L&G FY Results 2004 Pt2

Legal & General Group PLC 24 February 2005 Part 2 Legal & General Group Plc P1 Consolidated Profit and Loss Account - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- Notes 2004 2003 Restated Â£m Â£m Profit on continuing operations Life and pensions 1 613 620 Institutional fund management 103 82 General insurance 5 32 36 Other operational income 6 34 18 -------- -------- Operating profit on continuing operations 782 756 Profit on discontinuing operations General insurance - Gresham 5 7 5 -------- -------- Operating profit 789 761 Variation from longer term investment return 8 408 422 Change in equalisation provision (7) (7) Effect of economic assumption changes 9 32 (32) Effect of UK tax changes 10 - (27) -------- -------- Profit on ordinary activities before tax 1,222 1,117 Tax charge 10 (352) (258) -------- -------- Profit for the financial period 870 859 Dividends (329) (318) -------- -------- Retained profit 541 541 ================================================================================ Earnings per share 12 p p Based on operating profit after tax 8.80 8.49 Based on profit for the financial period 13.40 13.24 Diluted earnings per share Based on operating profit after tax 8.57 8.28 Based on profit for the financial period 12.97 12.83 Dividend per share 5.06 4.90 ================================================================================ These financial statements were approved by the Board on 23 February 2005 and have been prepared for long term business using the Achieved Profits (AP) basis. The Modified Statutory Solvency (MSS) results are included in Part 3. The results constitute non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. Urgent Issues Task Force abstract 38 'Accounting for ESOP trusts' has been adopted, and the shareholders' investment return for Institutional fund management has been reported as a longer term rate of return within operating profit. 2003 comparatives have been restated accordingly. ================================================================================ Legal & General Group Plc P2 Consolidated Balance Sheet - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- At At Notes 31.12.04 31.12.03 Restated Â£m Â£m Assets Investments 13 38,336 35,268 Assets held to cover linked liabilities 108,297 84,308 Long term in-force business asset 2,764 2,365 Other assets 4,978 5,320 --------- --------- 154,375 127,261 ========= ========= Liabilities Shareholders' funds 15 6,116 5,584 Fund for future appropriations 2,456 1,498 Technical provisions ######### ######### - Technical provisions for linked : : : : liabilities : 104,887 : : 83,730 : - Long term business provisions : 34,190 : : 33,206 : - General insurance provisions : 457 : : 405 : ######### ######### 139,534 117,341 Borrowings ######### ######### - Core debt : 1,513 : : 1,475 : - Non recourse financing : 275 : : - : ######### ######### 16 1,788 1,475 Other creditors 17 4,481 1,363 --------- --------- 154,375 127,261 ================================================================================ Statement of Total Recognised Gains and Losses Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 Â£m Â£m Profit for the financial period 870 859 Exchange losses (9) (7) --------- --------- Total recognised gains and losses 861 852 ================================================================================ Legal & General Group Plc P3 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 1. Operating profit from long term business Life and pensions Managed Intern- pension UK ational Total funds* Total Â£m Â£m Â£m Â£m Â£m 2004 Contribution from: New business 272 45 317 36 353 In-force business - expected return 267 50 317 17 334 - experience variances 43 14 57 16 73 - operating assumption changes** (219) 1 (218) 17 (201) Development costs - - - (1) (1) Shareholder net worth 131 9 140 6 146 ------- ------- ------- ------- ------- Operating profit 494 119 613 91 704 ======= ======= ======= ======= ======= 2003 Contribution from: New business 271 34 305 31 336 In-force business - expected return 215 45 260 13 273 - experience variances 9 (8) 1 5 6 - operating assumption changes** (107) 1 (106) 20 (86) Development costs (2) - (2) (1) (3) Shareholder net worth 151 11 162 5 167 ------- ------- ------- ------- ------- Operating profit 537 83 620 73 693 ======= ======= ======= ======= ======= * Included in the Institutional fund management result of Â£103m (2003: Â£82m). ** The largest impact on UK life and pensions business in 2004 was from the strengthening of assumptions for annuitant longevity, and in 2003, was from the tightening of future persistency assumptions and the strengthening of provisions for claims on the