	(0.8)	(1.1)	(0.2)	-	(8.7)		(8.7)
Overlay / advisory net flows		-	-	4.3	-	-	4.3	(0.2)	4.1
External net flows4		2.7	0.2	4.8	0.2	-	7.9	(0.2)	7.7
Internal net flows		-	(1.5)	-	0.3	-	(1.2)	-	(1.2)
Total net flows		2.7	(1.3)	4.8	0.5	-	6.7	(0.2)	6.5
Cash management movements5		-	(0.8)	-	-	-	(0.8)	-	(0.8)
Market and other movements		(13.5)	1.2	9.3	0.3	(0.8)	(3.5)	(0.4)	(3.9)
At 30 September 2015		263.9	105.5	322.3	17.5	7.8	717.0	10.7	727.7
External inflows3		8.2	5.3	10.8	0.3	-	24.6		24.6
External outflows		(7.2)	(1.0)	(2.1)	(0.4)	-	(10.7)		(10.7)
Overlay / advisory net flows		-	-	2.1	-	-	2.1	(0.9)	1.2
External net flows4		1.0	4.3	10.8	(0.1)	-	16.0	(0.9)	15.1
Internal net flows		(0.4)	0.4	-	0.2	(0.1)	0.1	-	0.1
Disposal of LGF6		-	(2.3)	-	-	-	(2.3)	-	(2.3)
Total net flows		0.6	2.4	10.8	0.1	(0.1)	13.8	(0.9)	12.9
Cash management movements5		-	(0.1)	-	-	-	(0.1)	-	(0.1)
Market and other movements		9.8	(1.0)	5.1	0.7	0.8	15.4	0.7	16.1
At 31 December 2015		274.3	106.8	338.2	18.3	8.5	746.1	10.5	756.6
1. Infrastructure debt investment has been reclassified from Active Fixed Income to Real Assets in 2015 (1 January 2015 AUM: £0.9bn).  The commercial loans business has also been reclassified and is now included in Real Assets (Q1 15: £0.1bn, Q2 15: £0.1bn, Q3 15: £0.3bn).
2. Solutions include liability driven investments, multi-asset funds, and include £226.2bn at 31 December 2015 (Q1 15: £197.1bn; Q2 15: £208.1bn; Q3 15: £216.6bn) of derivative notionals associated with the Solutions business.
3. External inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.
4. External net flows exclude movements in short term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2015 was £59.9bn (Q1 15: £44.0bn; Q2 15: £48.2bn; Q3 15: £52.5bn) and the movement in these assets is included in market and other movements for Solutions assets.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. On 31 December 2015, the group sold Legal & General Holdings (France) S.A. to APICIL Prévoyance.

Asset and premium flows                                                                                                                 Page 57

