L&G Full Year Results 2021 Part 3

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Legal & General Group (LGEN)

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		Active	Multi		Real	Total
	Index	strategies	asset	Solutions²	assets	AUM
For the year ended 31 December 2021	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2021	429.9	193.6	65.7	557.2	32.5	1,278.9
External inflows	93.9	18.7	15.1	34.4	1.7	163.8
External outflows	(91.5)	(15.8)	(8.1)	(25.5)	(1.8)	(142.7)
Overlay net flows	-	-	-	11.0	-	11.0
ETF net flows	2.5	-	-	-	-	2.5


External net flows³	4.9	2.9	7.0	19.9	(0.1)	34.6
Internal net flows⁴	(1.0)	(1.8)	0.2	(1.5)	2.0	(2.1)


Total net flows	3.9	1.1	7.2	18.4	1.9	32.5
Cash management movements⁵	-	1.1	-	-	-	1.1
Market and other movements³	68.6	3.0	5.1	29.5	2.8	109.0



As at 31 December 2021	502.4	198.8	78.0	605.1	37.2	1,421.5

Assets attributable to:
External						1,306.3
Internal						115.2


		Active	Multi		Real	Total
	Index	strategies	asset⁶	Solutions^2,6	assets	AUM
For the year ended 31 December 2020	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2020	403.6	177.2	59.0	525.6	30.8	1,196.2
External inflows	76.6	17.7	10.1	25.4	1.0	130.8
External outflows	(84.7)	(17.8)	(5.8)	(36.1)	(1.4)	(145.8)
Overlay net flows	-	-	-	33.9	-	33.9
ETF net flows	1.5	-	-	-	-	1.5


External net flows³	(6.6)	(0.1)	4.3	23.2	(0.4)	20.4
Internal net flows⁴	(0.2)	2.6	(0.4)	(0.3)	0.4	2.1


Total net flows	(6.8)	2.5	3.9	22.9	-	22.5
Cash management movements⁵	-	2.4	-	-	-	2.4
Market and other movements³	33.1	11.5	2.8	8.7	1.7	57.8



As at 31 December 2020	429.9	193.6	65.7	557.2	32.5	1,278.9

Assets attributable to:
External						1,162.6
Internal						116.3


1. Assets under management (AUM) includes assets on our Investment Only Platform that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £383.2bn (31 December 2020: £340.1bn) of derivative notionals associated with the Solutions business.
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2021 was £71.2bn (31 December 2020: £45.8bn) and the movement in these assets is included in Market and other movements for Solutions assets.
4. Internal includes legacy assets from the Mature Savings business sold to ReAssure in 2020.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. Multi asset AUM as at 31 December 2020 has been restated to include £2.3bn (31 December 2019: £1.0bn) of Target Date Return funds previously included within Solutions.

		Active	Multi		Real	Total
	Index	strategies	asset⁶	Solutions^2,6	assets	AUM
For the year ended 31 December 2021	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2021	429.9	193.6	65.7	557.2	32.5	1,278.9

External inflows	44.5	10.0	7.2	17.9	0.6	80.2
External outflows	(41.9)	(7.7)	(4.0)	(7.1)	(0.8)	(61.5)
Overlay net flows	-	-	-	6.6	-	6.6
ETF net flows	2.1	-	-	-	-	2.1


External net flows³	4.7	2.3	3.2	17.4	(0.2)	27.4
Internal net flows⁴	(0.3)	(2.3)	0.1	(0.2)	1.0	(1.7)

Total net flows	4.4	-	3.3	17.2	0.8	25.7
Cash management movements⁵	-	(0.4)	-	-	-	(0.4)
Market and other movements³	37.1	(3.1)	2.8	(14.6)	0.4	22.6


As at 30 June 2021	471.4	190.1	71.8	559.8	33.7	1,326.8


External inflows	49.4	8.7	7.9	16.5	1.1	83.6
External outflows	(49.6)	(8.1)	(4.1)	(18.4)	(1.0)	(81.2)
Overlay net flows	-	-	-	4.4	-	4.4
ETF net flows	0.4	-	-	-	-	0.4


External net flows³	0.2	0.6	3.8	2.5	0.1	7.2
Internal net flows⁴	(0.7)	0.5	0.1	(1.3)	1.0	(0.4)


Total net flows	(0.5)	1.1	3.9	1.2	1.1	6.8
Cash management movements⁵	-	1.5	-	-	-	1.5
Market and other movements³	31.5	6.1	2.3	44.1	2.4	86.4


