L&G Full Year Results 2021 Part 2

Companies

Legal & General Group (LGEN)

UK 100

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For the year ended 31 December 2021		2021	2020
	Notes	£m	£m

From continuing operations
Legal & General Retirement (LGR)	1.03	1,506	1,728
- LGR Institutional (LGRI)		1,154	1,331
- LGR Retail (LGRR) ¹		352	397
Legal & General Investment Management (LGIM) ¹	1.04	422	407
Legal & General Capital (LGC)	1.05	461	275
Legal & General Insurance (LGI)	1.03	268	189
- UK and Other		320	205
- US (LGIA)		(52)	(16)


Operating profit from divisions:
From continuing operations		2,657	2,599
From discontinued operations ²		-	34


Operating profit from divisions		2,657	2,633
Group debt costs ³		(230)	(233)
Group investment projects and expenses		(165)	(155)
Covid-19 costs ⁴		-	(27)


Operating profit		2,262	2,218
Investment and other variances	1.06	233	(394)
Losses attributable to non-controlling interests		(7)	(36)

Adjusted profit before tax attributable to equity holders		2,488	1,788
Tax expense attributable to equity holders	3.04	(445)	(217)


Profit for the year	2.01	2,043	1,571

Less: Profit after tax from discontinued operations ²	2.01	-	(290)
Profit after tax from continuing operations	2.01	2,043	1,281
Total tax expense	2.01	589	218
Profit before tax	2.01	2,632	1,499
Profit attributable to equity holders		2,050	1,607


Earnings per share:
Basic (pence per share) ⁵	1.07	34.19p	27.00p
Diluted (pence per share) ⁵	1.07	32.57p	25.60p


1. LGRR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in reporting structure. Further details are provided in Note 1.08.
2. In 2020, discontinued operations included the results of the Mature Savings division, the sale of which completed on 7 September 2020.
3. Group debt costs exclude interest on non-recourse financing.
4. Covid-19 costs reflected incremental operational expenses incurred as a result of Covid-19.
5. All earnings per share calculations are based on profit attributable to equity holders of the company.


					Changes in valuation assump- tions			Operating profit/ (loss) after tax		Operating profit/ (loss) before tax
		New business surplus/ (strain)	Net release from operations
	Release from operations¹			Exper- ience variances		Non-cash items	Other		Tax expense/ (credit)

For the year ended
31 December 2021	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


LGR	739	220	959	54	251	23	-	1,287	219	1,506
- LGRI	512	193	705	40	212	27	-	984	170	1,154
- LGRR ²	227	27	254	14	39	(4)	-	303	49	352
LGIM ²	342	-	342	-	-	-	-	342	80	422
LGC	379	-	379	-	-	-	-	379	82	461
LGI	236	27	263	14	82	6	(138)	227	41	268
- UK and Other	131	27	158	14	82	6	-	260	60	320
- US (LGIA) ³	105	-	105	-	-	-	(138)	(33)	(19)	(52)


Total from divisions	1,696	247	1,943	68	333	29	(138)	2,235	422	2,657


Group debt costs	(186)	-	(186)	-	-	-	-	(186)	(44)	(230)
Group investment projects and expenses	(69)	-	(69)	-	-	-	(68)	(137)	(28)	(165)


Total	1,441	247	1,688	68	333	29	(206)	1,912	350	2,262


1. Release from operations within US (LGIA) includes £80m of dividends from the US.
2. LGRR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in reporting structure. Further details are provided in Note 1.08.
3. Other includes experience variances, changes in valuation assumptions and non-cash items for LGIA.

Release from operations for LGR and LGI UK and Other represents the expected IFRS surplus generated in the year from the difference between the prudent assumptions underlying the IFRS liabilities and our best estimate of future experience for in-force annuities and UK protection businesses. For Workplace Savings, the release from operations represents the expected annual management charges generated from the in-force business less the expected expenses. The LGI release from operations also includes dividends remitted from LGIA.

New business surplus/(strain) for LGR and LGI UK and Other represents the initial profit or loss from writing new business. This includes the costs associated with acquiring new business and setting up prudent reserves in respect of new business for UK annuities and protection, net of tax. Similarly for Workplace Savings, this includes the cost of acquiring new business in the year less the annual management charges generated by the assets under administration (AUA), net of tax. The new business surplus and release from operations for LGR and LGI excludes any capital held in excess of the prudent reserves from the liability calculation.