3.02 Legal & General investment management total assets quarterly progression (continued)
			Active
			fixed	Solu-		Active	Total	Advisory	Total
For the year ended		Index	income1	tions2	Real assets1	equities	AUM	assets	assets
31 December 2014		£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2014		269.8	88.7	232.5	12.0	8.6	611.6	-	611.6
External inflows		4.9	1.4	2.4	0.3	-	9.0		9.0
External outflows		(5.8)	(0.5)	(1.2)	(0.1)	-	(7.6)		(7.6)
Overlay/ advisory net flows		-	-	5.2	-	-	5.2	-	5.2
External net flows3		(0.9)	0.9	6.4	0.2	-	6.6	-	6.6
Internal net flows		-	2.0	-	0.5	(0.1)	2.4	-	2.4
Total net flows		(0.9)	2.9	6.4	0.7	(0.1)	9.0	-	9.0
Cash management movements4		-	-	-	-	-	-	-	-
Market and other movements3		1.5	2.9	5.9	(0.1)	0.1	10.3	-	10.3
At 31 March 2014		270.4	94.5	244.8	12.6	8.6	630.9	-	630.9
External inflows		6.1	1.5	2.8	0.3	0.1	10.8		10.8
External outflows		(13.5)	(1.4)	(0.9)	(0.1)	(0.1)	(16.0)		(16.0)
Overlay/ advisory net flows		-	-	7.1	-	-	7.1	0.1	7.2
External net flows3		(7.4)	0.1	9.0	0.2	-	1.9	0.1	2.0
Internal net flows		(0.1)	(1.3)	0.5	0.4	(0.1)	(0.6)	-	(0.6)
Total net flows		(7.5)	(1.2)	9.5	0.6	(0.1)	1.3	0.1	1.4
Acquisition of GIA assets		-	-	-	-	-	-	13.4	13.4
Cash management movements4		-	0.2	-	-	-	0.2	-	0.2
Market and other movements3		5.8	3.0	(1.2)	0.3	(0.3)	7.6	0.2	7.8
At 30 June 2014		268.7	96.5	253.1	13.5	8.2	640.0	13.7	653.7
External inflows		5.6	1.0	1.5	0.3	-	8.4		8.4
External outflows		(8.7)	(0.8)	(1.4)	(0.2)	-	(11.1)		(11.1)
Overlay/ advisory net flows		-	-	2.5	-	-	2.5	-	2.5
External net flows3		(3.1)	0.2	2.6	0.1	-	(0.2)	-	(0.2)
Internal net flows		(0.3)	(0.9)	(0.1)	-	(0.1)	(1.4)	-	(1.4)
Total net flows		(3.4)	(0.7)	2.5	0.1	(0.1)	(1.6)	-	(1.6)
Cash management movements4		-	(0.7)	-	-	-	(0.7)	-	(0.7)
Market and other movements3		5.2	1.7	17.4	0.3	(0.2)	24.4	0.5	24.9
At 30 September 2014		270.5	96.8	273.0	13.9	7.9	662.1	14.2	676.3
External inflows		7.1	1.6	1.8	0.5	-	11.0		11.0
External outflows		(11.5)	(1.1)	(3.1)	(0.1)	-	(15.8)		(15.8)
Overlay/ advisory net flows		-	-	4.0	-	-	4.0	(0.3)	3.7
External net flows3		(4.4)	0.5	2.7	0.4	-	(0.8)	(0.3)	(1.1)
Internal net flows		0.2	(0.5)	-	0.6	0.2	0.5	-	0.5
Total net flows		(4.2)	-	2.7	1.0	0.2	(0.3)	(0.3)	(0.6)
Cash management movements4		-	(1.1)	-	-	-	(1.1)	-	(1.1)
Market and other movements3		8.5	7.2	17.6	(0.4)	0.1	33.0	0.9	33.9
At 31 December 2014		274.8	102.9	293.3	14.5	8.2	693.7	14.8	708.5
1. Infrastructure debt investment has been reclassified from Active Fixed Income to Real Assets in 2015.  2014 has therefore been restated (1 January 2014 AUM: £0.7bn; internal net flows: £0.2bn; 31 December 2014 AUM: £0.9bn).  The commercial loans business has also been reclassified and is now included in Real Assets (Q1 14: £0.0bn, Q2 14: £0.2bn, Q3 14: £0.1bn, Q4 14: £0.3bn).
2. Solutions include liability driven investments, multi-asset funds, and include £194.6bn at 31 December 2014 (Q1 14: £168.3bn; Q2 14: £174.9bn; Q3 14: £185.3bn) of derivative notionals associated with the Solutions business.
3. External net flows exclude movements in Solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2014 was £46.5bn (Q1 14: £33.8bn; Q2 14: £33.3bn; Q3 14: £41.2bn), and the movement in these assets is included in market and other movements for Solutions assets.
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.

Asset and premium flows                                                                                                                 Page 58

3.02 Legal & General investment management total assets quarterly progression (continued)
		As at	As at	As at	As at	As at	As at	As at	As at
		31.12.15	30.09.15	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
		£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Total assets attributable to:1
External		671.5	641.7	636.1	644.5	618.5	591.5	570.3	547.8
Internal		85.1	86.0	89.8	92.3	90.0	84.8	83.4	83.1
Total assets attributable to:1
UK		623.7	599.2	598.8	610.4	579.7	589.8	570.8	564.9
International2		132.9	128.5	127.1	126.4	128.8	86.5	82.9	66.0
1. Total assets at 31 December 2015 include £10.5bn of advisory assets (Q3 15: £10.7bn; Q2 15: £11.3bn; Q1 15: £14.3bn; Q4 14: £14.8bn; Q3 14: £14.2bn; Q2 14: £13.7bn; Q1 14: £nil).
2. In Q4 14, International assets included £37.5bn of assets transferred from our London office to our Chicago office.

