L&G 2002 Final Results Pt3
Legal & General Group PLC
27 February 2003
Part 3
Legal & General Group Plc P1
Consolidated Profit and Loss Account
Modified Statutory Solvency Basis
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
Notes
2002 2001
Restated
£m £m
Profit on continuing operations
Life and pensions 1 421 414
Institutional fund management 50 41
General insurance 46 37
Other operational income (24) 1
--------------- ---------------
Operating profit from continuing
operations 493 493
Profit on discontinued operations
Other operational income - Banking 4 4
--------------- ---------------
Operating profit 497 497
Variation from longer term investment return (63) (63)
Change in equalisation provision (5) (6)
Shareholder retained capital (SRC) contribution 2 (571) (550)
Profit on sale of discontinued operations 36 8
--------------- ---------------
Loss on ordinary activities before tax (106) (114)
Tax charge on loss on ordinary activities (74) (30)
--------------- ---------------
Loss for the financial period (180) (144)
Dividends (297) (261)
--------------- ---------------
Retained loss (477) (405)
============================================================================================================
Earnings per share p p
Based on operating profit on continuing
operations after tax 5.32 6.29
Based on loss for the financial period (2.77) (2.57)
Diluted earnings per share
Based on operating profit on continuing
operations after tax 5.25 6.00
Based on loss for the financial period (2.77) (2.57)
Dividend per share 4.78 4.67
============================================================================================================
These financial statements were approved by the Board on 26 February 2003 and
have been prepared for long term business using the Modified Statutory Solvency
(MSS) basis. The Achieved Profits (AP) results are included in Part 2. The
results for the year ended 2001 have been restated following the adoption of
Financial Reporting Standard 19, (FRS19) Deferred tax (see note 4) and earnings
per share and dividends per share have been restated to reflect the 2002 rights
issue.
The results constitute non statutory accounts within the meaning of Section 240
of the Companies Act 1985 and are extracted from the Company's financial
statements for the year ended 31 December 2002. The financial statements include
the auditor's 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
- Modified Statutory Solvency Basis
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
Notes At 31.12.02 At 31.12.01
Restated
Assets £m £m
Investments 32,442 34,464
Assets held to cover linked liabilities 69,723 70,982
Other assets 4,528 2,813
--------------- ---------------
106,693 108,259
=============== ===============
Liabilities
Shareholders' funds 3 3,184 2,877
Fund for future appropriations 516 1,845
Technical provisions 100,437 99,720
Borrowings and other creditors 2,556 3,817
--------------- ---------------
106,693 108,259
============================================================================================================
Statement of Total Recognised Gains and Losses
Notes At 31.12.02 At 31.12.01
Restated
£m £m
Loss for the financial period (180) (144)
Exchange (losses)/gains (8) 2
--------------- ---------------
Total recognised gains and losses (188) (142)
============================================================================================================
Legal & General Group Plc P3
Notes to Financial Statements
- Modified Statutory Solvency Basis
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
1. Life and pensions operating profit
2002 2001
£m £m
With-profits business 91 129
Non-profit business 275 224
--------------- ---------------
UK 366 353
USA 52 50
Netherlands 8 12
France (5) (1)
--------------- ---------------
421 414
=============== ===============
UK life and pensions operating profit is the accrued distributable transfer,
grossed up at the corporate tax rate, and for non-profit business is augmented
by the distribution in respect of the intra-group subordinated debt capital
included within the SRC. Profits for international life and pensions business
are reported on bases consistent with MSS or US GAAP.
============================================================================================================
2. Change in SRC
2002 2001
Restated
£m £m
Investment income 60 51
Interest expense and charges (2) (1)
Realised investment (losses)/gains (23) 6
Unrealised investment depreciation (377) (203)
--------------- ---------------
Investment return on SRC (342) (147)
Net capital released from/(invested in) 46 (179)
non-profit business
Distribution of operating profit from (275) (224)
non-profit business
--------------- ---------------
SRC contribution before tax (571) (550)
=============== ===============
SRC at 1 January 2,631 2,293
''''''''''''''' '''''''''''''''
SRC contribution before tax (571) (550)
Tax 63 101
''''''''''''''' '''''''''''''''
SRC contribution after tax (508) (449)
Change in the net asset values of SRC subsidiaries 36 432
Movement in intra-group subordinated debt 100 355
--------------- ---------------
SRC at end of period 2,259 2,631
=============== ===============
On 24 December 2001 the investment management subsidiaries held within the SRC
were transferred to new shareholder owned holding companies. SRC includes
intra-group subordinated debt capital of £602m (2001: £502m).