endowment book. ================================================================================ 2. Sterling exchange rates used 31.12.04 31.12.03 United States dollar 1.92 1.79 Euro 1.41 1.42 ================================================================================ Legal & General Group Plc P4 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 3. Life and pensions gross premiums and operating profit 2004 2004 2003 2003 Oper- Oper- Premiums rating Premiums rating written profit written profit Â£m Â£m Â£m Â£m UK 5,345 494 4,541 537 USA 294 73 292 50 Netherlands 191 32 155 24 France 213 14 171 9 -------- -------- -------- -------- 6,043 613 5,159 620 ======== ======== ======== ======== International life and pensions gross premiums and operating profit for 2003 expressed at 31 December 2004 exchange rates are: Oper- Premiums rating written profit Â£m Â£m USA 272 47 Netherlands 156 24 France 172 9 ================================================================================ 4. Half yearly analysis of operating profit from continuing operations 2004 2003 First Second First Second half half half half Restated Restated Restated Â£m Â£m Â£m Â£m Life and pensions 408 205 314 306 Institutional fund management 53 50 45 37 General insurance 15 17 18 18 Other operational income 17 17 15 3 -------- -------- -------- -------- Total 493 289 392 364 ================================================================================ 5. General insurance net premiums and operating profit 2004 2004 2003 2003 Oper- Oper- Premiums rating Premiums rating written profit written profit Continuing operations Â£m Â£m Â£m Â£m Household 209 22 178 14 Other business 86 10 75 22 -------- -------- -------- -------- 295 32 253 36 Discontinuing operations Gresham - Household 134 5 130 3 Gresham - Other business 3 2 4 2 -------- -------- -------- -------- 432 39 387 41 ======== ======== ======== ======== On 3 February 2005 the Group announced that it had agreed in principle to sell its 90% stake in its subsidiary Gresham Insurance Company Limited (Gresham) to Barclays Bank PLC subject to FSA approval. The transaction is expected to complete on 31 March 2005 and result in an exceptional profit before tax of approximately Â£26m (Â£26m after tax). ================================================================================ Legal & General Group Plc P5 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 6. Other operational income 2004 2003 Â£m Â£m Shareholders' other income - Investment return on shareholders' funds 109 100 - Interest expense (62) (58) -------- -------- 47 42 Retail investments 4 (15) Other operations (4) 1 Unallocated corporate and development expenses (13) (10) -------- -------- 34 18 ================================================================================ 7. General insurance and shareholders' investment return 2004 2003 Restated Â£m Â£m Investment income 106 92 Interest expense and charges (64) (60) Realised investment gains/(losses) 9 (12) Unrealised investment appreciation 58 101 -------- -------- 109 121 ======== ======== reported within: Institutional fund management 8 5 General insurance 22 18 Other operational income 47 42 Variation from longer term investment return ######## ######## - Institutional fund management* : 0 : : (2): - General insurance : (3): : 5 : - Other operational income : 35 : : 53 : ######## ######## 32 56 -------- -------- 109 121 ======== ======== * Shareholders' investment return for Institutional fund management business of Â£Nil (2003: negative Â£2m) which was previously recorded within operating profit has been reported as variation from longer term investment return. The investment return shown represents the return on the General insurance and Corporate funds. Shareholders' other income, reported within Other operational income, has been allocated based on a longer term rate of investment return with the variation from the actual return being reported as variation from longer term investment return. ================================================================================ Legal & General Group Plc P6 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 8. Variation from longer term investment return 2004 2003 Restated Â£m Â£m Life and pensions - UK 364 346 - International 0 4 -------- -------- Total life and pensions 364 350 Managed pension funds 12 16 -------- -------- Total long term business 376 366 ######## ######## Institutional fund management : 0 : : (2): General insurance : (3): : 5 : Other operational income : 35 : : 53 : ######## ######## 32 56 -------- -------- 408 422 ======== ======== For long term business the variation from longer term investment return represents the effect of the