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RNS
Legal & General Group Plc  -  LGEN   

L&G FY 2012 Preliminary Results - Part 3

Released 07:00 06-Mar-2013

RNS Number : 3194Z
Legal & General Group Plc
06 March 2013
 



European Embedded Value                                                                                                                                         Page 77

 

Consolidated Income Statement

For the year ended 31 December 2012

 

  


 

2012 

2011 

  


Notes

£m

£m

  


 



  


 



From continuing operations


 



Protection and Annuities


5.01

668 

808 

Savings


5.01

89 

226 

Investment management


5.06

216 

210 

US Protection


5.01

98 

238 

Group capital and financing


5.07

20 

43 

Investment projects


 

(50)

(56)

  


 



  


 



Operating profit


 

1,041 

1,469 

Investment variances


5.01

(32)

(111)

Effect of economic assumption changes


5.08

(162)

(21)

Losses attributable to non-controlling interests


 

(12)

(3)

  


 



  


 



Profit before tax  


 

835 

1,334 

Tax expense attributable to equity holders of the Company


5.10

(168)

(259)

Effect of tax rate changes and other taxation impacts


5.10

67 

156 

  


 



  


 



Profit for the year


 

734 

1,231 

Losses attributable to non-controlling interests


 

12 

  


 



  


 



Profit attributable to equity holders of the Company


 

746 

1,234 

  


 



  


 



  


 



  


 



  


 

p

p

  


 



  


 



Earnings per share  


5.11



  


 



Based on operating profit after tax attributable to equity holders of the Company


 

14.01 

19.08 

Based on profit attributable to equity holders of the Company


 

12.75 

21.17 

  


 



Diluted earnings per share


5.11



  


 



Based on operating profit after tax attributable to equity holders of the Company


 

13.78 

18.77 

Based on profit attributable to equity holders of the Company


 

12.54 

20.83 

  


 



  


 



1. Investment projects predominately relates to Solvency II and other strategic investments.

2. Investment variances include £18m of restructuring costs relating to a number of reorganisation initiatives around the Group, including the restructuring of the International segment.

  


 



During the year, the Group has changed the management lines of the international subsidiaries to reflect the development of our international strategy. This has had the consequence of changing the reportable segments of the Group as outlined in Note 2.19. The prior period segmental information has been restated accordingly.

 

 

European Embedded Value                                                                                                                                         Page 78

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

 




2012 

2011 




£m

£m











Profit for the year



734 

1,231 






Other comprehensive income after tax





Exchange differences on translation of overseas operations



(22)

(1)

Actuarial (losses) on defined benefit pension schemes



(59)

(70)

Actuarial losses on defined benefit pension schemes transferred to unallocated divisible surplus

41 

48 











Total comprehensive income for the year



694 

1,208 
















Total comprehensive income/(expense) attributable to:





Non-controlling interests



(12)

(3)

Equity holders of the Company



706 

1,211 






 

 

Consolidated Balance Sheet

As at 31 December 2012

 

  


 

2012 

2011 

  


 


Restated

  


Notes

£m

£m

  


 


  

  


 


  

Assets


 


  

Investments


 

338,630 

319,671 

Long term in-force business asset


 

3,670 

3,700 

Other assets


 

7,460 

6,680 

  


 


  

  


 


  

Total assets


 

349,760 

330,051 

  


 


  

  


 


  

  


 


  

  


 


  

Equity  


 


  

Shareholders' equity


 5.14/5.15

8,900 

8,608 

Non-controlling interests


 

39 

66 

  


 


  

  


 


  

Total equity


 

8,939 

8,674 

  


 


  

  


 


  

  


 


  

Liabilities


 


  

Subordinated borrowings


 2.12

1,890 

1,921 

Unallocated divisible surplus


 

1,153 

1,038 

Participating contract liabilities


 

15,277 

15,784 

Non-participating contract liabilities


 

302,686 

285,351 

Senior borrowings


 2.12

1,475 

1,329 

Other liabilities and provisions


 

18,340 

15,954 

  


 


  

  


 


  

Total liabilities


 

340,821 

321,377 

  


 


  

  


 


  

Total equity and liabilities


 

349,760 

330,051 

  


 


  

  


 


  

1. The Consolidated Balance Sheet has been restated to reflect the retrospective adoption of ASU 2010-26, issued by the FASB, which specifies the accounting for deferred acquisition costs under US GAAP. Details of this restatement are outlined in Note 5.19.

