L&G Interim Results Part 4
Legal & General Group PLC
28 July 2005
Part 4
Legal & General Investment Management
=====================================
- supplementary information
===========================
Legal & General Investment Management maintains its position as the largest
investment manager in the UK*. Strong new business and rising markets have
contributed to a 9.9% increase in funds under management from £162bn in December
2004 to £178bn.
Profits - International Financial Reporting basis
=================================================
Operating profit from institutional fund management was up 38% to £44m (1H04:
£32m). Corporate Pensions profitability increased by 43% from £23m in the first
half of June 2004 to £33m.
New business totalled £6.8bn of which £3.1bn was from new clients. Overseas Life
Assurance Business was another source of new business success with £721m
(1H04: £140m) of new funds, increasing funds under management to £2.2bn.
Client numbers at the end of June 2005 were 2,707 compared with 2,598 at the end
of 2004, an increase of 4.2%.
Legal & General Ventures, the private equity arm, successfully completed 5 exits
realising over £52m of cash for investors, and made 2 new investments in the
period. Profit for the period was £1.7m (1H04: £0.8m).
The Property fund management subsidiary is now the operator, asset manager or
property manager to eight external property partnerships. Profits increased by
50% to £3m (1H04: £2m) largely due to increased performance fees and asset
growth.
Total Legal & General Investment Management funds under management increased by
22% to £178bn (1H04: £146bn).
Profits - European Embedded Value (EEV) basis
=============================================
Managed pension fund business is written as a long-term contract and so the
results of the business are also presented on an EEV basis. The EEV assumptions
are detailed in Part 2 of this announcement.
Operating profit from institutional fund management was up 29% at £66m (1H04:
£51m). The contribution from in-force business was higher at £35m (1H04: £25m)
primarily due to lower than assumed outflows. Favourable new business mix led
to an increase in new business contribution of 24%, to £21m (1H04: £17m).
Further scale economies with pooled funds under management exceeding £100bn,
gave rise to positive assumption changes.
Fund Performance
================
75% of the retail flagship funds were above median over the year to June 2005.
Our flagship Linked Life Distribution Fund, which exceeds £2.8bn, maintained its
top quartile performance over 1, 3 and 5 years. 77% of our actively managed
fixed interest pooled funds outperformed their peer group median or index
benchmark over the year, to June 2005. All Index funds were within their
tracking tolerances in the year to June 2005.
*Source: IMA Asset Management Survey 2005 & Hymans Robertson Market Briefing
2005.
================================================================================
Part 4
Legal & General Investment Management P1
Consolidated Income Statement - IFRS Basis
Six months ended 30 June 2005
--------------------------------------------------------------------------------
Full year
30.6.05 30.6.04 2004
Restated Restated
£m £m £m
Profit from continuing operations
Corporate pensions 33 23 51
Ventures 2 1 4
Property 3 2 3
Other external income 2 2 3
Other operational income 4 4 8
-------- -------- --------
Operating profit 44 32 69
Variation from longer term investment return 0 (2) 0
-------- -------- --------
Profit on ordinary activities before tax 44 30 69
Tax charge on profit on ordinary activities (13) (9) (21)
-------- -------- --------
Profit for the financial period 31 21 48
======== ======== ========
This financial information was approved by the Board on 27 July 2005.
The results for the six months to 30 June 2005 and 30 June 2004 are unaudited,
but have been subject to a review by the independent auditors and constitute
non-statutory accounts within the meaning of Section 240 of the Companies Act
1985. They have been prepared on a basis which is consistent with the restated
financial information for the year ended 31 December 2004 published on 24 May
2005. The published 31 December 2004 supplementary financial information
includes an independent auditors' report which is unqualified. The original
results for the year ended 2004 published on 24 February 2005 have been filed
with the Registrar of Companies and include an independent auditors' report
which is unqualified and does not contain a statement under either Sections
237(2) or 237 (3) of the Companies Act 1985.
These figures have been prepared using International Financial Reporting
Standards (IFRS). The European Embedded Value (EEV) results are included on Page
4.