As at 31 December 2021	502.4	198.8	78.0	605.1	37.2	1,421.5

1. AUM includes assets on our Investment Only Platform, that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £383.2bn (30 June 2021: £345.3bn; 31 December 2020: £340.1bn) of derivative notionals associated with the Solutions business.
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2021 was £71.2bn (30 June 2021: £51.5bn; 31 December 2020: £45.8bn) and the movement in these assets is included in Market and other movements for Solutions assets.
4. Internal includes legacy assets from the Mature Savings business sold to ReAssure in 2020.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. Multi asset AUM as at 30 June 2021 has been restated to include £3.7bn (31 December 2020: £2.3bn) of Target Date Return funds previously included within Solutions.

		Active	Multi		Real	Total
	Index	strategies	asset⁶	Solutions^2,6	assets	AUM
For the year ended 31 December 2020	£bn	£bn	£bn	£bn	£bn	£bn


As at 1 January 2020	403.6	177.2	59.0	525.6	30.8	1,196.2
External inflows	27.7	9.5	4.4	10.8	0.6	53.0
External outflows	(32.3)	(9.0)	(2.7)	(22.7)	(0.4)	(67.1)
Overlay net flows	-	-	-	20.1	-	20.1
ETF net flows	0.2	-	-	-	-	0.2


External net flows³	(4.4)	0.5	1.7	8.2	0.2	6.2
Internal net flows⁴	-	(0.2)	(0.7)	(0.1)	0.4	(0.6)

Total net flows	(4.4)	0.3	1.0	8.1	0.6	5.6
Cash management movements⁵	-	2.8	-	-	-	2.8
Market and other movements³	(4.1)	9.2	(1.7)	31.9	0.7	36.0


As at 30 June 2020	395.1	189.5	58.3	565.6	32.1	1,240.6


External inflows	48.9	8.2	5.7	14.6	0.4	77.8
External outflows	(52.4)	(8.8)	(3.1)	(13.4)	(1.0)	(78.7)
Overlay net flows	-	-	-	13.8	-	13.8
ETF net flows	1.3	-	-	-	-	1.3


External net flows³	(2.2)	(0.6)	2.6	15.0	(0.6)	14.2
Internal net flows⁴	(0.2)	2.8	0.3	(0.2)	-	2.7


Total net flows	(2.4)	2.2	2.9	14.8	(0.6)	16.9
Cash management movements⁵	-	(0.4)	-	-	-	(0.4)
Market and other movements³	37.2	2.3	4.5	(23.2)	1.0	21.8


As at 31 December 2020	429.9	193.6	65.7	557.2	32.5	1,278.9

1. Assets under management (AUM) includes assets on our Investment Only Platform, that are managed by third parties, on which fees are earned.
2. Solutions include liability driven investments and £340.1bn of derivative notionals associated with the Solutions business.
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets as at 31 December 2020 was £45.8bn and the movement in these assets is included in Market and other movements for Solutions assets.
4. Internal net flows include flows in legacy assets from the Mature Savings business sold to ReAssure in 2020.
5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
6. Multi asset AUM as at 31 December 2020 has been restated to include £2.3bn (30 June 2020: £1.2bn; 31 December 2019: £1.0bn) of Target Date Return funds previously included within Solutions.

	Assets under management at				Net flows for the six months ended²


	31 December	30 June	31 December	30 June	31 December	30 June	31 December	30 June
	2021	2021	2020	2020	2021	2021	2020	2020
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


International¹	377.3	344.8	303.5	289.5	14.5	15.0	(1.0)	(3.0)

UK Institutional
- Defined contribution	137.7	125.5	112.7	96.7	5.0	4.4	5.6	5.5
- Defined benefit	733.3	689.6	699.4	706.7	(13.9)	4.6	7.7	2.5

Retail³	49.1	45.5	41.6	38.5	1.2	1.3	0.6	1.0

ETF⁴	8.9	8.2	5.4	3.5	0.4	2.1	1.3	0.2


Total external	1,306.3	1,213.6	1,162.6	1,134.9	7.2	27.4	14.2	6.2

1. International assets are shown on the basis of client domicile. Total International AUM including assets managed internationally on behalf of UK clients amounted to £479bn as at 31 December 2021 (31 December 2020: £388bn).
2. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability.
3. Retail represents assets from the Retail Intermediary business and £0.3bn of assets from Personal Investing customers that did not migrate to Fidelity International Limited.
4. ETF reflects external AUM and Flows invested on the platform. Total AUM managed on the platform is £10.1bn in 2021 (£6.2bn in 2020) and Flows are £2.9bn (£1.8bn in 2020) which include internal investment from other LGIM asset classes.



