Interim Results 2000 - Part 2
Legal & General Group PLC
26 July 2000
PART 2
Summary of unaudited results for the six months ended 30 June 2000
CONTENTS
P1 Interim results
P2 Consolidated balance sheet
P3 New business from continuing operations
P3 Half yearly analysis of operating profit
P4 Half yearly analysis of new UK business
P5 Life and pensions premiums and operating profit
P6 UK general insurance
P7 Investment return
P7 Other income
P8 Change in shareholders' retained capital (SRC)
in the UK long term fund
P8 Tax
P9 Funds under management
P10 Shareholders' funds
P10 Segmental analysis of shareholders' funds
P11 Borrowings
P11 UK long term fund
P12 Consolidated cash flow statement
Legal & General Group Plc P1
Consolidated Profit and Loss Account
Six months ended 30 June 2000
----------------------------------------------------------------------
Six Six Full
months to months to year
30.6.00 30.6.99 1999
Profit from Notes
continuing operations £m £m £m
Life and pensions 1 180 159 321
Investment management 29 13 43
General insurance 3 6 5 20
Other income 5 16 17 29
------ ------ ------
Operating profit 231 194 413
Variation from longer term
general insurance
investment return 4 (4) 2 3
Change in shareholders'
retained capital (SRC) 6 60 94 260
------ ------ ------
Profit from ordinary
activities before tax 287 290 676
Tax on profit on
ordinary activities 7 (102) (46) (89)
------ ------ ------
Profit for the financial period 185 244 587
Dividends (77) (66) (212)
------ ------ ------
Retained profit 108 178 375
======================================================================
Earnings per share p p p
Based on operating profit
from continuing operations
after tax 3.20 2.79 6.50
Based on profit for the
financial period 3.61 4.77 11.50
Diluted earnings per share
Based on operating profit
from continuing operations
after tax 3.19 2.77 6.47
Based on profit for the
financial period 3.59 4.74 11.44
Dividend per share 1.48 1.30 4.13
======================================================================
Statement of Total Recognised Gains and Losses
£m £m £m
Profit for the financial period 185 244 587
Exchange gains 16 6 3
------ ------ ------
Total recognised gains
and losses 201 250 590
======================================================================
These financial statements were approved by the Board on 25 July 2000
and have been prepared using the modified statutory solvency basis for
long term business.
The results for the six months to 30 June 2000 and 30 June 1999 are
unaudited, but have been subject to a review by the auditors and
constitute non-statutory accounts within the meaning of Section 240 of
the Companies Act 1985. They have been prepared on a basis which is
consistent with the financial statements for the year ended
31 December 1999. The results for the year ended 1999 have been taken
from these accounts which have been filed with the Registrar of
Companies, they include the auditors' unqualified report and do not
contain a statement under either sections 237(2) or 237(3) of the
Companies Act 1985.
Legal & General Group Plc P2
Consolidated Balance Sheet
As at 30 June 2000
----------------------------------------------------------------------
As at As at As at
Notes 30.6.00 30.6.99 31.12.99
Assets £m £m £m
Investments 8 34,350 32,307 34,143
Assets held to cover
linked liabilities 68,618 54,949 65,928
Other assets 2,321 2,090 2,135
--------- --------- ---------
105,289 89,346 102,206
========= ========= =========
Liabilities
Shareholders'
funds (i) 9 3,217 2,886 3,085
Fund for future
appropriations (ii) 5,147 4,709 5,814
Technical provisions
--------- --------- ---------
Technical provisions : : : : : :
for linked liabilities : 68,529: : 54,883: : 65,742:
Other long term : : : : : :
business provisions : 25,023: : 23,949: : 24,538:
General insurance : : : : : :
provisions : 333: : 368: : 365:
--------- --------- ---------
93,885 79,200 90,645
Borrowings
--------- --------- ---------
Borrowings for financing : : : : : :
operations : 138: : 64: : 141:
Mortgage related : : : : : :
borrowings : 257: : 309: : 285:
--------- --------- ---------
11 395 373 426
Bank customer deposits 1,245 968 1,031
Other creditors 1,400 1,210 1,205
--------- --------- ---------
105,289 89,346 102,206
========= ========= =========
(i) Shareholders' funds include profits retained as shareholders'
retained capital in the UK long term fund. These amounts, net of
allowance for tax, form part of the embedded value of the UK long term
fund which is reported in the supplementary financial statements
prepared on the Achieved Profits basis.