investment performance and changes to investment policy in respect of shareholder net worth and in-force business, compared with embedded value assumptions at the beginning of the period. ================================================================================ 9. Effect of economic assumption changes 2004 2003 Â£m Â£m Life and pensions - UK 15 (16) - International 17 (16) -------- -------- Total 32 (32) ================================================================================ Legal & General Group Plc P7 Notes to Financial Statements - Achieved Profits Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 10. Analysis of tax 2004 2004 2003 2003 Profit Tax Profit Tax before (charge)/ before (charge)/ tax credit tax credit Profit on continuing operations Â£m Â£m Â£m Â£m UK life and pensions 494 (139) 537 (150) International life and pensions 119 (41) 83 (29) -------- -------- -------- -------- 613 (180) 620 (179) Institutional fund management 103 (31) 82 (24) General insurance 32 (9) 36 (12) Other operational income 34 4 18 6 -------- -------- -------- -------- Operating profit on continuing operations 782 (216) 756 (209) Profit on discontinuing operations General insurance - Gresham 7 (2) 5 (1) -------- -------- -------- -------- Operating profit 789 (218) 761 (210) Variation from longer term investment return 408 (126) 422 (67) Change in equalisation provision (7) 2 (7) 2 Effect of economic assumption changes 32 (10) (32) 9 Effect of UK tax change * - - (27) 8 -------- -------- -------- -------- Profit on ordinary activities and tax 1,222 (352) 1,117 (258) ======== ======== ======== ======== * Changes in the 2003 Budget to the corporation tax rates applicable to the policyholders' share of certain income and gains reduced the UK life and pensions embedded value by Â£19m. The effect was reported as a charge before tax of Â£27m. ================================================================================ 11. Pension costs 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 approximately 98% of worldwide assets and contributions to such schemes. At 31 December 2004 the combined after tax deficit of these arrangements has been estimated at Â£102m (2003: Â£65m). If these amounts had been recognised in the financial statements, Â£75m would have been charged against shareholders' funds (2003: Â£49m) and Â£27m against the Fund for Future Appropriations (2003: Â£16m) in accordance with the guidelines contained in the December 2003 ABI SORP. ================================================================================ Legal & General Group Plc P8 Notes to Financial Statements - Achieved Profits Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 12. Earnings per share (EPS) Weighted average Earnings number Profit/ per of (loss) share shares Â£m p m Year ended 31.12.04 Operating profit after tax on continuing operations 566 8.72 6,491 Operating profit after tax on discontinuing operations 5 0.08 Variation from longer term investment return 282 4.34 Change in equalisation provision (5) (0.08) Effect of economic assumption changes 22 0.34 -------- -------- -------- Profit for the period/EPS 870 13.40 6,491 Net shares under options allocable for no further consideration - (0.03) 22 Convertible bonds outstanding 12 (0.40) 285 -------- -------- -------- Diluted profit for the period/EPS 882 12.97 6,798 ======== ======== ======== Year ended 31.12.03 Operating profit after tax on continuing operations 547 8.43 6,490 Operating profit after tax on discontinuing operations 4 0.06 Variation from longer term investment return 355 5.47 Change in equalisation provision (5) (0.08) Effect of economic assumption changes (23) (0.35) Effect of UK tax changes (19) (0.29) -------- -------- -------- Profit for the financial year/EPS 859 13.24 6,490 Net shares under options allocable for no further consideration - - 15 Convertible bonds outstanding 12 (0.41) 285 -------- -------- -------- Diluted profit for the financial year/EPS 871 12.83 6,790 ================================================================================ Legal & General Group Plc P9 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 13. Funds under management At At 31.12.04 31.12.03 Restated Â£m Â£m Land and buildings 3,741 4,228 Shares, variable yield securities and unit trusts 11,529 11,494 Debt and other fixed income securities 21,677 18,277 Loans secured by mortgages 260 183 Other loans and investments 307 74 Deposits with credit institutions 941 1,181 --------- --------- Total investments 38,455 35,437 Less amounts payable under a margining arrangement (119) (169) --------- --------- 38,336 35,268 Assets held to cover linked liabilities 108,297 84,308 --------- --------- Funds