	Workplace¹	Annuities²	Workplace	Annuities
	2021	2021	2020	2020
	£bn	£bn	£bn	£bn


As at 1 January	50.8	87.0	40.3	75.9
Gross inflows	11.9	8.7	10.0	10.1
Gross outflows	(3.4)	-	(2.2)	-
Payments to pensioners	-	(4.6)	-	(4.3)

Net flows	8.5	4.1	7.8	5.8
Market and other movements	6.4	(1.2)	2.7	5.3



As at 31 December	65.7	89.9	50.8	87.0

1. Workplace assets under administration as at 31 December 2021 includes £65.6bn (2020: £50.7bn) of assets under management included in Note 4.01.
2. Annuities assets under administration as at 31 December 2021 includes £80.6bn (2020: £79.4bn) of assets under management included in Note 4.01.

		6 months	6 months		6 months	6 months
	Total	31 December	30 June	Total	31 December	30 June
	2021	2021	2021	2020	2020	2020
	£m	£m	£m	£m	£m	£m


Pension risk transfer
- UK¹	6,240	3,275	2,965	7,593	4,417	3,176
- US	789	682	107	1,250	1,002	248
- Bermuda	147	147	-	-	-	-
Individual annuities	957	474	483	910	489	421
Lifetime & Retirement Interest Only mortgage advances	848	434	414	791	429	362


Total LGR new business	8,981	5,012	3,969	10,544	6,337	4,207


1. UK pension risk transfer includes a £925m (H1 21: £925m; H2 21: £nil) (H1 20: £nil; H2 20: £397m) Assured Payment Policy (APP).

As at 31 December 2021, and on the above basis, the group had a surplus of £8,185m (31 December 2020: £7,436m) over its Solvency Capital Requirement, corresponding to a Solvency II capital coverage ratio of 187% (31 December 2020: 175%). The Solvency II capital position is as follows:
	2021	2020 ¹
	£m	£m


Unrestricted Tier 1 Own Funds	13,254	12,478
Restricted Tier 1 Own Funds²	495	495
Tier 2 Subordinated liabilities³	3,995	4,531
Eligibility restrictions	(183)	(188)
Solvency II Own Funds^4,5	17,561	17,316
Solvency Capital Requirement	(9,376)	(9,880)


Solvency II surplus	8,185	7,436


SCR Coverage ratio	187%	175%



1. 2020 figures have been restated to include the contribution from the final salary pension schemes, replacing the "shareholder view" from prior years' disclosures.
2. Restricted Tier 1 Own Funds represent restricted Tier 1 contingent convertible notes.
3. £300m of Tier 2 subordinated liabilities were redeemed in full on 23 July 2021.
4. Solvency II Own Funds do not include an accrual for the final dividend of £790m (31 December 2020: £754m) declared after the balance sheet date.
5. Solvency II Own Funds allow for a Risk Margin of £5,488m (2020: £6,064m) and TMTP of £4,736m (2020: £5,564m).


The table below shows the movement (net of tax) during the year ended 31 December 2021 in the group's Solvency II surplus.

	2021	2021	2021
	Own Funds	SCR	Surplus
	£m	£m	£m
Opening Position	17,316	(9,880)	7,436
Operational Surplus Generation (Continuing Operations)	1,144	492	1,636
Operational Surplus Generation (Discontinued Operations)	-	-	-
Total operational surplus generation	1,144	492	1,636
New business strain	330	(684)	(354)
Net surplus generation	1,474	(192)	1,282
Operating variances¹			26
Market movements²			727
M&A, portfolio and business transfers³			77
Subordinated liabilities⁴			(300)
Dividends paid⁵			(1,063)
Total surplus movement (after dividends paid in the period)	245	504	749
Closing Position	17,561	(9,376)	8,185
1. Operating variances include the impact of experience variances, changes to valuation assumptions, methodology changes and other management actions including changes in asset mix.
2. Market movements represent the impact of changes in investment market conditions over the year and changes to future economic assumptions.
3. Includes the impact of the sale of the Personal Investment business.
4. Reflects the redemption of £300m debt issued in 2009.
5. Dividends paid are the amounts from the 2020 final dividend and the 2021 interim dividend.