LGR's new business metrics are presented based on a target long-term asset portfolio. At certain year ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may have sourced more or less of the high quality assets targeted to support that business. At year end, the profit impact of the difference between actual assets held (including alternative surplus assets where suitable) and the long-term asset mix is reflected in investment variance.

Net release from operations for LGR and LGI is defined as release from operations plus new business surplus/(strain).

Release from operations and net release from operations for LGC and LGIM represents the operating profit (net of tax).

See Note 1.03 for more detail on experience variances, changes to valuation assumptions and non-cash items.

					Changes in valuation assump- tions			Operating profit/ (loss) after tax		Operating profit/ (loss) before tax
		New business surplus/ (strain)	Net release from operations
	Release from operations¹			Exper- ience variances		Non-cash items	Other		Tax expense/ (credit)

For the year ended
31 December 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m


LGR	685	262	947	99	400	32	-	1,478	250	1,728
- LGRI	492	220	712	81	314	30	-	1,137	194	1,331
- LGRR ²	193	42	235	18	86	2	-	341	56	397
LGIM ²	327	-	327	-	-	-	-	327	80	407
LGC	224	-	224	-	-	-	-	224	51	275
LGI	250	8	258	(41)	58	(5)	(115)	155	34	189
- UK and Other	146	8	154	(41)	58	(5)	-	166	39	205
- US (LGIA) ³	104	-	104	-	-	-	(115)	(11)	(5)	(16)


From continuing operations	1,486	270	1,756	58	458	27	(115)	2,184	415	2,599
From discontinued operations ⁴	28	-	28	-	-	-	-	28	6	34


Total from divisions	1,514	270	1,784	58	458	27	(115)	2,212	421	2,633


Group debt costs	(189)	-	(189)	-	-	-	-	(189)	(44)	(233)
Group investment projects and expenses	(56)	-	(56)	-	-	-	(61)	(117)	(38)	(155)
Covid-19 costs ⁵	-	-	-	-	-	-	(20)	(20)	(7)	(27)


Total	1,269	270	1,539	58	458	27	(196)	1,886	332	2,218


1. Release from operations within US (LGIA) includes £84m of dividends from the US.
2. LGRR includes the Workplace Savings business which was previously reported in LGIM. Further details are provided in Note 1.08.
3. Other includes experience variances, changes in valuation assumptions and non-cash items for LGIA.
4. Discontinued operations include the results of the Mature Savings division, the sale of which completed on 7 September 2020.
5. Covid-19 costs reflect incremental operational expenses incurred as a result of Covid-19.

	LGR¹	LGI	LGR¹	LGI
	2021	2021	2020	2020
	£m	£m	£m	£m


Net release from operations	959	263	947	258


Experience variances
- Persistency	1	(5)	7	3
- Mortality/morbidity ²	40	13	104	(46)
- Expenses	-	5	(18)	(5)
- Project and development costs	(19)	(11)	(9)	(1)
- Other	32	12	15	8


Total experience variances	54	14	99	(41)


Changes in valuation assumptions
- Persistency	-	(5)	-	(1)
- Mortality/morbidity ³	201	(2)	255	54
- Expenses	-	(1)	-	2
- Other ^4,5	50	90	145	3


Total changes in valuation assumptions	251	82	400	58


Movement in non-cash items
- Acquisition expense tax relief	-	-	-	(3)
- Other ⁶	23	6	32	(2)


Total movement in non-cash items	23	6	32	(5)


Other ²	-	(138)	-	(115)