3.03 Legal & General investment management total external assets under management net flows
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.15	30.09.15	30.06.15	30.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
LGIM total external AUM net flows1	16.0	7.9	9.5	4.3	(0.8)	(0.2)	1.9	6.6
Attributable to:
International	1.5	2.6	4.6	0.8	1.6	1.3	2.4	3.4
UK Institutional
- Defined contribution	1.1	0.8	0.6	0.4	0.9	0.7	0.5	0.6
- Defined benefit 2	13.1	3.9	4.0	3.1	(3.6)	(2.2)	(1.2)	2.3
UK Retail	0.3	0.6	0.3	-	0.3	-	0.2	0.3
1. External net flows exclude movements in short term overlay assets, with maturity as determined by client agreements and cash management movements.
2. External inflows include £11.7bn of assets associated with the transfer of National Grid UK Pension Scheme after the purchase of their asset manager Aerion Fund Management.

Asset and premium flows                                                                                                                 Page 59

3.04 Assets under administration
							LGIM
				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the year ended	Platforms2	Life	Savings3	ment4	Savings	rlands	place	ments7	Annuities
ended 31 December 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2015	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
Gross inflows1	8.7	1.2	1.1	(0.5)	10.5	0.4	3.3	5.9	3.0
Gross outflows	(5.2)	(0.5)	(4.1)	0.8	(9.0)	(0.3)	(0.7)	(5.7)	-
Payments to pensioners		-	-	-	-	-	-	-	(2.6)
Disposals5,6	-	-	(2.8)	-	(2.8)	(2.7)	-	-	-
Net flows	3.5	0.7	(5.8)	0.3	(1.3)	(2.6)	2.6	0.2	0.4
Market and other
movements	1.5	0.2	(0.6)	(0.2)	0.9	(0.2)	1.0	1.1	(1.2)
At 31 December 2015	76.9	8.6	29.6	(6.8)	108.3	1.6	14.7	22.6	43.4
							LGIM
				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the year ended	Platforms2	Life	Savings3	ment4	Savings	rlands	place	ments7	Annuities
ended 31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2014	64.1	6.6	36.3	(6.8)	100.2	4.5	8.7	20.5	34.4
Gross inflows1	10.1	1.3	1.4	(0.5)	12.3	0.4	2.8	4.4	6.5
Gross outflows	(4.7)	(0.5)	(4.4)	0.7	(8.9)	(0.4)	(0.6)	(4.8)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(2.1)
Net flows	5.4	0.8	(3.0)	0.2	3.4	-	2.2	(0.4)	4.4
Market and other
movements	2.4	0.3	2.7	(0.3)	5.1	(0.1)	0.2	1.2	5.4
At 31 December 2014	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
1. Platforms gross inflows include Cofunds institutional net flows. Total 2015 Platforms comprise £37.5bn (2014: £38.3bn) of retail assets and £39.4bn (2014: £33.6bn) of assets held on behalf of institutional clients.
2. Platforms AUA comprise ISAs £19.9bn (2014: £19.1bn); onshore bonds £3.0bn (2014: £3.3bn); offshore bonds £0.1bn (2014: £0.1bn); platform SIPPs £3.5bn (2014: £3.3bn) and non-wrapped funds £50.4bn (2014: £46.1bn).
3. Mature Retail Savings products include with-profits products, bonds and retail pensions.
4. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
5. £2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015.
6. £2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prévoyance.
7. 2015 Retail Investments include £2.0bn (2014: £1.7bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (2014: £3.2bn) of LGIM unit trust assets held on our IPS platform.

Asset and premium flows                                                                                                                 Page 60