The table below shows a projection of future Operational Surplus Generation (OSG) expected from the £85.7bn UK annuity portfolio as at 31 December 2021. The projection excludes any allowance for future new business.
The table shows the Operational Surplus Generation from all of the group's divisions that are involved in the management of the annuity business, i.e. Legal & General Retirement, Legal & General Capital and Legal & General Investment Management. The impact of management actions is excluded; we expect management actions to contribute between £100m and £200m each year.

								Total
	2021	2022	2023	2024	2025	2026-2030	2031-2040	2022-2040
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn


Annuity back book OSG¹	0.7	0.7	0.7	0.6	0.5	1.9	4.9	9.3
L&G Other	0.2	0.3	0.3	0.3	0.3	1.4	2.1	4.7
Total OSG for UK Annuity back book	0.9	1.0	1.0	0.9	0.8	3.3	7.0	14.0
1. Annuity back book Operational Surplus Generation does not include new business.

(i) The table below provides a reconciliation of the group's IFRS Release from operations to Solvency II Operational surplus generation.
	2021	2020
	£m	£m
IFRS Release from operations	1,441	1,269
Expected release of IFRS prudential margins	(496)	(465)
Releases of IFRS specific reserves¹	(162)	(163)
Solvency II investment margin^2,3	213	344
Release of Solvency II Capital Requirement and Risk Margin less TMTP amortisation	640	507
Solvency II Operational surplus generation⁴	1,636	1,492
1. Release of prudence from IFRS specific reserves which are not included in Solvency II (e.g. long-term longevity and expense margins).
2. Release of prudence related to differences between the PRA defined Fundamental Spread and Legal & General's best estimate default assumption.
3. Expected market returns earned on LGR's free assets in excess of risk-free rates over 2021.
4. Solvency II Operational Surplus Generation includes management actions which at the start of 2021 were reasonably expected to be implemented over the year.

(ii) The table below provides a reconciliation of the group's IFRS New business surplus to Solvency II New business strain.
	2021	2020
	£m	£m
IFRS New business surplus	247	270
Removal of requirement to set up prudential margins above best estimate on new business	280	355
Set up of SCR on new business	(684)	(719)
Set up of Risk Margin on new business	(197)	(208)
Solvency II New business strain¹	(354)	(302)
1. UK PRT new business volume during 2021 was £6.2bn (2020: £7.6bn).


A reconciliation of the group's IFRS equity to Solvency II Own Funds is given below:
	2021	2020
	£m	£m
IFRS equity¹	10,981	9,997
Remove DAC, goodwill and other intangible assets and associated liabilities	(406)	(391)
Add IFRS carrying value of subordinated borrowings²	3,700	4,000
Insurance contract valuation differences³	4,132	4,495
Difference in value of net deferred tax liabilities	(716)	(638)
Other	53	41
Eligibility restrictions	(183)	(188)
Solvency II Own Funds⁴	17,561	17,316
1. IFRS equity represents equity attributable to owners of the parent and restricted Tier 1 convertible notes as per the Consolidated Balance Sheet.
2. Treated as available capital on the Solvency II balance sheet as the liabilities are subordinate to policyholder claims.
3. Differences in the measurement of technical provisions between IFRS and Solvency II.
4. Solvency II Own Funds do not include an accrual for the final dividend of £790m (31 December 2020: £754m) declared after the balance sheet date.

The following sensitivities are provided to give an indication of how the group's Solvency II surplus as at 31 December 2021 would have changed in a variety of adverse events. These are all independent stresses to a single risk. In practice, the balance sheet is impacted by combinations of stresses and the combined impact can be larger than adding together the impacts of the same stresses in isolation. It is expected that, particularly for market risks, adverse stresses will happen together.