Operating profit after tax	1,287	227	1,478	155


Tax expense	219	41	250	34


Operating profit before tax	1,506	268	1,728	189


1. LGR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in reporting structure. Further details are provided in Note 1.08.
2. Mortality experience variances in 2020 were driven by increased claims experience due to Covid-19, particularly impacting LGIA (reflected in Other) where we retain the majority of the mortality risk. In 2021, total LGI Covid-19 claims have exceeded the prior year reserves by £79m, and we have further established a provision of £57m for Covid-19 mortality impacts expected in 2022.
3. In 2021, mortality assumption changes for LGR reflect a one-off update to the spouse demography assumption of £100m. We have not recognised an explicit release from adopting CMI 2019 given the uncertainty in the data created by Covid-19. In 2020, the assumption changes included a one-off release of £153m (net of tax) from an update in the longevity trend assumption from adjusted CMI 2017 to adjusted CMI 2018. Other positive longevity variances in both years are driven by routine updates to our assumptions relating to base mortality rates.
4. In 2020, the £145m positive Other changes in valuation assumptions in LGR reflect both a reduction in the assumed late retirement factors applied to deferred annuities and the impact of updating unit cost and investment management expense assumptions.
5. In 2021, the £90m positive Other changes in valuation assumptions in LGI reflect the benefit of modelling improvements in UK retail protection, including the introduction of an illiquidity premium in the liability discount rate.
6. LGR Other movement in non-cash items is driven by the net effect of the capitalisation and unwind of future asset management profits on activity managed by LGIM, and is a function of new business volumes and movements in the main unit cost assumptions.

	2021	2020
	£m	£m


Asset management revenue (excluding 3rd party market data) ¹	980	929
Asset management transactional revenue ²	32	27
Asset management expenses (excluding 3rd party market data) ¹	(590)	(549)

Total LGIM operating profit ³	422	407

1. Asset management revenue and expenses exclude income and costs of £32m in relation to the provision of third party market data (2020: £27m).
2. Transactional revenue from external clients includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees.
3. The Workplace Savings business, which was previously reported in LGIM, has been transferred to LGRR. Prior year comparatives have been restated to reflect the change in reporting structure. Further details are provided in Note 1.08.


	2021	2020
	£m	£m


Direct investments ¹	350	112
Traded investment portfolio including treasury assets ²	111	163


Total LGC operating profit	461	275


1. Direct investments represents LGC's portfolio of assets across specialist commercial real estate, clean energy, housing and SME finance. Direct investments include operating profit in relation to CALA of £132m (2020: £7m).
2. The traded investment portfolio holds a diversified set of exposures across equities, fixed income, multi-asset funds and cash.


	2021	2020
	£m	£m


Investment variance related to protection liabilities	111	(459)
Investment variance related to the traded investment portfolio and direct investments	19	(299)
Other investment variance ¹	211	67

Investment variance	341	(691)
M&A related and other variances ²	(108)	297


Total investment and other variances	233	(394)


1. Other investment variance includes variances in respect of the defined benefit pension scheme, reflecting the impact of the acquisition of annuity assets from LGR, and the difference between the IAS 19 and annuity discount rates.
2. M&A related and other variances includes gains and losses, expenses and intangible amortisation relating to acquisitions, disposals and restructuring. 2021 includes: the impact of the sale of a book of retail investment products within the L&G Personal Investing business to Fidelity International Limited, announced in October 2020; the costs associated with LGIM's appointment of State Street to provide Charles River technology and middle office services, including the recognition of a multi-year restructuring provision; and the impact of impairing capitalised software intangibles as a result of various restructuring exercises.

Investment variance includes differences between actual and long-term expected investment return on traded and real assets (including direct investments), economic assumption changes caused by changes in market conditions or expectations (e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business, and the yield associated with assets held for future new pension risk transfer business from the valuation discount rate.

The long-term expected investment return is based on opening economic assumptions applied to the assets under management at the start of the reporting year. The assumptions underlying the calculation of the expected returns for traded equity, commercial property and residential property are based on market consensus forecasts and long-term historic average returns expected to apply through the cycle.

The long-term expected investment returns are:
	2021	2020


Equities	7%	7%
Commercial property	5%	5%
Residential property	RPI + 50bps	RPI + 50bps


Additionally, other alternative assets within the LGC portfolio comprise investments in housing, specialist commercial real estate, clean energy, digital infrastructure and venture capital. The long-term expected investment return is on average between 8% and 10%, in line with our stated investment objectives. Rates of return specific to each asset are determined at the point of underwriting and reviewed and updated annually. The expected investment return includes assumptions on appropriate discount rates and inflation as well as sector specific assumptions including retail and commercial property yields and power prices.


	After tax	Per share¹	After tax	Per share¹
	2021	2021	2020	2020
	£m	p	£m	p


Profit for the year attributable to equity holders	2,050	34.58	1,607	27.10
Less: coupon payable in respect of restricted Tier 1 convertible notes net of tax relief	(23)	(0.39)	(6)	(0.10)
Total basic earnings	2,027	34.19	1,601	27.00
Less: earnings derived from discontinued operations	-	-	(290)	(4.89)
Basic earnings derived from continuing operations	2,027	34.19	1,311	22.11

1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares.