(ii) The fund for future appropriations comprises funds which have not
been allocated between policyholders and shareholders at the end of
the financial period and consists primarily of unrealised investment
appreciation within the with-profits part of the UK long term fund.
======================================================================
Legal & General Group Plc P3
New business from continuing operations
Six months ended 30 June 2000
----------------------------------------------------------------------
Life and pensions Six months to Six months to Full year
30.6.00 30.6.99 1999
Annual Single Annual Single Annual Single
£m £m £m £m £m £m
Life 77 327 64 320 150 634
Pensions 45 496 44 643 84 1,327
------ ------ ------ ------ ------ ------
UK 122 823 108 963 234 1,961
USA 40 0 31 1 63 1
Netherlands 3 22 2 18 5 35
France 3 56 3 30 5 71
------ ------ ------ ------ ------ ------
Insurance total 168 901 144 1,012 307 2,068
Retail investment
business
UK 11 440 4 592 23 877
France - 20 - 16 - 31
------ ------ ------ ------ ------ ------
Total new business 179 1,361 148 1,620 330 2,976
====== ====== ====== ====== ====== ======
Equivalent premium income (EPI) is calculated for total new business,
including unit trusts, ISAs and PEPs (excluding cash ISAs), and
comprises the new annual premiums together with 10% of single
premiums. EPI from insurance business in the first six months has
increased from £245m in 1999 to £258m in 2000 (Full year 1999: £514m).
EPI from total new business in the same period has increased from
£310m in 1999 to £315m in 2000 (Full year 1999: £628m).
New overseas insurance premiums expressed at 30 June 2000
exchange rates
2000 1999
6 months3 months 3 months6 months 3 months3 months
to to to to to to
Annual 30 June 30 June 31 Mar 30 June 30 June 31 Mar
£m £m £m £m £m £m
USA 40 19 21 33 17 16
Netherlands 3 2 1 3 2 1
France 3 2 1 3 2 1
Single
USA 0 0 0 1 0 1
Netherlands 22 11 11 17 8 9
France 56 34 22 29 15 14
======================================================================
Legal & General Group Plc P4
New UK business
Six months ended 30.6.2000
----------------------------------------------------------------------
New UK annual premiums 2000 1999
6 months3 months 3 months6 months 3 months3 months
to to to to to to
30 June 30 June 31 Mar 30 June 30 June 31 Mar
£m £m £m £m £m £m
Life:
Mortgage related 57 30 27 45 28 17
Savings 0 0 0 1 1 0
Protection 6 3 3 8 4 4
Group risk 14 7 7 10 5 5
Pensions:
Individual pensions 42 22 20 40 21 19
Group pensions 3 1 2 4 2 2
Investments:
ISAs/PEPs (excluding
cash ISAs) 11 8 3 4 3 1
------ ------ ------ ------ ------ ------
Total New UK Annual
Business 133 71 62 112 64 48
====== ====== ====== ====== ====== ======
New UK single premiums
Bonds:
With-profits 267 159 108 233 131 102
Other 60 28 32 87 45 42
Pensions:
Individual pensions 157 76 81 135 70 65
Annuities
- individual 189 90 99 137 92 45
Annuities
- bulk purchase 91 34 57 297 112 185
Other group business 33 14 19 30 16 14
DSS rebates 26 5 21 44 11 33
Investments:
ISAs/PEPs (excluding
cash ISAs) 296 113 183 468 195 273
Unit trusts 144 66 78 124 89 35
------ ------ ------ ------ ------ ------
Total New UK Single
Business 1,263 585 678 1,555 761 794
====== ====== ====== ====== ====== ======
New UK EPI
Total individual life
and pensions EPI 175 91 84 157 88 69
Total investments EPI 55 26 29 63 32 31
------ ------ ------ ------ ------ ------
Total individual EPI 230 117 113 220 120 100
Total group EPI 30 13 17 47 20 27
------ ------ ------ ------ ------ ------
Total EPI 260 130 130 267 140 127
====== ====== ====== ====== ====== ======
Institutional fund
management* 5,869 3,541 2,328 6,004 3,091 2,913
====== ====== ====== ====== ====== ======
* Institutional fund management new business comprises new monies from
external clients for both pooled and segregated pension funds and
other business not invested in retail products.