	Impact on	Impact on	Impact on	Impact on
	net of tax	net of tax	net of tax	net of tax
	Solvency II	Solvency II	Solvency II	Solvency II
	capital	coverage	capital	coverage
	surplus	ratio	surplus¹	ratio¹
	2021	2021	2020	2020
	£bn	%	£bn	%


50bps increase in risk-free rates¹	0.5	10	0.6	11
100bps increase in risk-free rates¹	0.9	19	1.0	20
50bps decrease in risk-free rates^1,2	(0.6)	(10)	(0.7)	(11)
Credit spreads widen by 100bps assuming an escalating addition to ratings^3,4	0.6	13	0.5	11
Credit spreads narrow by 100bps assuming an escalating deduction from ratings^3,4	(0.6)	(14)	(0.7)	(12)
Credit spreads widen by 100bps assuming a level addition to ratings³	0.7	14	0.7	13
Credit spreads of sub investment grade assets widen by 100bps assuming a level addition to ratings^3,5	(0.4)	(7)	(0.4)	(5)
Credit migration⁶	(0.9)	(10)	(1.2)	(12)
25% fall in equity markets⁷	(0.5)	(3)	(0.5)	(4)
15% fall in property markets⁸	(0.8)	(7)	(0.6)	(5)
50bps increase in future inflation expectations	-	(2)	-	(2)
10% increase in maintenance expenses⁹	(0.3)	(3)	(0.3)	(3)
Substantially reduced Risk Margin¹⁰	0.6	7	0.5	5

1. Assuming a recalculation of the Transitional Measure on Technical Provisions that partially offsets the impact on Risk Margin.
2. In the interest rate down stress negative rates are allowed, i.e. there is no floor at zero rates.
3. The spread sensitivity applies to the group's corporate bond (and similar) holdings, with no change in long-term default expectations, post management actions. Restructured lifetime mortgages are excluded as the underlying exposure is mostly to property.
4. The stress for AA bonds is twice that for AAA bonds, for A bonds it is three times, for BBB four times and so on, such that the weighted average spread stress for the portfolio is 100 basis points. To give a 100bps increase on the total portfolio, the spread stress increases in steps of 32bps, i.e. 32bps for AAA, 64bps for AA etc.
5. No stress for bonds rated BBB and above. For bonds rated BB and below the stress is 100bps. The spread widening on the total portfolio is 2bps as the group holds less than 2% in bonds rated BB and below. The impact is primarily an increase in SCR arising from the modelled cost of trading downgraded bonds back to a higher rating in the stress scenarios in the SCR calculation.
6. Credit migration stress covers the cost of an immediate big letter downgrade on 20% of all assets where the capital treatment depends on a credit rating (including corporate bonds, and sale and leaseback rental strips; lifetime mortgage senior notes are excluded). Downgraded assets are assumed to be traded to their original credit rating, so the impact is primarily a reduction in Own Funds from the loss of value on downgrade. The impact of the sensitivity will depend upon the market levels of spreads at the balance sheet date.
7. This relates primarily to equity exposure in LGC but will also include equity-based mutual funds and other investments that receive an equity stress (for example, certain investments in subsidiaries). Some assets have factors that increase or decrease the stress relative to general equity levels via a beta factor.
8. Assets stressed include residual values from sale and leaseback, the full amount of lifetime mortgages and direct investments treated as property.
9. A 10% increase in the assumed unit costs and future costs of investment management across all long-term insurance business
10. Assuming a 2/3 reduction in the Risk Margin, allowing for offset from an equivalent reduction in the Transitional Measure on Technical Provisions.

The above sensitivity analysis does not reflect all management actions which could be taken to reduce the impacts. In practice, the group actively manages its asset and liability positions to respond to market movements. Other than in the interest rate and inflation stresses, we have not allowed for the recalculation of TMTP.
The impacts of these stresses are not linear therefore these results should not be used to interpolate or extrapolate the impact of a smaller or larger stress. The results of these tests are indicative of the market conditions prevailing at the balance sheet date. The results would be different if performed at an alternative reporting date.

The table below shows a breakdown of the group's SCR by risk type. The split is shown before the effects of diversification and tax.

	2021	2020¹
	%	%


Interest rate	4	2
Equity	5	6
Property	8	8
Credit²	25	30
Currency	2	3
Inflation	7	7
Total Market risk ³	51	56
Counterparty risk	4	1
Life mortality	2	3
Life longevity⁴	27	22
Life mass lapse	2	2
Life non-mass lapse	2	2
Life catastrophe	4	4
Expense	2	3
Total Insurance risk	39	36
Non-life underwriting	-	1
Operational risk	4	4
Miscellaneous⁵	2	2

Total SCR	100	100

1. The 2020 SCR by risk type has been restated to include the contribution from the final salary pension schemes, replacing the "shareholder view" from prior years' disclosures.
2. Credit risk is one of the group's most significant exposures, arising predominantly from the portfolio of bonds and bond-like assets backing the group's annuity business.
3. In addition to credit risk the group also has significant exposure to other market risks, primarily due to the investment holdings within the shareholder funds but also the risk to fee income from assets backing unit-linked business.
4. Longevity risk is the group's most significant insurance risk exposure, arising from the annuity book on which the majority of the longevity risk on the back book is retained.
5. Miscellaneous includes LGA and L&G Re 2 on a Deduction and Aggregation basis and the sectoral capital requirements for non-insurance regulated firms.