	After tax	Weighted average number of shares	Per share¹
	2021	2021	2021
	£m	m	p


Profit for the year attributable to equity holders	2,050	5,929	34.58
Net shares under options allocable for no further consideration	-	59	(0.34)
Conversion of restricted Tier 1 notes	-	307	(1.67)


Total diluted earnings	2,050	6,295	32.57



	After tax	Weighted average number of shares	Per share¹
	2020	2020	2020
	£m	m	p


Profit for the year attributable to equity holders	1,607	5,930	27.10
Net shares under options allocable for no further consideration	-	40	(0.18)
Conversion of restricted Tier 1 notes	-	307	(1.32)


Total diluted earnings	1,607	6,277	25.60
Less: diluted earnings derived from discontinued operations	(290)	-	(4.62)
Diluted earnings derived from continuing operations	1,317	6,277	20.98
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 and conversion of restricted Tier 1 notes.

(a) Profit/(loss) for the year

					Group
					expenses	Total
					and debt	continuing
	LGR¹	LGIM¹	LGC	LGI	costs²	operations
For the year ended 31 December 2021	£m	£m	£m	£m	£m	£m


Operating profit/(loss)^#	1,506	422	461	268	(395)	2,262
Investment and other variances	242	(11)	19	111	(128)	233
Losses attributable to non-controlling interests	-	-	-	-	(7)	(7)

Profit/(loss) before tax attributable to equity holders	1,748	411	480	379	(530)	2,488

Tax (expense)/credit attributable to equity holders	(276)	(79)	(93)	(59)	62	(445)


Profit/(loss) for the year	1,472	332	387	320	(468)	2,043


					Group
					expenses	Total
					and debt	continuing
	LGR¹	LGIM¹	LGC	LGI	costs²	operations
For the year ended 31 December 2020	£m	£m	£m	£m	£m	£m


Operating profit/(loss)^#	1,728	407	275	189	(415)	2,184
Investment and other variances	15	1	(299)	(459)	24	(718)
Losses attributable to non-controlling interests	-	-	-	-	(36)	(36)



Profit/(loss) before tax attributable to equity holders	1,743	408	(24)	(270)	(427)	1,430

Tax (expense)/credit attributable to equity holders	(228)	(65)	(8)	58	94	(149)


Profit/(loss) for the year	1,515	343	(32)	(212)	(333)	1,281


1. LGR includes the Workplace Savings business which was previously reported in LGIM. Prior year comparatives have been restated to reflect the change in reporting structure.
2. Group expenses and debt costs include £nil of incremental costs incurred as a result of Covid-19 (2020: £27m).


# Operating profit for total continuing operations represents 'Adjusted operating profit', an alternative performance measure defined in the glossary.

(b) Total income

				LGC and	Total continuing
	LGR	LGIM^1,2	LGI	other³	operations
For the year ended 31 December 2021	£m	£m	£m	£m	£m


Internal income	-	179	-	(179)	-
External income	5,959	35,738	2,029	1,724	45,450


Total income	5,959	35,917	2,029	1,545	45,450



				LGC and	Total continuing
	LGR	LGIM^1,2	LGI	other³	operations
For the year ended 31 December 2020	£m	£m	£m	£m	£m


Internal income	-	201	-	(201)	-
External income	15,057	20,878	1,799	12,497	50,231


Total income	15,057	21,079	1,799	12,296	50,231


1. LGIM internal income relates to investment management services provided to other segments.
2. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds.
3. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.