 

 

European Embedded Value                                                                                                                                         Page 79

 

Notes to the Financial Statements

5.01 Profit/(loss) for the year



  






  



 


Invest-


Group


  



 


ment


capital


  



 

P&A and

manage-

US

and


  



 

Savings

ment

Protection

financing

Total

For the year ended 31 December 2012


Notes

£m

£m

£m

£m

£m

  



 






  



 






Business reported on an EEV basis:



 






Contribution from new business after cost of capital


5.03

377 


98 


475 

Contribution from in-force business:



 






   - expected return



 

372 


76 


448 

   - experience variances  



5.05

12 


(59)


(47)

   - operating assumption changes



5.05

(11)


(18)


(29)

Development costs



 

(37)



(37)

Contribution from shareholder net worth



 


134 

145 

  



 






  



 






Operating profit on covered business



 

719 

102 

134 

955 

  



 






Business reported on an IFRS basis:



 






Protection and Annuities non-covered business



 

27 




27 

Savings non-covered business



 

11 




11 

Investment management



5.06


216 



216 

Group capital and financing



5.07




(114)

(114)

Investment projects



 




(50)

(50)

US Protection non-covered business



 



(4)


(4)

  



 






  



 






Total operating profit



 

757 

216 

98 

(30)

1,041 

Investment variances



 

(5)

(40)

(32)

Effect of economic assumption changes



5.08

(164)

(162)

Losses attributable to non-controlling interests


 

(12)

(12)

  



 






  



 






Profit/(loss) before tax  



 

600 

211 

106 

(82)

835 

Tax (expense)/credit on profit from ordinary activities


5.10

(128)

(39)

(28)

27 

(168)

Effect of tax rate changes and other taxation impacts



5.10

89 

(22)

67 

  



 






  



 






Profit/(loss) for the year



 

561 

172 

56 

(55)

734 

  



 






  



 






  



 






Operating profit attributable to:



 






Protection and Annuities



 

668 





Savings



 

89 





  



 






  



 






1. The expected return on in-force is based on the unwind of the risk discount rate on the opening, adjusted base value of in-force (VIF). The opening base VIF of the UK Protection and Annuities and Savings business was £4,247m in 2012 (2011: £3,886m). This is adjusted for the effects of opening model changes of £86m (2011: £200m) to give an adjusted opening base VIF of £4,333m (2011: £4,086m). This is then multiplied by the opening risk discount rate of 6.2% (2011: 7.3%) and the result grossed up at the notional attributed tax rate of 21% (2011: 23%) to give a return of £340m (2011: £387m). The same approach has been applied for the overseas Protection and Annuities businesses.

2. Protection and Annuities non-covered business primarily reflects GI operating profit of £30m (2011: £42m). See Note 2.01(f).

3. Savings non-covered business mainly comprises Savings investments on an IFRS basis, adjusted for Suffolk Life, International (Ireland), Nationwide and our joint venture operation in India.

4. Investment management operating profit excludes £27m (2011: £24m) of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a look through basis and as a consequence are included in the Protection and Annuities, Savings and Group capital and financing covered business on an EEV basis.

5. Investment projects predominately relates to Solvency II and other strategic investments.

6. US Protection non-covered business includes business unit costs of £4m (2011: £4m) allocated to the US Protection segment.

7. Investment variances include £18m of restructuring costs relating to a number of reorganisation initiatives around the Group, including the restructuring of the International segment.

8. Primarily reflects the implementation of the UK planned future reductions in corporation tax to 21% on 1 April 2014, and improvements in the US to the recognition of tax losses and DAC tax assets.