3.05 Assets under administration quarterly progression
							LGIM
				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nethe-	Work-	Invest-
For the year ended	Platforms	Life	Savings2	ment3	Savings	rlands	place	ments5	Annuities
31 December 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2015	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
Gross inflows1	1.9	0.3	0.3	-	2.5	0.1	0.6	1.5	0.7
Gross outflows	(1.2)	(0.1)	(0.9)	0.2	(2.0)	(0.1)	(0.1)	(1.6)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	0.7	0.2	(0.6)	0.2	0.5	-	0.5	(0.1)	0.2
Market and other
movements	3.4	0.3	0.7	(0.4)	4.0	(0.1)	1.4	1.2	1.2
At 31 March 2015	76.0	8.2	36.1	(7.1)	113.2	4.3	13.0	22.4	45.6
Gross inflows1	1.9	0.3	0.4	(0.2)	2.4	0.1	0.6	1.5	0.7
Gross outflows	(1.5)	(0.2)	(1.3)	0.2	(2.8)	(0.1)	(0.2)	(1.4)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.7)
Net flows	0.4	0.1	(0.9)	-	(0.4)	-	0.4	0.1	-
Market and other
movements	(1.8)	-	(0.4)	0.2	(2.0)	(0.1)	(0.3)	-	(2.2)
At 30 June 2015	74.6	8.3	34.8	(6.9)	110.8	4.2	13.1	22.5	43.4
Gross inflows1	2.7	0.3	0.1	(0.2)	2.9	0.1	1.0	1.7	0.2
Gross outflows	(1.2)	(0.1)	(1.0)	0.2	(2.1)	-	(0.2)	(1.2)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.7)
Disposal of LGI4	-	-	(2.8)	-	(2.8)	-	-	-	-
Net flows	1.5	0.2	(3.7)	-	(2.0)	0.1	0.8	0.5	(0.5)
Market and other
movements	(3.0)	(0.3)	(0.9)	0.3	(3.9)	(0.1)	(0.8)	(0.8)	0.2
At 30 September 2015	73.1	8.2	30.2	(6.6)	104.9	4.2	13.1	22.2	43.1
Gross inflows1	2.2	0.3	0.3	(0.1)	2.7	0.1	1.1	1.2	1.4
Gross outflows	(1.3)	(0.1)	(0.9)	0.2	(2.1)	(0.1)	(0.2)	(1.5)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.7)
Disposal of LGF6	-	-	-	-	-	(2.7)	-	-	-
Net flows	0.9	0.2	(0.6)	0.1	0.6	(2.7)	0.9	(0.3)	0.7
Market and other
movements	2.9	0.2	-	(0.3)	2.8	0.1	0.7	0.7	(0.4)
At 31 December 20157	76.9	8.6	29.6	(6.8)	108.3	1.6	14.7	22.6	43.4
1. Platforms gross inflows include Cofunds institutional net flows. Total 2015 Platforms comprise £37.5bn (Q3 15: £36.5bn; Q2 15: £37.9bn; Q1 15: £38.8bn) of retail assets and £39.4bn (Q3 15: £36.6bn; Q2 15: £36.7bn; Q1 15: £37.2bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Mature Retail Savings assets included in the Platforms column.
4. £2.8bn of assets relating to Legal & General International (Ireland) Limited, were sold to Canada Life Group on 1 July 2015.
5. At 31 December 2015 Retail Investments include £3.2bn (Q3 15: £1.9bn; Q2 15: £1.8bn; Q1 15: £1.8bn) of LGIM unit trust assets held on our Cofunds platform and £2.0bn (Q3 15: £3.1bn; Q2 15: £3.3bn; Q1 15: £3.4bn) of LGIM unit trust assets held on our IPS platform.
6. £2.7bn of assets relating to Legal & General Holdings (France) S.A. were sold on 31 December 2015 to APICIL Prévoyance.
7. On 21 January 2016 Suffolk Life was sold. The assets of £8.6bn and consol adjustment of £0.1m are included in the total savings assets as at 31 December 2015.

Asset and premium flows                                                                                                                 Page 61