================================================================================
Legal & General Investment Management P2
Funds under management
Six months ended 30 June 2005
--------------------------------------------------------------------------------
At 30.6.05 At 30.6.04 At 31.12.04
Restated Restated
£m £m £m
Total investments 177,626 145,746 162,331
========= ========= =========
Represented by
Index tracking funds:
- UK equities 52,200 44,795 49,429
- Overseas equities 29,417 22,896 26,301
- Fixed interest 20,859 18,295 20,369
- Index linked 16,665 13,071 14,544
- Cash/deposits 411 482 529
--------- --------- ---------
Total index tracking funds 119,552 99,539 111,172
Actively managed funds 58,074 46,207 51,159
--------- --------- ---------
177,626 145,746 162,331
========= ========= =========
By fund management approach
Indexed equities 81,617 67,690 75,729
Active bonds (including index linked funds) 40,319 31,697 35,456
Indexed bonds (including index linked funds) 37,935 31,848 35,442
Active equities 10,248 8,093 8,458
Property 7,107 6,117 6,851
Private equity (ventures) 400 301 395
--------- --------- ---------
177,626 145,746 162,331
========= ========= =========
By source of business
Institutional funds under management *:
- Managed pension funds pooled 105,114 81,502 93,989
- Managed pension funds segregated 8,070 9,328 9,318
- Other 2,809 2,594 1,781
--------- --------- ---------
Total institutional funds under management 115,993 93,424 105,088
UK Operations (unit trusts - excluding
life fund investment) 8,363 7,392 7,919
UK Operations (life and general insurance
funds) 53,270 44,930 49,324
--------- --------- ---------
177,626 145,746 162,331
========= ========= =========
* excludes institutional investments in unit trust funds
================================================================================
Legal & General Investment Management P3
New business
Six months ended 30 June 2005
--------------------------------------------------------------------------------
6 months 3 months 3 months 6 months 3 months 3 months
30.6.05 30.6.05 31.3.05 30.6.04 30.6.04 31.3.04
£m £m £m £m £m £m
Managed pension funds*
- Pooled funds 6,710 3,396 3,314 7,610 3,198 4,412
- Segregated funds 105 63 42 1,063 101 962
------- ------- ------- ------- ------- -------
6,815 3,459 3,356 8,673 3,299 5,374
Other funds 60 3 57 70 13 57
------- ------- ------- ------- ------- -------
6,875 3,462 3,413 8,743 3,312 5,431
======= ======= ======= ======= ======= =======
Full year
30.6.05 30.6.04 2004
£m £m £m
Managed pension funds*
- Pooled funds 6,710 7,610 13,951
- Segregated funds 105 1,063 1,228
-------- -------- --------
6,815 8,673 15,179
Other funds** 60 70 368
-------- -------- --------
6,875 8,743 15,547
======== ======== ========
By fund management approach
Active equities 0.0% 0.1% 0.1%
Active bonds (including cash) 11.1% 18.6% 16.2%
Indexed equities 46.7% 44.8% 47.9%
Indexed bonds (including cash) 41.7% 35.9% 34.8%
Property 0.0% 0.4% 0.6%
Private equity 0.5% 0.2% 0.4%
-------- -------- --------
100.0% 100.0% 100.0%
-------- -------- --------
* New monies from pension fund clients of Legal & General Assurance (Pensions
Management) Ltd.
Corporate pensions gross new business excludes £1.8bn (1H04: £2.2bn; FY04:
£5.0bn) which was held through the year on a temporary basis, generally as part
of a portfolio reconstruction.
** Includes segregated property, property partnerships, ventures and
institutional clients excluding trusts.
================================================================================
Legal & General Investment Management P4
Consolidated Profit and Loss Account - European Embedded Value Basis
Six months ended 30 June 2005
--------------------------------------------------------------------------------
Full year
30.6.05 30.6.04 2004
Restated Restated
Profit from continuing operations £m £m £m
Managed pension funds:
Contribution from:
New business 21 17 36
In-force business
- expected return 10 9 18
- experience variances 12 8 15
- operating assumption changes 13 8 18
Development costs 0 - (1)
Shareholder net worth 3 3 6
------- ------- -------
Total 59 45 92
Ventures 2 1 4
Property 3 2 3
LGIM 1 2 3
Other operational income 1 1 2
------- ------- -------
Operating profit from institutional fund
management 66 51 104
Variation from longer term investment return* 11 - 11
Effect of economic assumption changes 1 (1) -
------- ------- -------
Profit on ordinary activities before tax 78 50 115
Tax charge on profit on ordinary activities (21) (13) (31)
------- ------- -------
Profit for the financial period 57 37 84
======= ======= =======
* The variation from longer term investment return represents the effect of the
investment performance in respect of shareholder net worth and in-force
business, compared with embedded value assumptions at the beginning of the
period.
Managed pension funds embedded value Full year
30.6.05 30.6.04 2004
£m £m £m
At 1 January 353 301 301
Profit after tax 50 31 72
Distributions and capital movements - - (20)
------- ------- -------
At period end 403 332 353
======= ======= =======
comprising:
Value of in-force business 215 171 191
Shareholder net worth 188 161 162
------- ------- -------
403 332 353
================================================================================
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