		2021	2020
As at 31 December 2021	Notes	£m	£m

Assets
Goodwill		68	68
Other intangible assets		365	329
Deferred acquisition costs		26	47
Investment in associates and joint ventures accounted for using the equity method		375	288
Property, plant and equipment		316	274
Investment property	3.03	10,150	8,475
Financial investments	3.03	538,374	526,057
Reinsurers' share of contract liabilities		7,180	6,939
Deferred tax assets	3.04	2	5
Current tax assets		670	634
Receivables and other assets		8,625	9,429
Cash and cash equivalents		16,487	18,020


Total assets		582,638	570,565


Equity
Share capital	3.05	149	149
Share premium	3.05	1,012	1,006
Employee scheme treasury shares		(99)	(75)
Capital redemption and other reserves		196	198
Retained earnings		9,228	8,224


Attributable to owners of the parent		10,486	9,502
Restricted Tier 1 convertible notes	3.06	495	495
Non-controlling interests	3.07	(38)	(31)


Total equity		10,943	9,966


Liabilities
Non-participating insurance contract liabilities		89,825	89,029
Non-participating investment contract liabilities		372,954	343,543
Core borrowings	3.08	4,256	4,558
Operational borrowings	3.09	932	1,055
Provisions	3.13	1,238	1,288
Deferred tax liabilities	3.04	251	207
Current tax liabilities		84	61
Payables and other financial liabilities	3.10	74,264	91,942
Other liabilities		925	756
Net asset value attributable to unit holders		26,966	28,160


Total liabilities		571,695	560,599


Total equity and liabilities		582,638	570,565




			Employee	Capital		Equity	Restricted
			scheme	redemption		attributable	Tier 1	Non-
	Share	Share	treasury	and other	Retained	to owners	convertible	controlling	Total
For the year ended 31 December 2021	capital	premium	shares	reserves¹	earnings	of the parent	notes	interests	equity
For the year ended 31 December 2021	£m	£m	£m	£m	£m	£m	£m	£m	£m


As at 1 January 2021	149	1,006	(75)	198	8,224	9,502	495	(31)	9,966


Profit for the year	-	-	-	-	2,050	2,050	-	(7)	2,043
Exchange differences on translation of overseas operations	-	-	-	(11)	-	(11)	-	-	(11)
Net movement in cross-currency hedge	-	-	-	13	-	13	-	-	13
Net actuarial remeasurements on defined benefit pension schemes	-	-	-	-	46	46	-	-	46
Net movement in financial investments designated as available-for-sale	-	-	-	(3)	-	(3)	-	-	(3)


Total comprehensive income for the year	-	-	-	(1)	2,096	2,095	-	(7)	2,088
Options exercised under share option schemes	-	6	-	-	-	6	-	-	6
Shares purchased	-	-	(34)	-	-	(34)	-	-	(34)
Shares vested	-	-	10	(48)	-	(38)	-	-	(38)
Employee scheme treasury shares: - Value of employee services	-	-	-	33	-	33	-	-	33
Share scheme transfers to retained earnings	-	-	-	-	8	8	-	-	8
Dividends	-	-	-	-	(1,063)	(1,063)	-	-	(1,063)
Coupon payable in respect of restricted Tier 1 convertible notes net of tax relief	-	-	-	-	(23)	(23)	-	-	(23)
Currency translation differences	-	-	-	14	(14)	-	-	-	-


As at 31 December 2021	149	1,012	(99)	196	9,228	10,486	495	(38)	10,943


1. Capital redemption and other reserves as at 31 December 2021 include share-based payments £86m, foreign exchange £46m, capital redemption £17m, hedging £48m and available-for-sale reserves £(1)m.

	Dividend	Per share¹	Dividend	Per share¹
	2021	2021	2020	2020
	£m	p	£m	p


Ordinary dividends paid and charged to equity in the year:
- Final 2019 dividend paid in June 2020	-	-	754	12.64
- Interim 2020 dividend paid in September 2020	-	-	294	4.93
- Final 2020 dividend paid in June 2021	754	12.64	-	-
- Interim 2021 dividend paid in September 2021	309	5.18	-	-


Total dividends	1,063	17.82	1,048	17.57


Ordinary share dividend proposed ²	790	13.27	754	12.64

1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
2. Subsequent to 31 December 2021, the directors declared a final dividend for 2021 of 13.27 pence per ordinary share. This dividend will be paid on 1 June 2022. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2022 and is not included as a liability in the Consolidated Balance Sheet as at 31 December 2021.

	2021	2020
	£m	£m


Equities¹	213,049	189,089
Debt securities^2,3	296,930	295,660
Derivative assets⁴	16,792	24,631
Loans⁵	11,603	16,677


Financial investments	538,374	526,057


Investment property	10,150	8,475

Total financial investments and investment property	548,524	534,532
1. Equity securities include investments in unit trusts of £18,248m (31 December 2020: £13,215m).
2. Debt securities include accrued interest of £1,420m (31 December 2020: £1,434m).
3. A detailed analysis of debt securities to which shareholders are directly exposed is disclosed in Note 6.03.
4. Derivatives are used for 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 of £15,718m (31 December 2020: £23,208m).
5. Loans include £92m (31 December 2020: £131m) of loans valued at amortised cost.