======================================================================
Legal & General Group Plc P5
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
1. Life and pensions premiums and operating profit
Six months to Six months to Full year
30.6.00 30.6.99 1999
Gross Oper- Gross Oper- Gross Oper-
premiums ating premiums ating premiums ating
profit profit profit
£m £m £m £m £m £m
With-profits business
- Life 635 50 623 47 1,233 88
- Individual pensions 320 16 351 15 688 35
- Group pensions 46 2 37 2 56 8
------ ------ ------ ------ ------ ------
1,001 68 1,011 64 1,977 131
Non-profit business 513 88 611 78 1,284 154
------ ------ ------ ------ ------ ------
UK 1,514 156 1,622 142 3,261 285
USA 121 19 68 12 181 30
Netherlands 41 4 35 4 72 5
France 73 1 47 1 102 1
------ ------ ------ ------ ------ ------
1,749 180 1,772 159 3,616 321
====== ====== ====== ====== ====== ======
UK life and pensions profit is included in operating profit as the
accrued statutory transfer, grossed up at the corporate tax rate. USA
profits are included on the basis of US GAAP.
Overseas life and pensions premium income and results expressed at
30 June 2000 exchange rates are:
Gross Oper- Gross Oper- Gross Oper-
premiums ating premiums ating premiums ating
profit profit profit
£m £m £m £m £m £m
USA 121 19 71 13 193 32
Netherlands 41 4 34 4 73 5
France 73 1 46 1 104 1
======================================================================
2. Principal sterling exchange rates used
As at 30.6.00 As at 30.6.99 As at 31.12.99
United States dollar 1.51 1.58 1.61
Euro 1.58 1.53 1.61
======================================================================
Legal & General Group Plc P6
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
3. General insurance
Equal- Oper-
Net Under- isation Invest- ating
premiums writing prov- ment profit/
written result ision return (loss)
Six months to 30.6.00 £m £m £m £m £m
Household 75 0 (3) 6 3
Healthcare and ASU* 16 0 - 0 0
Motor 19 (1) 0 1 0
Mortgage indemnity 1 8 0 2 10
------ ------ ------ ------ ------
UK 111 7 (3) 9 13
Overseas 0 (8) 0 1 (7)
------ ------ ------ ------ ------
Total 111 (1) (3) 10 6
====== ====== ====== ====== ======
Six months to 30.6.99
Household 67 (3) (3) 6 0
Healthcare and ASU* 6 0 - 0 0
Motor 14 (3) 0 1 (2)
Mortgage indemnity 1 5 0 2 7
------ ------ ------ ------ ------
UK 88 (1) (3) 9 5
Overseas 0 (1) 0 1 0
------ ------ ------ ------ ------
Total 88 (2) (3) 10 5
====== ====== ====== ====== ======
Full year 1999
Household 168 (4) (5) 11 2
Healthcare and ASU* 14 (1) - 0 (1)
Motor 26 (2) 0 1 (1)
Mortgage indemnity 3 16 0 4 20
------ ------ ------ ------ ------
UK 211 9 (5) 16 20
Overseas 0 (2) 0 2 0
------ ------ ------ ------ ------
Total 211 7 (5) 18 20
====== ====== ====== ====== ======
* Accident, Sickness and Unemployment business.