3.05 Assets under administration quarterly progression (continued)
							LGIM
				Consol-		France
			Mature	idation		and		Retail
		Suffolk	Retail	adjust-	Total	Nether-	Work-	Invest-
For the year ended	Platforms	Life	Savings2	ment3	Savings	lands	place	ments4	Annuities
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2014	64.1	6.6	36.3	(6.8)	100.2	4.5	8.7	20.5	34.4
Gross inflows1	2.6	0.3	0.4	(0.1)	3.2	0.1	0.7	1.0	3.3
Gross outflows	(1.1)	(0.1)	(1.1)	0.2	(2.1)	(0.1)	(0.2)	(0.9)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.5	0.2	(0.7)	0.1	1.1	-	0.5	0.1	2.8
Market and other
movements	-	0.1	0.5	(0.1)	0.5	(0.1)	(0.1)	0.2	1.1
At 31 March 2014	65.6	6.9	36.1	(6.8)	101.8	4.4	9.1	20.8	38.3
Gross inflows1	2.2	0.3	0.3	(0.1)	2.7	0.1	0.6	0.9	0.2
Gross outflows	(1.2)	(0.1)	(1.1)	0.2	(2.2)	(0.1)	(0.1)	(1.5)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.0	0.2	(0.8)	0.1	0.5	-	0.5	(0.6)	(0.3)
Market and other
movements	0.8	0.1	0.6	-	1.5	0.1	(0.1)	0.4	0.5
At 30 June 2014	67.4	7.2	35.9	(6.7)	103.8	4.5	9.5	20.6	38.5
Gross inflows1	2.8	0.4	0.4	(0.2)	3.4	0.1	0.7	1.2	0.4
Gross outflows	(1.3)	(0.2)	(1.2)	0.2	(2.5)	(0.1)	(0.2)	(1.3)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.6)
Net flows	1.5	0.2	(0.8)	-	0.9	-	0.5	(0.1)	(0.2)
Market and other
movements	0.1	0.1	0.4	(0.1)	0.5	(0.1)	0.1	0.2	1.6
At 30 September 2014	69.0	7.5	35.5	(6.8)	105.2	4.4	10.1	20.7	39.9
Gross inflows1	2.5	0.3	0.3	(0.1)	3.0	0.1	0.8	1.3	2.6
Gross outflows	(1.1)	(0.1)	(1.0)	0.1	(2.1)	(0.1)	(0.1)	(1.1)	-
Payments to pensioners	-	-	-	-	-	-	-	-	(0.5)
Net flows	1.4	0.2	(0.7)	-	0.9	-	0.7	0.2	2.1
Market and other
movements	1.5	-	1.2	(0.1)	2.6	-	0.3	0.4	2.2
At 31 December 2014	71.9	7.7	36.0	(6.9)	108.7	4.4	11.1	21.3	44.2
1. Platforms gross inflows include Cofunds institutional net flows. At 31 December 2014 Platforms comprise £38.3bn (Q1 14 £36.6bn; Q2 14: £37.3bn; Q3 14: £37.4bn) of retail assets and £33.6bn (Q1 14: £29.0bn; Q2 14: £30.1bn; Q3 14: £31.6bn) of assets held on behalf of institutional clients.
2. Mature Retail Savings products include with-profits products, bonds and retail pensions.
3. Consolidation adjustment represents Suffolk Life and Retail Savings assets included in the Platforms column.
4. At 31 December 2014 Retail Investments include £1.7bn (Q1 14: £1.6bn; Q2 14: £1.5bn; Q3 14: £1.6bn) of LGIM unit trust assets held on our Cofunds platform and £3.2bn (Q1 14: £3.2bn; Q2 14: £3.2bn; Q3 14: £3.2bn) of LGIM unit trust assets held on our IPS platform.

Asset and premium flows                                                                                                                 Page 62

3.06 LGR new business
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.15	30.09.15	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m	£m	£m
Individual Annuities	65	82	81	99	83	125	139	244
Bulk Purchase Annuities
- UK	739	92	491	655	2,619	233	90	3,045
- USA	295	-	-	-	-	-	-	-
- Netherlands	145	-	-	-	-	-	-	-
Lifetime Mortgage Advances1	99	65	37	-	-	-	-	-
Total LGR new business	1,343	239	609	754	2,702	358	229	3,289
1. In Q2 15, £12m of these advances were funded by L&G prior to our acquisition of New Life Home Finance Ltd.

3.07 Insurance new business annual premiums
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.15	30.09.15	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m	£m	£m
UK Retail Protection	41	42	41	38	41	41	41	42
UK Group Protection	16	13	22	18	11	14	20	20
France Protection	-	-	-	30	-	-	-	33
Netherlands Protection	1	1	2	1	-	1	-	2
US Protection	14	15	21	20	21	23	24	23
Total Insurance new business	72	71	86	107	73	79	85	120

3.08 Gross written premiums on Insurance business
	3	3	3	3	3	3	3	3
	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to
	31.12.15	30.09.15	30.06.15	31.03.15	31.12.14	30.09.14	30.06.14	31.03.14
	£m	£m	£m	£m	£m	£m	£m	£m
UK Retail Protection	282	285	275	270	273	269	260	254
UK Group Protection	51	50	127	102	57	65	130	99
General Insurance	86	87	83	81	95	104	94	84
France Protection	44	39	42	43	41	41	45	46
Netherlands Protection	11	11	11	13	9	16	12	14
US Protection	201	186	202	184	184	162	170	162
Longevity Insurance	81	81	85	79	82	84	83	84
Total gross written premiums on insurance business	756	739	825	772	741	741	794	743

Asset and premium flows                                                                                                                 Page 63

3.09 Overseas new business in local currency
					Annual	Single	Annual	Single
					premiums	premiums	premiums	premiums
					2015	2015	2014	2014
US (US$m)					106	-	150	-
Netherlands (€m)					14	111	10	138
France (€m)					41	418	41	351
India (Rs m) - Group's 26% interest					478	3,266	408	4,003
Egypt (Pounds m) - Group's 55% interest					144	-	149	-
Gulf (US$m) - Group's 50% interest					2	2	3	5

Asset and premium flows                                                                                                                 Page 64

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END

 

 

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