L&G FY 2004 Results Pt3
Legal & General Group PLC
24 February 2005
Part 3
Legal & General Group Plc P1
Consolidated Profit and Loss Account - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
Notes
2004 2003
Restated
£m £m
Profit on continuing operations
Life and pensions 1 466 443
Institutional fund management 69 55
General insurance 32 36
Other operational income 34 18
--------- ---------
Operating profit on continuing operations 601 552
Profit on discontinuing operations
General insurance - Gresham 7 5
--------- ---------
Operating profit 608 557
Variation from longer term investment
return 32 56
Change in equalisation provision (7) (7)
Shareholder retained capital (SRC)
movement 2 13 (137)
--------- ---------
Profit on ordinary activities before tax 646 469
Tax charge on profit on ordinary
activities 3 (182) (65)
--------- ---------
Profit for the financial period 464 404
Dividends (329) (318)
--------- ---------
Retained profit 135 86
================================================================================
Earnings per share 4 p p
Based on operating profit after tax 6.75 6.10
Based on profit for the financial period 7.15 6.22
Diluted earnings per share
Based on operating profit after tax 6.61 6.00
Based on profit for the financial period 7.00 6.12
Dividend per share 5.06 4.90
================================================================================
These financial statements were approved by the Board on 23 February 2005 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 constitute non statutory accounts within the meaning of Section 240 of
the Companies Act 1985 and are extracted from the Group's financial statements
for the year ended 31 December 2004.
Urgent Issues Task Force abstract 38 'Accounting for ESOP trusts' has been
adopted, and the shareholders investment return for Institutional fund
management has been reported as a longer term rate of return within operating
profit. 2003 comparatives have been restated accordingly.
The Group's financial statements for 2004 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 2004
--------------------------------------------------------------------------------
Notes At 31.12.04 At 31.12.03
Restated
Assets £m £m
Investments 38,336 35,268
Assets held to cover linked liabilities 108,297 84,308
Other assets 5,002 5,349
--------- ---------
151,635 124,925
========= =========
Liabilities
Shareholders' funds 5 3,376 3,248
Fund for future appropriations 2,456 1,498
Technical provisions 139,534 117,341
Borrowings and other creditors 6,269 2,838
--------- ---------
151,635 124,925
================================================================================
Statement of Total Recognised Gains and Losses
2004 2003
£m £m
Profit for the financial period 464 404
Exchange losses (7) (11)
--------- ---------
Total recognised gains and losses 457 393
================================================================================
Legal & General Group Plc P3
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
1. 'Life and pensions operating profit
2004 2003
£m £m
With-profits business 67 74
Non profit business 324 295
--------- ---------
UK 391 369
USA 55 57
Netherlands 20 17
France 0 0
--------- ---------
466 443
========= =========
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.
================================================================================
2. Change in SRC
2004 2003
£m £m
Investment income 60 73
Interest expense and charges (2) (2)
Realised investment gains 100 20
Unrealised investment appreciation 51 230
--------- ---------
Investment return on SRC 209 321
Net capital released from/(invested in)
non-profit business 128 (163)
Distribution of operating profit from
non-profit business (324) (295)
--------- ---------
SRC movement before tax 13 (137)
========= =========
SRC at 1 January 2,212 2,259
######### #########
SRC movement before tax : 13 : : (137):
Tax credit : 8 : : 90 :
######### #########
SRC movement after tax 21 (47)
--------- ---------
SRC at end of period 2,233 2,212
SRC includes intra-group subordinated debt capital of £602m.
================================================================================
Legal & General Group Plc P4
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
3. Analysis of tax
2004 2004 2003 2003
Profit Tax Profit Tax
before (charge)/ before (charge)/
tax credit tax credit
Profit on continuing operations £m £m £m £m
UK life and pensions 391 (117) 369 (110)
International life and pensions 75 (25) 74 (28)
-------- -------- -------- --------
466 (142) 443 (138)
Institutional fund management 69 (21) 55 (16)
General insurance 32 (9) 36 (12)
Other operational income 34 4 18 6
-------- -------- -------- --------
Operating profit on continuing
operations 601 (168) 552 (160)
Profit on discontinuing operations
General insurance -
Gresham Insurance Company 7 (2) 5 (1)
-------- -------- -------- --------
Operating profit 608 (170) 557 (161)
Variation from longer term investment
return 32 (22) 56 4
Change in equalisation provision (7) 2 (7) 2
SRC movement 13 8 (137) 90
-------- -------- -------- --------
Profit on ordinary activities and tax 646 (182) 469 (65)
======== ======== ======== ========
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 at 31.12.04
was £630m (2003: £668m).