	Carrying	Coupon		Carrying	Coupon
	amount	rate	Fair value	amount	rate	Fair value
	2021	2021	2021	2020	2020	2020
	£m	%	£m	£m	%	£m
Subordinated borrowings
10% Sterling subordinated notes 2041 (Tier 2) ¹	-	-	-	313	10.00	329
5.5% Sterling subordinated notes 2064 (Tier 2)	590	5.50	776	589	5.50	813
5.375% Sterling subordinated notes 2045 (Tier 2)	604	5.38	673	604	5.38	714
5.25% US Dollar subordinated notes 2047 (Tier 2)	635	5.25	694	628	5.25	703
5.55% US Dollar subordinated notes 2052 (Tier 2)	373	5.55	428	369	5.55	411
5.125% Sterling subordinated notes 2048 (Tier 2)	400	5.13	461	400	5.13	484
3.75% Sterling subordinated notes 2049 (Tier 2)	598	3.75	632	598	3.75	662
4.5% Sterling subordinated notes 2050 (Tier 2)	500	4.50	558	499	4.50	587
Client fund holdings of group debt (Tier 2) ²	(44)	-	(51)	(42)	-	(51)

Total subordinated borrowings	3,656	-	4,171	3,958	-	4,652

Senior borrowings
Sterling medium term notes 2031-2041	609	5.87	846	609	5.88	926
Client fund holdings of group debt ²	(9)	-	(11)	(9)	-	(12)
Total senior borrowings	600	-	835	600	-	914
Total core borrowings	4,256	-	5,006	4,558	-	5,566
1. These notes were redeemed in full on 23 July 2021.
2. £53m (31 December 2020: £51m) of the group's subordinated and senior borrowings are held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above.

The presented fair values of the group's core borrowings reflect quoted prices in active markets and they have been classified as Level 1 in the fair value hierarchy.


	Carrying	Interest		Carrying	Interest
	amount	rate	Fair value	amount	rate	Fair value
	2021	2021	2021	2020	2020	2020
	£m	%	£m	£m	%	£m

Short-term operational borrowings
Euro Commercial Paper	50	0.16	50	50	0.78	50
Bank loans and overdrafts	-	-	-	54	-	54

Non-recourse borrowings
Cardiff Interchange Limited	45	2.29	45	-	-	-
Later Living portfolio	-	-	-	72	2.77	72
CALA revolving credit facility	100	1.96	100	170	2.95	170
Class B Surplus Notes	664	1.72	664	639	2.45	639
Affordable Homes revolving credit facility	56	2.08	56	60	2.13	60
Homes Modular revolving credit facility	9	3.27	9	-	-	-

Operational borrowings ¹	924	-	924	1,045	-	1,045


1. Unit linked borrowings with a carrying value of £8m (31 December 2020: £10m) are excluded from the analysis above as the risk is retained by policyholders. Operational borrowings including unit linked borrowings are £932m (31 December 2020: £1,055m).



Non-recourse borrowings
- Cardiff Interchange Limited entered into a debt facility agreement with National Westminster Bank Plc. The facility is secured on the assets of Cardiff Interchange Limited and LGCIL's shares in, and intercompany debt owed by, Cardiff Interchange Limited. - Loan facilities to Later Living portfolio had a charge on all assets of each individual SPV company. - CALA Group (Holdings) Limited's revolving credit facility is secured by way of a bond and floating charge, and guarantees and fixed charges granted by CALA Group Limited and its main subsidiaries (CALA 1999 Limited, CALA Limited, and CALA Management Limited). A number of other bonds and floating charges, fixed securities, debentures and share pledges over land and assets have been granted by certain subsidiaries of CALA Group Limited in favour of the lenders. - The Class B Surplus Notes have been issued by a US subsidiary of the group as part of a coinsurance structure for the purpose of US statutory regulations. The notes were issued in exchange for bonds of the same value from an unrelated party, included within financial investments on the group's Consolidated Balance Sheet. - The revolving credit facility to Affordable Homes is subject to agreed covenants, the breach of which could result in a charge on the land and work in progress of Legal & General Affordable Homes (Development 2) Limited. - Legal & General Homes Modular Limited's revolving credit facility is secured by way of fixed charges over development properties owned by the company and a fixed charge over the shares in the company. There are also fixed and floating charges over the other assets of the company.