Management estimates of the present value of new business premium (PVNBP) and the margin for selected lines of business are provided below:


		Contribution			Contribution
		from new			from new
	PVNBP²	business³	Margin⁴	PVNBP²	business³	Margin⁴
	2021	2021	2021	2020	2020	2020
	£m	£m	%	£m	£m	%


LGR - UK annuity business	7,016	635	9.1	8,503	901	10.6

UK Protection Total	1,883	149	7.9	1,887	160	8.5
- Retail Protection	1,476	120	8.1	1,359	123	9.1
- Group Protection	407	29	7.1	528	37	7.0

US Protection⁵	842	113	13.4	829	94	11.2


1. Selected lines of business only.
2. PVNBP excludes quota share reinsurance single premium of £181m relating to LGR new business.
3. The contribution from new business is defined as the present value at the point of sale of expected future Solvency II surplus emerging from new business written in the year using the risk discount rate applicable at the end of the year.
4. Margin is based on unrounded inputs.
5. In local currency, US Protection reflects PVNBP of $1,159m (31 December 2020: $1,064m) and a contribution from new business of $155m (31 December 2020: $120m).

The decrease in LGR margin was driven by the shorter average duration for the schemes written in 2021, compared to the schemes written in 2020. For UK Protection the contribution from new business is supported by increased Retail Protection volumes; the reduction in margin is largely due to pricing action, movements in product mix and changes in market conditions in 2021. The US Protection margin improved compared to the prior full year. The increase is driven by business mix and modified reinsurance terms on digital products.

Analysed by investment class:


				Other
		LGR	LGC	shareholder
		investments	investments	investments	Total	Total
		2021	2021	2021	2021	2020
	Notes	£m	£m	£m	£m	£m


Equities		80	2,845	260	3,185	3,086
Bonds	6.03	81,812	2,157	2,834	86,803	85,502
Derivative assets ²		13,135	68	-	13,203	20,936
Property	6.04	5,286	424	-	5,710	4,672
Loans ³		1,899	372	61	2,332	4,248


Financial investments		102,212	5,866	3,155	111,233	118,444


Cash and cash equivalents		1,983	984	629	3,596	3,616
Other assets ⁴		96	1,765	-	1,861	1,798


Total investments		104,291	8,615	3,784	116,690	123,858


2. Derivative assets are shown gross of derivative liabilities of £14.1bn (31 December 2020: £21.2bn). Exposures arise from use of derivatives for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for assets and liability management.
3. Loans include reverse repurchase agreements of £2,240m (31 December 2020: £4,117m).
4. Other assets include finance leases of £86m (31 December 2020: £88m), associates and joint ventures of £375m (31 December 2020: £288m) and the consolidated net asset value of the group's investments in CALA Homes and other housing businesses.

	Direct¹	Traded²		Direct¹	Traded²
	investments	securities	Total	investments	securities	Total
	2021	2021	2021	2020	2020	2020
	£m	£m	£m	£m	£m	£m


Equities	1,248	1,937	3,185	1,145	1,941	3,086
Bonds ³	24,237	62,566	86,803	21,555	63,947	85,502
Derivative assets	-	13,203	13,203	-	20,936	20,936
Property ⁴	5,710	-	5,710	4,672	-	4,672
Loans	63	2,269	2,332	99	4,149	4,248

Financial investments	31,258	79,975	111,233	27,471	90,973	118,444

Cash and cash equivalents	114	3,482	3,596	42	3,574	3,616
Other assets	1,861	-	1,861	1,798	-	1,798


Total investments	33,233	83,457	116,690	29,311	94,547	123,858
1. Direct investments, which generally constitute an agreement with another party, represent an exposure to untraded and often less volatile asset classes. Direct investments also include physical assets, bilateral loans and private equity, but excluded hedge funds.
2. Traded securities are defined by exclusion. If an instrument is not a direct investment, then it is classed as a traded security.
3. Bonds include lifetime mortgage loans of £6,857m (31 December 2020: £6,036m).
4. A further breakdown of property is provided in Note 6.04.