included in the consolidated balance sheet 146,633 119,576 Segregated funds 11,098 11,235 Unit trusts, ISAs and PEPs 7,949 6,975 --------- --------- Total funds under management 165,680 137,786 ========= ========= representing: Managed in the UK - Active 50,221 42,214 - Index tracking 111,197 92,047 - For overseas subsidiaries 1,061 1,076 --------- --------- 162,479 135,337 Other including managed overseas 3,201 2,449 --------- --------- 165,680 137,786 ========= ========= including Institutional funds under management: Managed pension funds - Pooled 93,989 72,841 - Segregated 9,317 8,522 --------- --------- 103,306 81,363 Other funds 1,781 2,713 --------- --------- 105,087 84,076 ================================================================================ Legal & General Group Plc P10 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 14. Embedded value Life and pensions Managed Intern pension UK -ational Total funds Total Â£m Â£m Â£m Â£m Â£m Year ended 31.12.04 At 1 January 4,253 657 4,910 305 5,215 Exchange rate movements - (29) (29) - (29) ------- ------- ------- ------- ------- 4,253 628 4,881 305 5,186 Profit after tax 629 90 719 72 791 Capital movements * - 25 25 - 25 Distributions (274) (1) (275) (20) (295) ------- ------- ------- ------- ------- At 31 December 4,608 742 5,350 357 5,707 ======= ======= ======= ======= ======= comprising: Value of in-force business 3,007 499 3,506 194 3,700 Shareholder net worth ** 1,601 243 1,844 163 2,007 ------- ------- ------- ------- ------- 4,608 742 5,350 357 5,707 ======= ======= ======= ======= ======= Year ended 31.12.03 At 1 January 3,876 641 4,517 262 4,779 Exchange rate movements - (37) (37) - (37) ------- ------- ------- ------- ------- 3,876 604 4,480 262 4,742 Profit after tax 636 47 683 61 744 Capital movements* - 6 6 - 6 Distributions (259) - (259) (18) (277) ------- ------- ------- ------- ------- At 31 December 4,253 657 4,910 305 5,215 ======= ======= ======= ======= ======= comprising: Value of in-force business 2,668 429 3,097 162 3,259 Shareholder net worth ** 1,585 228 1,813 143 1,956 ------- ------- ------- ------- ------- 4,253 657 4,910 305 5,215 ======= ======= ======= ======= ======= * Capital movements for 2004 relate to capital injected into Legal & General America; the 2003 increase is for Legal & General France. ** For the UK life and pensions business, shareholder net worth comprises the shareholder retained capital (SRC) on the MSS basis, adjusted for deferred acquisition costs, and the sub-fund, both net of an appropriate allowance for tax. It also includes intra-group subordinated debt capital of Â£602m. ================================================================================ Legal & General Group Plc P11 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 14. Embedded value (continued) Reconciliation of in-force business At At 31.12.04 31.12.03 Â£m Â£m Long term in-force business asset included in the balance sheet 2,764 2,365 Sub-fund (245) (223) Deferred acquisition costs 742 709 Deferred tax * 397 366 Other miscellaneous adjustments 42 42 -------- -------- Value of in-force business 3,700 3,259 ======== ======== Reconciliation of shareholder net worth of long term business operations - UK (SRC) 2,233 2,212 - USA 475 443 - Netherlands 48 36 - France 48 45 - Managed pension funds 163 143 -------- -------- Shareholder net worth on the MSS basis 2,967 2,879 Purchased interests in long term business (24) (29) Sub-fund 245 223 Deferred acquisition costs (742) (709) Deferred tax * (397) (366) Other miscellaneous adjustments (42) (42) -------- -------- Shareholder net worth on the AP basis 2,007 1,956 ======== ======== * Deferred tax represents all tax which is expected to be paid under current legislation, including tax which would arise if shareholders' backing assets were eventually distributed. ** Including Â£602m of intra-group subordinated debt capital attributed to the SRC. ================================================================================ Legal & General Group Plc P12 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 15. Shareholders' funds Segmental analysis At At 31.12.04 31.12.03 Restated Â£m Â£m Embedded value of life and pensions businesses: - UK* 4,608 4,253 - USA 504 460 - Netherlands 144 112 - France 94 85 -------- -------- 5,350 4,910 Institutional fund management** 393 338 -------- -------- 5,743 5,248 General insurance 149 120 Corporate funds*** 224 216 -------- -------- 6,116 5,584 ======== ======== Movement At 1 January as originally published 5,584 5,061 Prior year adjustment in respect of UITF 38**** - (13) -------- -------- 5,584 5,048 Profit for the financial period 870 859 Exchange movements (9) (7) Dividends (329) (318) Increase in share capital/share premium 1 1 Allocation of ESOT shares (1) 1 -------- -------- At 31 December 6,116 5,584 ======== ======== * Includes Â£602m of intra-group subordinated debt capital attributed to the SRC. ** Includes Â£357m (2003: Â£305m) embedded value of managed pension funds business. *** Stated after deducting Â£521m (2003: Â£518m) of convertible debt, Â£602m of senior debt which has been onlent to the Long Term Fund (LTF), and including assets of Â£788m representing the net proceeds from the 2002 Rights Issue and Â£188m (2003: Â£139m) representing the aggregated investment returns. **** UITF abstract 38 'Accounting for ESOP trusts' requires that own shares held within the Employee Share Ownership Trust (ESOT) should be accounted for as a deduction from shareholders' funds rather than be disclosed as an investment as was previously required. The 2003 amounts have been restated accordingly. ================================================================================ Legal & General Group Plc P13 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 16. Borrowings At At 31.12.04 31.12.03 Â£m Â£m 2.75% Convertible bond 2006 521 518 Undated subordinated notes 394 - Medium Term Notes 2031-2041 597 597 Medium Term Notes 2004 - 6 Euro commercial paper 2004 - 352 Bank loans 2005 1 2 -------- -------- Core debt 1,513 1,475 Non recourse financing - Triple X 2025 275 - -------- -------- Total borrowings 1,788 1,475 ======== ======== The convertible bond matures in 2006 and is convertible into ordinary shares of the Company at 184p per share. If converted, this bond would give rise to the issue of 285.3m new ordinary shares which represents approximately 4.4% of the current issued share capital. In November 2004 a subsidiary of Legal & General America issued US$550m of non-recourse debt in the US domestic capital markets as floating rate Dutch Auction Market Securities due 2025. The transaction provides capital to meet the Regulation Triple X reserve requirements on the US term insurance business without affecting the Group's debt capacity or financial gearing. ================================================================================ 17. Other creditors Other creditors includes Â£3,295m (2003: Â£369m) of pension fund monies held on a temporary basis on behalf of corporate pension fund clients, generally as part of a portfolio reconstruction. ================================================================================ Legal & General Group Plc P14 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 18. Embedded value assumptions UK life and pensions i) The assumed future pre-tax returns on fixed interest and RPI linked securities are set by reference to redemption yields available in the market at the end of the reporting period. The corresponding return on equities and property and the risk discount rate have been set by reference to the fixed interest gilt assumption. The economic assumptions were: At 31.12.04 At 31.12.03 % p.a. % p.a. Investment return - Gilts - Fixed interest 4.5 4.7 - RPI linked 4.5 4.6 - Non-gilts - Fixed interest 4.9 - 5.3 5.1 - 5.5 - RPI linked 4.7 - 5.1 5.1 - 5.4 - Equities and property 7.1 7.3 Risk discount rate (after tax) 7.0 7.2 Inflation - Expenses/earnings 3.8 3.8 - Indexation 2.8 2.8 The assumed returns on non-gilt securities are net of an allowance for default risk of 0.20% p.a. (2003: 0.20% p.a.), other than for certain government-supported securities where no such allowance is made. ii) Assets are valued at market value. For the projection of fixed interest and RPI linked investment returns, asset values are adjusted to reflect the assumed interest and inflation rates. iii) Capital reported as transferred into the LTF since 1996, in the form of subordinated debt and any remaining excess consideration over the net asset value of subsidiaries transferred from the LTF in December 2001, is treated as residual. iv) The value of the sub-fund is the discounted value of projected investment returns for a period of 20 years (2003: 20 years). v) Development costs relate primarily to the development of strategic administration systems. vi) Future bonus rates have been set at levels which would fully utilise the assets supporting with-profits business. The proportion of profits derived from with-profits business allocated to shareholders has been assumed to be 10% throughout. ================================================================================ Legal & General Group Plc P15 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 18. Embedded value assumptions (continued) vii) The value of in-force business reflects the cost of providing for benefit enhancement or compensation in