Investment return is reported on a basis which reflects longer term
rates of investment return. The rates used are consistent with those
used for Achieved Profits reporting. Capital supporting the business
to which the longer term rates are applied is based on the solvency
margin appropriate for the business.
The investment return has been calculated by applying the longer term
rates of return, as shown below, to the investment funds at the start
of each quarter.
2000 1999
% %
UK equities 7.7 p.a. 7.1 p.a.
UK gilts 5.1 p.a. 4.5 p.a.
======================================================================
Legal & General Group Plc P7
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
4. Investment return
Six Six Full
months months year
to to to
30.6.00 30.6.99 1999
£m £m £m
Investment income 30 33 62
Interest expense and charges (3) (4) (7)
Realised investment gains/(losses) 15 2 (1)
Unrealised investment (depreciation)
/appreciation (18) 1 8
------- ------- -------
24 32 62
======= ======= =======
reported as:
Allocated to general insurance operating profit 10 10 18
Variation from longer term general
insurance investment return (see note 3) (4) 2 3
Shareholders' other income 18 20 41
The investment return shown represents the return on the shareholders'
and worldwide GI funds excluding that in respect of SRC and
non-insurance operations (primarily Legal & General Bank).
======================================================================
5. Other income
Six Six Full
months months year
to to to
30.6.00 30.6.99 1999
£m £m £m
Shareholders' other income
Investment return on shareholders'
funds (excluding SRC) 21 23 47
Interest expense on core debt (3) (3) (6)
------- ------- -------
18 20 41
Other operations
------- ------- -------
Banking : 0 : : (1): : (3):
Estate agency : (1): : (1): : 0 :
Fairmount : 1 : : 1 : : 1 :
------- ------- -------
0 (1) (2)
Unallocated corporate expenses
------- ------- -------
Corporate fees : - : : 0 : : (3):
Other expenses : (2): : (2): : (7):
------- ------- -------
(2) (2) (10)
------- ------- -------
16 17 29
======================================================================
Legal & General Group Plc P8
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
6. Change in Shareholders' Retained Capital
(SRC) in the UK Long Term Fund
Six months Six months Full year
to 30.6.00 to 30.6.99 1999
£m £m £m
Investment income 21 28 50
Interest expense and charges 0 0 (1)
Realised investment gains 63 67 97
Unrealised investment
(depreciation)/appreciation (96) 46 142
------ ------ ------
Investment return on SRC (12) 141 288
Net capital released from
non-profit business 160 31 126
Accrued transfer to
shareholders in respect of
non-profit business included
in operating profit (88) (78) (154)
------ ------ ------
Change in SRC before tax 60 94 260
======================================================================
7. Tax
Six months Six months Full year
to 30.6.00 to 30.6.99 1999
Profit/
(loss) Tax Profit Tax Profit Tax
before (charge) before (charge) before (charge)
tax /credit tax /credit tax /credit
£m £m £m £m £m £m
Profit from continuing
operations
Life and pensions 180 (47) 159 (44) 321 (79)
Investment management 29 (8) 13 (4) 43 (12)
General insurance 6 (2) 5 (2) 20 1
Other income 16 (10) 17 (2) 29 9
------ ------ ------ ------ ------ ------
Tax charge on
operating profit 231 (67) 194 (52) 413 (81)
Variation from longer
term general insurance
investment return (4) 1 2 0 3 (1)
Change in shareholders'
retained capital (SRC) 60 (36) 94 6 260 (7)
------ ------ ------ ------ ------ ------
Tax charge on profit
from ordinary
activities 287 (102) 290 (46) 676 (89)
====== ====== ====== ====== ====== ======
The bases adopted in determining tax include the following:
(a) Tax on UK life and pensions business - by grossing up the
statutory transfers at corporate tax rates.