============================================================================================================
Legal & General Group Plc P4
Notes to Financial Statements
- Modified Statutory Solvency Basis
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
3. Shareholders' funds
At 31.12.02 At 31.12.01
Restated
£m £m
At 1 January 2,877 3,255
Total recognised gains and losses (188) (142)
Dividends (297) (261)
Increase in share capital/premium 792 5
Goodwill written back on sale of Fairmount
Group plc - 20
--------------- ---------------
At end of period 3,184 2,877
=============== ===============
Comprising:
Share capital 163 129
Share premium 905 147
Profit and loss account 2,116 2,601
--------------- ---------------
3,184 2,877
=============== ===============
The number of fully paid ordinary shares of 2.5p in issue at the period end was
6,502m (2001: 5,156m).
============================================================================================================
4. Tax
FRS19, Deferred tax, has been adopted and the 2001 comparatives restated
accordingly. The principal impact is the recognition of deferred tax in respect
of unrealised appreciation and depreciation of investments and future tax relief
for acquisition expenses. It is estimated that profits after tax for 2002
reduced by £13m (2001: increased by £47m) and at 31.12.02 Shareholders' funds
increased by £102m (2001: £115m) and the Fund for future appropriations reduced
by £76m (2001: £405m). Deferred tax provisions have not been discounted.
Although the SRC has been recognised as profit in these financial statements,
there has been no corresponding recognition in the FSA regulatory returns, on
which the taxation of life assurance business is currently based. As the payment
of incremental tax on this profit depends upon a future event, the occurrence of
which is under the company's control, no event giving rise to the need to
provide deferred tax has occurred. Accordingly no additional deferred tax has
been provided. The maximum amount of such deferred tax not provided was £655m
(2001: £768m).
============================================================================================================
Legal & General Group Plc P5
Notes to Financial Statements
- Modified Statutory Solvency Basis
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
5. Segmental analysis of shareholders' funds
At 31.12.02 At 31.12.01
Restated
£m £m
Life and Pensions
- UK (SRC)* 2,270 2,563
- USA 453 462
- Netherlands 24 19
- France 36 40
--------------- ---------------
2,783 3,084
Institutional fund management 161 148
General insurance 101 91
Banking - 93
Corporate funds** 139 (539)
--------------- ---------------
Shareholders' funds on the MSS basis 3,184 2,877
Less: Purchased interests in long term
business included in above (39) (30)
AP long term in-force business asset 1,916 2,147
--------------- ---------------
Shareholders' funds on the AP basis 5,061 4,994
=============== ===============
* Excluding net liabilities of £11m (2001: net assets of £68m) in respect of SRC
subsidiaries, but including £602m (2001: £502m) of intra-group subordinated debt
capital included in the SRC.
** Corporate funds include the convertible debt of £516m (2001: £515m), the
senior debt of £602m (2001: £502m) which has been onlent to the UK LTF and the
net proceeds of £788m from the 2002 rights issue.
============================================================================================================
6. UK Long Term Fund
At 31.12.02 At 31.12.01
Restated
£bn £bn
With-profits business 23.0 25.2
Non-profit business 11.6 10.5
''''''''''''''' '''''''''''''''
Sub-fund 0.2 0.2
SRC 2.3 2.6
''''''''''''''' '''''''''''''''
2.5 2.8
--------------- ---------------
Value of fund 37.1 38.5
============================================================================================================
Legal & General Group Plc P6
Consolidated Cash Flow Statement
(excluding long term business)
Year ended 31 December 2002
------------------------------------------------------------------------------------------------------------
2002 2001
Restated
£m £m
Net cash inflow/(outflow) from operating activities 520 (79)
Interest paid (52) (24)
Tax received/(paid) 18 (20)
Capital expenditure - net payments (1) 0
Disposal of banking subsidiaries 20 34
Acquisition of subsidiaries from the LTF (107) (570)
Dividends paid (263) (250)
''''''''''''''' '''''''''''''''
Issue of share capital 792 5
Increase in total borrowing 249 808
(Decrease)/increase in mortgage related borrowing (31) 24
''''''''''''''' '''''''''''''''
Financing 1,010 837
--------------- ---------------
1,145 (72)
=============== ===============
Cash flows (not including long term business)
were invested/(divested) as follows:
Increase/(decrease) in cash holdings 4 (6)
Net purchase/(sale) of investments 1,141 (66)
--------------- ---------------
Net investment/(divestment) 1,145 (72)
=============== ===============
Reconciliation of profit before tax
to operating cash flow
Loss on ordinary activities before tax (106) (114)
Profit relating to long term business 112 108
Cash received from/(paid to) long term business 133 (137)
''''''''''''''' '''''''''''''''
Increase in other operating
creditors 199 50
Other items 182 14
''''''''''''''' '''''''''''''''
381 64
--------------- ---------------
Net cash inflow/(outflow) from operating activities 520 (79)
============================================================================================================
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