relation to certain products including administration expenses. viii) Other actuarial assumptions have been set at levels commensurate with recent operating experience, including those for mortality, persistency and maintenance expenses (excluding the development costs referred to above). These assumptions are reviewed annually. An allowance is made for future improvements in annuitant mortality based on externally published data. For end 2004, male annuitant mortality is assumed to improve in accordance with CMI Working Paper 1, projection MC for experience and the average of projections MC and LC for statutory reserving. Female annuitant mortality is assumed to improve in accordance with the MC projection from CMI Working Paper 1 for statutory reserving and at 70% of this rate for experience. ix) Business in force comprises previously written single premium, regular premium and recurrent single premium contracts. For this purpose, DWP rebates have not been treated as recurrent and their value is included as premiums are received. x) Projected tax has been determined assuming current tax legislation and rates. xi) AP results are computed on an after tax basis and are grossed up to the pre-tax level for presentation in the profit and loss account. The tax rate used for grossing up is the corporation tax rate of 30% (2003: 30%), except for the profit attributable to shareholder net worth, where the rate used is derived from the tax attributed to the contribution from shareholder net worth in the MSS accounts. To arrive at operating profit, the contribution from shareholder net worth is grossed up at a rate to reflect the tax associated with a longer term investment return. UK managed pension funds The UK life and pensions economic assumptions are used. All contracts are assumed to lapse after 10 years. Fees are projected on a basis which reflects current charges or, if less, anticipated charges. New business consists of monies received from new clients and incremental receipts from existing clients, and excludes the roll-up of the investment returns. Development costs relate to strategic systems. International Key assumptions are: At At 31.12.04 31.12.03 % p.a. % p.a. USA Reinvestment rate 4.9 4.8 Risk discount rate (after tax) 6.8 6.8 Europe Government bond return 3.8 4.5 Risk discount rate (after tax) 7.3 8.0 ================================================================================ Legal & General Group Plc P16 Notes to Financial Statements - Achieved Profits basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 19. Alternative assumptions The discount rate appropriate to any investor will depend on the investor's own requirements, tax and perception of the risks associated with the anticipated cash flows to shareholders. The table below shows the effect of alternative discount rates and equity and property yields on the UK life and pensions embedded value and new business contribution for the period. 1% 1% 1% lower higher higher risk risk equities/ As discount discount property published rate rate yields Â£m Â£m Â£m Â£m Effect on embedded value at 31 December 2004 4,608 +290 -250 +220 Effect on new business contribution for the period 272 +44 -39 +24 It should be noted that in calculating the alternative values all other assumptions are left unchanged. ================================================================================ Legal & General Group Plc P17 Notes to Financial Statements - Achieved Profits Basis Year ended 31 December 2004 -------------------------------------------------------------------------------- 20. Contingent liabilities, guarantees and indemnities Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance of actual experience from that assumed may result in such liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the interpretation of such contracts, or the circumstances in which policyholders have entered into them (together in this paragraph 'liabilities'). The extent of such liabilities is influenced by a number of factors including the actions and requirements of the FSA, by ombudsman rulings, by industry compensation schemes and by court judgements. The continuing general profile and emphasis being given by the FSA and other bodies to the suitability of the past sales of endowment policies in the context of some mortgage transactions has led to the continuing receipt of claims from holders of endowment policies. Provision for liabilities continues to be made and is regularly reviewed. However, it is not possible to predict, with certainty, the extent and the timing of the financial impact to which these liabilities may give rise. The relevant members of the Group nevertheless consider that each makes prudent provision for such liabilities, as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet all reasonably foreseeable eventualities. In 1975 the 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. 