(b) Tax on the change in SRC, excluding investment return (see note 6)
- by grossing up net of tax amounts by the UK corporate tax rate of 30%
(1999: 30.25%).
======================================================================
Legal & General Group Plc P9
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
8. Funds under management
As at 30.6.00 As at 30.6.99 As at 31.12.99
Long Long Long
term Other term Other term Other
business business business business business business
£m £m £m £m £m £m
Land and buildings 3,471 193 3,013 181 3,299 199
Shares, variable
yield securities
and unit trusts 14,144 1,369 13,310 1,334 14,337 1,448
Debt and other fixed
income securities 11,833 795 11,591 766 12,055 1,019
Loans secured by
mortgages 28 1,102 22 947 13 1,009
Other loans and
investments 81 383 147 217 100 80
Deposits with credit
institutions 606 345 456 323 339 245
------- ------- ------- ------- ------- -------
Total investments 30,163 4,187 28,539 3,768 30,143 4,000
======= ======= ======= ======= ======= =======
Held within the UK
long term fund 2,853 2,491 2,718
Held outside the UK
long term fund 1,334 1,277 1,282
-------- -------- --------
4,187 3,768 4,000
======== ======== ========
Total Total Total
£m £m £m
Total investments 34,350 32,307 34,143
Assets held to cover
linked liabilities 68,618 54,949 65,928
-------- -------- --------
Funds included in the
consolidated balance sheet 102,968 87,256 100,071
Segregated funds 4,753 3,328 4,027
Unit trusts, ISAs and PEPs
(excluding cash ISAs) 3,778 3,017 3,450
-------- -------- --------
Total funds under
management 111,499 93,601 107,548
======== ======== ========
representing:
Managed in the UK
- Active 34,523 33,575 35,414
- Index tracking 72,279 55,963 67,817
- for overseas
subsidiaries 999 1,024 964
-------- -------- --------
107,801 90,562 104,195
Mortgages and other 1,876 1,764 1,636
-------- -------- --------
109,677 92,326 105,831
Managed overseas 1,822 1,275 1,717
-------- -------- --------
111,499 93,601 107,548
======== ======== ========
(i) Assets managed for external pension fund clients totalled £63,090m
(30.6.99 £50,567m; 31.12.99 £61,320m).
(ii) The reported asset mix shown above does not reflect the use of
derivatives. The effect of outstanding futures contracts is to change
the mix as if, for long term business, the value as reported for
shares, variable yield securities and unit trusts decreased by £154m
(30.6.99: £503m; 31.12.99: £383m); and there was no effect on debt and
other fixed income securities (30.6.99: £145m increase; 31.12.99: no
effect); and for shareholders' and general insurance funds, the value
as reported for shares, variable yield securities and unit trusts
decreased by £16m (30.6.99: £79m; 31.12.99: £94m). In both cases, cash
and deposits would be changed by corresponding amounts. The effect of
other derivatives was not considered significant enough to be
separately reported.
Legal & General Group Plc P10
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
9. Shareholders' funds Six months Six months Full year
to 30.6.00 to 30.6.99 1999
£m £m £m
At 1 January 3,085 2,700 2,700
Total recognised gains
and losses 201 250 590
Dividends (77) (66) (212)
Increase in share capital/
premium
- conversion of bonds 3 - 1
- exercise of share options 5 2 6
------- ------- -------
At end of period 3,217 2,886 3,085
======= ======= =======
Comprising:
Share capital 129 128 128
Share premium 140 127 132
Profit and loss account
------- ------- -------
-SRC :2,023: :1,806: :1,981:
-Other : 925: : 825 : : 844:
------- ------- -------
2,948 2,631 2,825
------- ------- -------
3,217 2,886 3,085
======= ======= =======
The number of fully paid ordinary shares of 2.5p in issue was 5,145m
(30.6.99: 5,118m; 31.12.99: 5,129m), including 13m (30.6.99: 15m;
31.12.99: 13m) shares held within the Employee Share Ownership Trust.