================================================================================
Legal & General Group Plc P5
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
4. Earnings per share (EPS)
Weighted
Earnings average
Profit/ per number
(loss) share of shares
£m p m
Year ended 31.12.04
Operating profit after tax on
continuing operations 433 6.67 6,491
Operating profit after tax on
discontinuing operations 5 0.08
Variation from longer term investment
return 10 0.15
Change in equalisation provision (5) (0.07)
Change in SRC 21 0.32
--------- --------- ---------
Profit for the period/EPS 464 7.15 6,491
Net shares under options allocable for
no further consideration - (0.01) 22
Convertible bonds outstanding 12 (0.14) 285
--------- --------- ---------
Diluted profit for the period/EPS 476 7.00 6,798
========= ========= =========
Year ended 31.12.03
Operating profit after tax on
continuing operations 392 6.04 6,490
Operating profit after tax on
discontinuing operations 4 0.06
Variation from longer term investment
return 60 0.92
Change in equalisation provision (5) (0.08)
Change in SRC (47) (0.72)
--------- --------- ---------
Profit for the financial year/EPS 404 6.22 6,490
Net shares under options allocable for
no further consideration - - 15
Convertible bonds outstanding 12 (0.10) 285
--------- --------- ---------
Diluted profit for the financial year/EPS 416 6.12 6,790
================================================================================
Legal & General Group Plc P6
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
5. Shareholders' funds
At 31.12.04 At 31.12.03
Restated
£m £m
At 1 January as originally published 3,248 3,184
Prior year adjustment in respect of
UITF 38* - (13)
--------- ---------
3,248 3,171
Total recognised gains and losses 457 393
Dividends (329) (318)
Increase in share capital/premium 1 1
Allocation of ESOT shares* (1) 1
--------- ---------
At 31 December 3,376 3,248
========= =========
Comprising:
Share capital 163 163
Share premium 907 906
ESOT reserve* (13) (12)
Profit and loss account 2,319 2,191
--------- ---------
3,376 3,248
========= =========
The number of fully paid ordinary shares of 2.5p in issue at the period end was
6,506m (2003: 6,504m).
* UITF abstract 38 'Accounting for ESOP trusts' requires that own shares held
within the Employee Share Ownership Trust (ESOT) should be accounted for as a
deduction from shareholders' funds rather than be disclosed as an investment as
was previously required. The 2003 amounts have been restated accordingly.
================================================================================
Legal & General Group Plc P7
Notes to Financial Statements - Modified Statutory Solvency Basis
Year ended 31 December 2004
--------------------------------------------------------------------------------
6. Segmental analysis of shareholders' funds
At 31.12.03
At 31.12.04 restated
£m £m
UK solvency capital ######### #########
SRC * : 2,233 : : 2,212 :
Society shareholder capital (SSC) ** : 1,972 : : 1,905 :
:---------: :---------:
Society solvency capital : 4,205 : : 4,117 :
General insurance : 149 : : 120 :
######### #########
UK solvency capital 4,354 4,237
International shareholders' funds
- USA 475 443
- Netherlands 48 36
- France 48 45
--------- ---------
4,925 4,761
Institutional fund management 199 176
Corporate funds *** (1,748) (1,689)
--------- ---------
Shareholders' funds on the MSS basis 3,376 3,248
Less: Purchased interests in long term
business included in above (24) (29)
AP long term in-force business asset 2,764 2,365
--------- ---------
Shareholders' funds on the AP basis 6,116 5,584
========= =========
* Including £602m of intra-group subordinated debt capital attributed to the
SRC.
** Includes £788m from the 2002 rights issue and aggregate investment returns of
£188m (2003: £139m).
***Includes the convertible debt of £521m (2003: £518m) and £602m of senior debt
which has been onlent to the UK LTF.
================================================================================
7. UK Long Term Fund
At 31.12.04 At 31.12.03
£bn £bn
With-profits business 26.8 25.3
Non profit business 17.6 14.3
######### #########
Sub-fund : 0.2 : : 0.2 :
SRC : 2.2 : : 2.2 :
######### #########
2.4 2.4
--------- ---------
Value of fund 46.8 42.0
================================================================================
Legal & General Group Plc P8
Consolidated Cash Flow Statement (excluding long term business)
Year ended 31 December 2004
--------------------------------------------------------------------------------
2004 2003
Restated
£m £m
Net cash inflow from operating activities 437 407
Interest paid (63) (58)
Tax paid (8) (2)
Dividends paid (321) (313)
######### #########
Issue of share capital : 1 : : 1 :
(Increase)/decrease in shares held by the ESOT : (1): : 1 :
Increase/(decrease) in borrowing : 59 : : (76):
######### #########
Financing 59 (74)
--------- ---------
104 (40)
========= =========
Cash flows (not including long term business)
were invested/(divested) as follows:
(Increase)/decrease in cash holdings (4) 2
Net purchase/(sale) of investments 108 (42)
--------- ---------
Net investment/(divestment) 104 (40)
========= =========
Reconciliation of profit before
tax to operating cash flow
Profit on ordinary activities before
tax 646 469
Profit relating to life and pensions
business (479) (308)
Long term business profit included in
Institutional fund management (51) (40)
Cash received from life and pensions
business 233 275
Cash received from Institutional fund
management 28 24
Increase in other operating creditors 35 19
Other items 25 (32)
--------- ---------
Net cash inflow from operating activities 437 407
===============================================================================
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