Trading and Annuity Statement

Legal & General Group PLC
02 July 2004



Trading and annuity statement


Legal & General Group Plc ('the Group') will hold a conference call for analysts
and fund managers at 09.00 UK time today as it enters the closed period prior to
the announcement of its interim financial results on 29 July 2004.


In the second quarter of 2004, the Group has seen a marked increase in UK new
business growth, which it believes indicates a return of consumer confidence in
financial products. New business volumes in the second quarter of the year were
more than 20% above both the first quarter of this year and the second quarter
of last year, which is expected to be significantly above market expectations.


Most product areas have shown growth but it was particularly strong in group
protection business and unit-linked bonds with unit trusts showing a recovery
from the first quarter. Sales of unit-linked bonds reflected a continuing switch
by consumers away from with-profit bonds. The amount of bulk purchase annuity
business written has improved but is below that in the first half of 2003. Term
assurance volumes continue to be good and it is anticipated that Legal & General
will remain the market leader in protection business.


In its interim financial results announcement, the Group will also confirm the
move to a more conservative mortality basis for reserving and reporting on its
annuity business. Full details will be given in the interim results announcement
on 29 July. However, preliminary guidance follows in this announcement.



Commenting, David Prosser, Group Chief Executive, said

'Legal & General's new business growth has accelerated in the second quarter. We
believe this reflects a return of consumer confidence in financial products
reinforced by the continuing trend towards those companies which offer the
combination of financial strength, operating efficiency and good value for
money. These factors underline Legal & General's strong market position.


'In addition, the Group's Board has decided to move to a more conservative
mortality basis for reporting on annuity business which will result in a net
increase in reserves of less than £100m and a reduction in embedded value of
less than 3p per share.


Enquiries to: -

Investors:

Andrew Palmer, Group Director (Finance)                       020 7528 6286
Peter Horsman, Head of Investor Relations                     020 7528 6362

Media:

John Morgan, Head of Public Relations                         020 7528 6213
Anthony Carlisle, Citigate Dewe Rogerson                      020 7638 9571
 
                                                              07973 611888


Conference Call

There will be a conference call for analysts and fund managers at 09.00 UK time
chaired by David Prosser, Group Chief Executive. Please access the conference
call by dialling 0845 245 3471 from the UK or [phone] from outside
the UK. A brief slide presentation to introduce to the conference call may be
found at http://investor.legalandgeneral.com/presentations.cfm


A recording of this call will be available for one week at 0845 245 5205 from
the UK or [phone] from outside the UK (in the USA call 1866 247
4222). The access number is 1583476#.


New mortality basis for annuity business

Legal & General is a leading provider of annuity products. At 31 December 2003,
reserves for this business amounted to £12.8bn of which Bulk Purchase Annuities
represented 55%, Retained Money Annuities 25% and Compulsory Purchase Annuities
20%.


The evidence from our more mature books of business is that mortality
improvements have been in line with our recent Achieved Profits (AP) experience
assumptions. However, recent research suggests that the current level of
mortality improvement may persist for longer than previously anticipated and
Legal & General has decided to adjust its mortality improvement bases
accordingly.


• The Board has decided to use the medium cohort table for improvements
in male annuitant mortality experience in its AP reporting for its UK life and
pensions business. For male annuitants, the average of medium cohort (MC) and
long cohort (LC) will be used for reserving on the Modified Statutory Solvency
(MSS) basis of reporting. The bases for female annuitant mortality will also be
strengthened.


• These changes in bases will reduce reported net embedded value as at
30 June 2004 by between £160m and £180m (less than 3p per share). This flows
through to a reduction in pre tax AP operating profit of between £230m and
£260m. We expect this reduction to be partially offset by positive experience
variances and assumption changes as part of our half yearly review.


• The annuity business written by the Group in 2004 is expected to
deliver a double digit return on capital on both the old and new bases of
reserving. Similarly, 2003 business on the new basis would also have shown a
double digit return.


• On the MSS basis at 30 June 2004, management estimates that there will
be an overall net reduction of less than £100m in Shareholder Retained Capital,
before taking account of any net capital strain which has been incurred in the
normal course of our business in the first six months of the year. The new
mortality basis will reduce Shareholder Retained Capital by between £270m and
£310m net, equivalent to a fall in profit before tax of between £390m and £440m.
However, this impact will be reduced by releases from other reserves during the
first half of the year, together with the impact of improved asset/liability
matching and other actions.


• In the Board's view, there will be no material impact from these
changes on the Group's dividend paying capacity.


The following table indicates the changes in our experience and reserving
assumptions: -

                          Males                            Females
             AP experience    MSS valuation    AP experience    MSS valuation
Previous           SC               MC            CMIR 17          CMIR 17
basis
New basis          MC              50%           70% of MC            MC
                                 (MC+LC)



The new MSS valuation basis for males has been set to establish broadly the same
margin over AP experience assumptions as at the 2003 year end.


Life expectancy based on both our end 2003 MSS reserving basis and our new
reserving basis, is as follows: -

Males aged 65                        Old basis                New basis
@ 1/1/2004                               MC                  50% (MC+LC)
                                      (years)                  (years)
BPA                                    20.5                      21.3
RMA                                    20.7                      21.5
CPA                                    23.0                      23.9

Weighted Average                       21.0                      21.9











                      This information is provided by RNS
            The company news service from the London Stock Exchange