The carrying value of operational borrowings approximates their fair value. The presented fair values reflect observable market information and have been classified as Level 2 in the fair value hierarchy with the exception of Affordable Homes revolving credit facilities which have been classified as Level 3.


Syndicated Credit Facility
As at 31 December 2021, the group had in place a £1bn syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in December 2024. No amounts were outstanding at 31 December 2021.

	Impact on		Impact on
	pre-tax	Impact on	pre-tax	Impact on
	group profit	group equity	group profit	group equity
	net of re-	net of re-	net of re-	net of re-
	insurance	insurance	insurance	insurance
	2021	2021	2020	2020
	£m	£m	£m	£m


Economic sensitivity
100bps increase in interest rates¹	55	188	260	350
50bps decrease in interest rates¹	(77)	(139)	(194)	(227)
50bps increase in future inflation expectations	(41)	(60)	(148)	(119)
Credit spreads widen by 100bps with no change in expected defaults	(311)	(234)	(304)	(246)
25% rise in equity markets	513	423	482	399
25% fall in equity markets	(513)	(423)	(482)	(399)
15% rise in property values	1,299	1,084	1,111	903
15% fall in property values	(1,368)	(1,144)	(1,187)	(964)
10bps increase in credit default assumptions	(765)	(651)	(856)	(692)
10bps decrease in credit default assumptions	754	642	832	672


Non-economic sensitivity
1% increase in annuitant mortality	166	146	209	176
1% decrease in annuitant mortality	(170)	(150)	(218)	(183)
5% increase in assurance mortality	(451)	(357)	(450)	(356)
10% increase in maintenance expenses	(254)	(208)	(254)	(205)

1. Following improvements to the modelling of market risk sensitivities during the current year, the 2020 impacts on pre-tax group profit net of reinsurance under interest rates sensitivities have been restated to be on a basis consistent with the 2021 results. These restatements do not impact any items reported in the Consolidated Income Statement or Consolidated Balance Sheet.

(a) Tax expense in the Consolidated Income Statement

The tax expense attributable to equity holders differs from the tax calculated on profit before tax at the standard UK corporation tax rate as follows:

		Continuing
	Total	operations	Total
	2021	2020	2020
	£m	£m	£m


Profit before tax attributable to equity holders	2,488	1,430	1,788
Tax calculated at 19.00%	473	272	340

Adjusted for the effects of:
Recurring reconciling items:
(Lower)/higher rate of tax on profits taxed overseas¹	(104)	(111)	(111)
Income not subject to tax	-	(1)	(1)
Non-deductible expenses	6	11	11
Differences between taxable and accounting investment gains	(13)	(10)	(10)
Foreign tax	-	1	1
Unrecognised tax losses	1	14	14

Non-recurring reconciling items:
Adjustments in respect of prior years²	24	(42)	(42)
Impact of the revaluation of deferred tax balances³	58	16	16
Other	-	(1)	(1)


Tax expense/(credit) attributable to equity holders	445	149	217


Equity holders' effective tax rate	17.9%	10.4%	12.1%


1. The lower rate of tax on overseas profits is principally driven by the 0% rate of taxation arising in our Bermudan reinsurance company, which provides the group with regulatory capital flexibility for both our PRT business and our US term insurance business. This also includes the impact of our US operations which are taxed at 21%.
2. Adjustments in respect of prior years relate to revisions of prior estimates.
3. The Finance Act 2021 increased the rate of corporation tax from 19% to 25% from 1 April 2023. The prevailing rate of UK corporation tax for the year remained at 19%. The future enacted tax rate of 25% has been used in the calculation of UK deferred tax assets and liabilities, as the rate of corporation tax that is expected to apply when the majority of those deferred tax balances reverse.