======================================================================
10. Segmental analysis of shareholders' funds
Six months Six months Full year
to 30.6.00 to 30.6.99 1999
£m £m £m
Life and Pensions
- UK (Shareholders' retained
capital (SRC))* 1,841 1,666 1,818
- USA 423 322 377
- Netherlands 18 19 15
- France 42 30 40
------- ------- -------
2,324 2,037 2,250
Investment management 113 70 92
General insurance 73 70 69
Banking 94 97 96
Corporate funds 613 612 578
------- ------- -------
3,217 2,886 3,085
====== ======= =======
* Excluding SRC funds of £182m (30.6.99: £140m; 31.12.99: £163m) in
respect of the net assets of subsidiaries.
======================================================================
Legal & General Group Plc P11
Notes to Financial Statements
Six months ended 30 June 2000
----------------------------------------------------------------------
11. Borrowings
As at 30.6.00 As at 30.6.99 As at 31.12.99
Long Long Long
term Other term Other term Other
businessbusiness businessbusiness businessbusiness
£m £m £m £m £m £m
Core debt 24 114 11 53 31 110
Mortgage related
borrowings 6 251 10 299 8 277
------ ------ ------ ------ ------ ------
Total borrowings 30 365 21 352 39 387
======================================================================
12. UK Long Term Fund As at 30.6.00 As at 30.6.99 As at 31.12.99
£bn £bn £bn
With-profits business 26.9 24.9 26.9
Non-profit business 8.9 8.2 8.6
------ ------ ------
Sub-fund * : 0.3: : 0.3: : 0.3:
Shareholders' retained : : : : : :
capital (SRC) : 2.0: : 1.8: : 2.0:
------ ------ ------
2.3 2.1 2.3
------ ------ ------
Market value of assets 38.1 35.2 37.8
====== ====== ======
* The sub-fund, together with the SRC, represents the amount of
accumulated profits retained in the long term fund from non-profit
business. Earnings on the sub-fund may, at the discretion of
directors, be used to support with-profits business.
======================================================================
Legal & General Group Plc P12
Consolidated cash flow statement
(excluding long term business and SRC)
Six months ended 30 June 2000
----------------------------------------------------------------------
Six months Six months Full year
to 30.6.00 to 30.6.99 1999
£m £m £m
Net cash inflow from
operating activities 245 124 115
Interest paid on
operational borrowings (3) (3) (6)
Tax (paid)/received (2) (13) 36
Dividends paid (146) (126) (193)
Financing ------- ------- -------
- Issue of share capital : 8 : : 2 : : 7 :
- (Decrease)/increase : : : : : :
in core debt : (19): : (31): : 30 :
------- ------- -------
(11) (29) 37
------- ------- -------
83 (47) (11)
======= ======= =======
Cash flows (not including
long term business) were
invested as follows:
Increase/(decrease)
in cash holdings 8 (4) 0
------- ------- -------
Shares, variable yield : : : : : :
securities and unit trusts : (11): : (2): : 2 :
Debt and other fixed income : : : : : :
securities :(282): : 7 : : 283 :
Deposits with credit : : : : : :
institutions : 71 : : (22): : (79):
Other loans and investments : 297 : : (26): :(217):
------- ------- -------
Net portfolio investment/
(divestment) 75 (43) (11)
------- ------- -------
Net investment/(divestment) 83 (47) (11)
======= ======= =======
Reconciliation of profit before tax
to operating cash flow
Profit on ordinary
activities before tax 287 290 676
- Profits relating to long
term business and SRC (266) (262) (617)
- Cash received from
long term business 198 177 180
- Other items 26 (81) (124)
------- ------- -------
Net cash inflow from
operating activities 245 124 115
======================================================================
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