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. ================================================================================ Legal & General Group Plc P18 New business Year ended 31 December 2004 -------------------------------------------------------------------------------- Life and pensions 2004 2003 Annual Single Annual Single Â£m Â£m Â£m Â£m Insurance business Life 219 1,808 183 1,126 Pensions 129 1,932 118 1,783 ------- ------- ------- ------- UK 348 3,740 301 2,909 ####### ####### ####### ####### USA : 51 : : 1 : : 47 : : 10 : Europe : 27 : : 269 : : 19 : : 220 : ####### ####### ####### ####### 78 270 66 230 ------- ------- ------- ------- Insurance total 426 4,010 367 3,139 Retail investment business UK 22 1,565 33 1,689 Europe - 23 - 25 ------- ------- ------- ------- Total new business 448 5,598 400 4,853 ======= ======= ======= ======= International insurance new business for 2003 expressed at 31 December 2004 exchange rates Annual Single Â£m Â£m USA 44 9 Europe 19 222 ------- ------- 63 231 ======= ======= Annual Premium Equivalent (APE) is calculated for total new business, including unit trusts and ISAs but excluding institutional fund management, and comprises the new annual premiums together with 10% of single premiums. APE from insurance business was Â£827m (2003: Â£681m); APE from total new business in the same period has increased to Â£1,008m (2003: Â£886m). 2004 2003 Â£m Â£m Institutional fund management Managed pension funds * - Pooled funds 13,951 11,066 - Segregated funds 1,228 1,504 -------- -------- 15,179 12,570 Other funds 368 482 -------- -------- 15,547 13,052 ======== ======== * New monies from pension fund clients of Legal & General Assurance (Pensions Management) Ltd. Corporate pensions gross new business excludes Â£5.0bn (2003: Â£4.0bn) which was held through the year on a temporary basis, generally as part of portfolio reconstruction. ================================================================================ Legal & General Group Plc P19 New business Year ended 31 December 2004 -------------------------------------------------------------------------------- 2004 2003 Full Second First Full Second First year half half year half half UK annual premiums Â£m Â£m Â£m Â£m Â£m Â£m Insurance business Life - Mortgage-related 109 56 53 103 55 48 - Protection 51 26 25 46 23 23 - Group risk 59 22 37 34 21 13 Pensions - Individual pensions 126 65 61 114 57 57 - Group pensions 3 1 2 4 2 2 ------- ------- ------- ------- ------- ------- 348 170 178 301 158 143 Retail investment business ISAs 20 7 13 27 12 15 Unit trusts 2 1 1 6 2 4 ------- ------- ------- ------- ------- ------- Total 370 178 192 334 172 162 ================================================================================ UK single premiums Insurance business Bonds - With-profits 390 166 224 593 264 329 - Other 1,418 822 596 533 347 186 Pensions - Individual pensions 452 273 179 274 109 165 - Annuities - individual 859 493 366 727 413 314 - Annuities - bulk purchase 449 219 230 598 231 367 - Other group business 7 5 2 5 2 3 - DWP rebates 165 148 17 179 142 37 ------- ------- ------- ------- ------- ------- 3,740 2,126 1,614 2,909 1,508 1,401 Retail investment business ISAs 499 110 389 572 179 393 Unit trusts 1,066 445 621 1,117 485 632 ------- ------- ------- ------- ------- ------- Total 5,305 2,681 2,624 4,598 2,172 2,426 ================================================================================ UK APE Individual life and pensions 614 337 277 494 263 231 Retail investments by channel 179 64 115 202 80 122 ####### ####### ####### ####### ####### ####### - Independent : : : : : : : : : : : : financial advisers : 505 : : 271 : : 234 : : 382 : : 194 : : 188 : - Business : : : : : : : : : : : : partnerships : 235 : : 117 : : 118 : : 252 : : 129 : : 123 : - Business : : : : : : : : : : : : partnerships : : : : : : : : : : : : direct : 18 : : 1 : : 17 : : 27 : : 8 : : 19 : - Direct : 35 : : 12 : : 23 : : 35 : : 12 : : 23 : ####### ####### ####### ####### ####### ####### Total UK individual 793 401 392 696 343 353 Group 108 46 62 98 46 52 ------- ------- ------- ------- ------- ------- Total 901 447 454 794 389 405 ================================================================================ This information is provided by RNS The company news service from the London Stock Exchange

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Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

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