	LGR	LGC ¹	LGI	Total
	2021	2021	2021	2021
	£m	£m	£m	£m


Equities	12	1,124	112	1,248
Bonds²	23,029	3	1,205	24,237
Property	5,286	424	-	5,710
Loans	-	63	-	63
Financial investments	28,327	1,614	1,317	31,258
Other assets, cash and cash equivalents	96	1,879	-	1,975
Total direct investments	28,423	3,493	1,317	33,233

	LGR	LGC¹	LGI	Total
	2020	2020	2020	2020
	£m	£m	£m	£m


Equities	-	1,043	102	1,145
Bonds ²	20,306	3	1,246	21,555
Property	4,319	353	-	4,672
Loans	-	99	-	99
Financial investments	24,625	1,498	1,348	27,471
Other assets, cash and cash equivalents	106	1,730	4	1,840
Total direct investments	24,731	3,228	1,352	29,311

1. LGC includes £54m (2020: £47m) of equities that belong to other shareholder funds.
2. Bonds include lifetime mortgage loans of £6,857m (2020: £6,036m).

	2021	2020
	%	%


Margin for Risk	4.1	3.9

Risk-free rate
- UK	0.9	0.5
- US	1.5	0.9
Risk discount rate (net of tax)
- UK	5.0	4.4
- US	5.6	4.8

Long-term rate of return on non-profit annuities in LGR	2.5	2.1

A reconciliation of PVNBP and gross written premium is given below:
		2021	2020
	Notes	£bn	£bn


PVNBP	5.02 (a)	9.7	11.2
Effect of capitalisation factor		(2.1)	(2.3)


New business premiums from selected lines		7.6	8.9
Other¹		1.8	2.0


Total LGR and LGI new business	4.07,4.08	9.4	10.9
Annualisation impact of regular premium long-term business		(0.2)	(0.2)
IFRS gross written premiums from existing long-term insurance business		3.3	3.0
Deposit accounting for investment products		(2.1)	(1.2)


Total gross written premiums²		10.4	12.5


1. Other principally includes annuity sales in the US, lifetime and retirement interest only mortgage advances and £0.2bn quota share reinsurance premiums.
2. Total gross written premiums includes £109m (2020: £114m) of gross written premiums relating to a residual reinsurance treaty following the disposal of the General Insurance business in 2019.

	Market	Market
	value	value
	2021	2020
	£m	£m


Worldwide total assets under management¹	1,426,462	1,285,489
Client and policyholder assets	(1,309,772)	(1,161,631)


Investments to which shareholders are directly exposed	116,690	123,858


1. Worldwide total assets under management include LGIM AUM and other group assets not managed by LGIM.

					BB or
	AAA	AA	A	BBB	below	Other	Total²	Total²
As at 31 December 2021	£m	£m	£m	£m	£m	£m	£m	%


Sovereigns, Supras and Sub-Sovereigns	2,008	10,348	1,302	360	9	-	14,027	16
Banks:
- Tier 2 and other subordinated	-	-	56	36	3	-	95	-
- Senior	95	1,858	3,998	738	1	-	6,690	8
- Covered	138	-	-	-	-	-	138	-
Financial Services:
- Tier 2 and other subordinated	-	111	60	72	-	8	251	-
- Senior	57	416	422	315	-	-	1,210	1
Insurance:
- Tier 2 and other subordinated	61	192	32	62	-	-	347	-
- Senior	4	196	460	535	-	-	1,195	1
Consumer Services and Goods:
- Cyclical	-	33	1,399	1,760	206	-	3,398	4
- Non-cyclical	350	1,003	2,737	3,836	346	-	8,272	10
- Healthcare	-	690	837	889	5	-	2,421	3
Infrastructure:
- Social	215	780	5,001	900	79	-	6,975	8
- Economic	303	50	1,121	4,294	191	-	5,959	7
Technology and Telecoms	177	307	1,530	3,024	22	2	5,062	6
Industrials	-	31	688	558	30	-	1,307	2
Utilities	27	206	5,666	5,947	30	-	11,876	14
Energy	-	-	385	840	16	-	1,241	1
Commodities	-	-	365	889	8	-	1,262	1
Oil and Gas	-	546	971	387	271	-	2,175	3
Real estate	-	16	1,802	1,587	122	-	3,527	4
Structured finance ABS / RMBS / CMBS / Other	450	860	445	668	28	-	2,451	3
Lifetime mortgage loans¹	4,238	1,550	584	470	-	15	6,857	8
CDOs	-	-	54	13	-	-	67	-


Total £m	8,123	19,193	29,915	28,180	1,367	25	86,803	100


Total %	9	22	35	32	2	-	100


1. The credit ratings attributed to lifetime mortgage loans are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for £81,812m, representing 94% of the total group portfolio.