(b) Deferred tax
	2021	2020
Deferred tax (liabilities)/assets	£m	£m


Deferred acquisition expenses	95	85
- Overseas	95	85
Difference between the tax and accounting value of insurance contracts	(695)	(557)
- UK	(269)	(207)
- Overseas	(426)	(350)
Realised and unrealised gains on investments³	(83)	(113)
Excess of depreciation over capital allowances	22	18
Excess expenses	-	1
Accounting provisions and other³	55	54
Trading losses¹	348	289
Pension fund deficit	9	22
Acquired intangibles	-	(1)

Net deferred tax liabilities	(249)	(202)


Presented on the Consolidated Balance Sheet as:
- Deferred tax assets²	2	5
- Deferred tax liabilities	(215)	(168)
- Overseas net deferred tax liabilities	(36)	(39)


Net deferred tax liabilities	(249)	(202)


1. Trading losses include deferred tax on UK trade and US operating losses of £2m (2020: £5m) and £346m (2020: £284m) respectively. Overseas net deferred tax liabilities include a deferred tax asset of £346m (2020: £284m) on accumulated losses in our US insurance business. These losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax assets is routinely reviewed by management.
2. The deferred tax asset recognised separately in the consolidated balance sheet refers to deferred tax assets against which there are no appropriate deferred tax liabilities to offset the asset. The closing amount of £2m (2020: £5m) are restricted losses which cannot be offset against profits arising elsewhere in the group.
3. The US deferred tax liability of £102m (2020: £40m) in respect of US bond contracts has been reclassified from Accounting provisions and other to Realised and unrealised gains on investments. The net impact on the total balance is £nil.

		2021			2020
		Number of	2021		Number of	2020
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 2021			5,967,358,713		149	1,006
Options exercised under share option schemes			3,057,104		-	6


As at 31 December 2021			5,970,415,817		149	1,012


					Share	Share
				Number of	capital	premium
Issued share capital, fully paid				shares	£m	£m


As at 1 January 2020			5,965,349,607		149	1,000
Options exercised under share option schemes			2,009,106		-	6


As at 31 December 2020			5,967,358,713		149	1,006


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.

				2021	2020
				£m	£m

Derivative liabilities				15,718	23,208
Repurchase agreements ¹				46,331	53,853
Other financial liabilities ²				12,215	14,881

Total payables and other financial liabilities				74,264	91,942




Due within 12 months				53,250	65,316
Due after 12 months				21,014	26,626
1. Repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements. The significant majority of repurchase agreements are unit linked.
2. Other financial liabilities includes trail commission, lease liabilities, FX spots and the value of short positions taken out to cover reverse repurchase agreements. The value of short positions as at 31 December 2021 was £5,418m (2020: £5,147m).


Fair value hierarchy
					Amortised
	Total	Level 1	Level 2	Level 3	cost¹
As at 31 December 2021	£m	£m	£m	£m	£m


Derivative liabilities	15,718	331	15,316	71	-
Repurchase agreements	46,331	-	46,331	-	-
Other financial liabilities	12,215	5,438	55	-	6,722
Total payables and other financial liabilities	74,264	5,769	61,702	71	6,722



					Amortised
	Total	Level 1	Level 2	Level 3	cost¹
As at 31 December 2020	£m	£m	£m	£m	£m


Derivative liabilities	23,208	300	22,826	82	-
Repurchase agreements	53,853	-	53,853	-	-
Other financial liabilities ²	14,881	7,438	29	11	7,403

Total payables and other financial liabilities	91,942	7,738	76,708	93	7,403


1. The carrying value of payables and other financial liabilities at amortised cost approximates its fair value.
2. For 2020, £2,216m of Other financial liabilities have been reclassified from Amortised cost to Level 1 in the Fair value hierarchy, such that they are consistent with their treatment in the current year.

Significant transfers between levels There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the year ended 31 December 2021 (2020: no significant transfers).

Principal rates of exchange used for translation are:

Year end exchange rates	2021	2020


United States dollar	1.35	1.37
Euro	1.19	1.12



Average exchange rates	2021	2020


United States dollar	1.38	1.28
Euro	1.16	1.13

3.15 Related party transactions
(i) Key management personnel transactions and compensation


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 £109m (31 December 2020: £137m) for all employees.
At 31 December 2021 and 31 December 2020 there were no loans outstanding to officers of the company.

The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:

	2021	2020
	£m	£m


Salaries	10	8
Share-based incentive awards	5	5


Key management personnel compensation	15	13