				Rest of
	UK	US	EU	the World	Total
As at 31 December 2021	£m	£m	£m	£m	£m


Sovereigns, Supras and Sub-Sovereigns	9,829	1,892	1,244	1,062	14,027
Banks	2,253	1,799	1,956	915	6,923
Financial Services	425	429	517	90	1,461
Insurance	113	1,291	15	123	1,542
Consumer Services and Goods:
- Cyclical	473	2,213	442	270	3,398
- Non-cyclical	1,879	5,828	391	174	8,272
- Healthcare	284	2,054	82	1	2,421
Infrastructure:
- Social	6,141	628	154	52	6,975
- Economic	4,348	902	309	400	5,959
Technology and Telecoms	412	3,025	782	843	5,062
Industrials	190	681	354	82	1,307
Utilities	6,963	2,158	2,217	538	11,876
Energy	415	667	1	158	1,241
Commodities	20	537	175	530	1,262
Oil and Gas	196	626	785	568	2,175
Real estate	1,895	734	602	296	3,527
Structured finance ABS / RMBS / CMBS / Other	861	1,395	10	185	2,451
Lifetime mortgage loans	6,857	-	-	-	6,857
CDOs	-	-	-	67	67


Total	43,554	26,859	10,036	6,354	86,803

	Externally	Internally
	rated	rated¹	Total
As at 31 December 2021	£m	£m	£m


AAA	3,506	4,617	8,123
AA	15,544	3,649	19,193
A	21,240	8,675	29,915
BBB	20,715	7,465	28,180
BB or below	950	417	1,367
Other	10	15	25


Total	61,965	24,838	86,803



	Externally	Internally
	rated	rated¹	Total
As at 31 December 2020	£m	£m	£m


AAA	4,101	4,068	8,169
AA	17,101	3,347	20,448
A	21,235	6,702	27,937
BBB	21,307	6,109	27,416
BB or below	1,049	465	1,514
Other	4	14	18


Total	64,797	20,705	85,502


1. Where external ratings are not available an internal rating has been used where practicable to do so.

	Direct
	investments	Traded	Total
As at 31 December 2021	£m	£m	£m


Sovereigns, Supras and Sub-Sovereigns	1,037	12,990	14,027
Banks	665	6,258	6,923
Financial Services	432	1,029	1,461
Insurance	119	1,423	1,542
Consumer Services and Goods:
- Cyclical	498	2,900	3,398
- Non-cyclical	512	7,760	8,272
- Healthcare	357	2,064	2,421
Infrastructure:
- Social	3,699	3,276	6,975
- Economic	4,267	1,692	5,959
Technology and Telecoms	153	4,909	5,062
Industrials	60	1,247	1,307
Utilities	1,883	9,993	11,876
Energy	475	766	1,241
Commodities	55	1,207	1,262
Oil and Gas	56	2,119	2,175
Real estate	2,091	1,436	3,527
Structured finance ABS / RMBS / CMBS / Other	1,021	1,430	2,451
Lifetime mortgage loans	6,857	-	6,857
CDOs	-	67	67


Total	24,237	62,566	86,803

	LGR¹	LGC²	Total
As at 31 December 2021	£m	£m	£m	%


Fully let	4,746	-	4,746	83
Development	540	293	833	15
Land	-	131	131	2

Total	5,286	424	5,710	100





	LGR¹	LGC²	Total
As at 31 December 2020	£m	£m	£m	%

Fully let	3,974	-	3,974	85
Development	345	224	569	12
Land	-	129	129	3

Total	4,319	353	4,672	100

1. The fully let LGR property includes £4.5bn (31 December 2020: £3.8bn) let to investment grade tenants.
2. The above analysis does not include assets related to the group's investments in CALA Homes and other housing businesses, which are accounted for as inventory within Receivables and other assets on the group's Consolidated Balance Sheet and measured at the lower of cost and net realisable value. At 31 December 2021 the group held a total of £2,044m (31 December 2020: £2,179m) of such assets.