 

 

 

European Embedded Value                                                                                                                                         Page 80

 

Notes to the Financial Statements

5.01 Profit/(loss) for the year (continued)

 






  



 


Invest-


Group


  



 


ment


capital


  



 

P&A and

manage-

US

and


  



 

Savings

ment

Protection

financing

Total

For the year ended 31 December 2011



Notes

£m

£m

£m

£m

£m

  



 






  



 






Business reported on an EEV basis:



 






Contribution from new business after cost of capital


5.03

372 


69 


441 

Contribution from in-force business:



  






   - expected return



  

421 


73 


494 

   - experience variances  



5.05

87 


150 


237 

   - operating assumption changes



5.05

95 


(62)


33 

Development costs



 

(10)



(10)

Contribution from shareholder net worth



 


12 

157 

178 

  



 






  



 






Operating profit on covered business



 

974 

242 

157 

1,373 

  



 






Business reported on an IFRS basis:



 






Protection and Annuities non-covered business



 

35 




35 

Savings non-covered business



 

25 




25 

Investment management



5.06


210 



210 

Group capital and financing



5.07




(114)

(114)

Investment projects



 




(56)

(56)

US Protection non-covered business



 



(4)


(4)

  



 






  



 






Total operating profit



 

1,034 

210 

238 

(13)

1,469 

Investment variances



 

102 

(7)

16 

(222)

(111)

Effect of economic assumption changes



5.08

16 

(37)

(21)

Losses attributable to non-controlling interests


 

(3)

(3)

  



 






  



 






Profit/(loss) before tax  



 

1,152 

203 

217 

(238)

1,334 

Tax (expense)/credit on profit from ordinary activities


5.10

(266)

(38)

(76)

121 

(259)

Effect of tax rate changes and other taxation impacts



5.10

156 

156 

  



 






  



 






Profit/(loss) for the year



 

1,042 

165 

141 

(117)

1,231 

  



 






  



 






  



 






Operating profit attributable to:



 






Protection and Annuities



 

808 





Savings



 

226 





  



 






  



 






1. The expected return on in-force is based on the unwind of the risk discount rate on the opening, adjusted base value of in-force (VIF). The opening base VIF of the UK Protection and Annuities and Savings business was £3,886m. This is adjusted for the effects of opening model changes of £200m to give an adjusted opening base VIF of £4,086m. This is then multiplied by the opening risk discount rate of 7.3% and the result grossed up at the notional attributed tax rate of 23% to give a return of £387m. The same approach has been applied for the overseas Protection and Annuities businesses.

2. Protection and Annuities non-covered business primarily reflects GI operating profit of £42m (see Note 2.01(f)).

3. Savings non-covered business mainly comprises Savings investments on an IFRS basis, adjusted for Suffolk Life, International (Ireland), Nationwide and our joint venture operation in India.

4. Investment management operating profit excludes £24m of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a look through basis and as a consequence are included in the Protection and Annuities, Savings and Group capital and financing covered business on an EEV basis.

5. Investment projects predominately relates to Solvency II and other strategic investments.

6. US Protection non-covered business includes business unit costs of £4m allocated to the US Protection segment.

7. Primarily reflects the implementation of the UK planned future reductions in corporation tax to 23% on 1 April 2014.

 

 

European Embedded Value                                                                                                                                         Page 81

 

Notes to the Financial Statements

5.02 New business summary


 

  

  

  




  


 

APE

PVNBP

Margin

APE

PVNBP

Margin

  


 

2012 

2012 

2012 

2011 

2011 

2011 

  


Notes

£m

£m

%

£m

£m

%

  


 

  

  

  




  


 

  

  

  




Protection and Annuities


 5.03

537 

4,239 

8.3 

490 

3,983 

8.4 

Savings


 5.03

877 

5,119 

0.5 

590 

3,896 

0.8 

US Protection


 5.03

90 

830 

11.8 

69 

637 

10.7 

  


 

  

  

  




  


 

  

  

  




  


 

1,504 

10,188 

4.7 

1,149 

8,516 

5.1 

  


 

  

  

  




  


 

  

  

  




1. Covered business only.

2. Annual Premium Equivalent (APE) comprises the new annual premiums together with 10% of single premiums.

3. The present value of new business premiums (PVNBP) on the EEV basis is defined as the present value of annual premiums plus single premiums for any given period. It is calculated using the same assumptions as for the contribution from new business but determined as at the point of sale.

4. The new business margin is defined as the contribution from new business (including the cost of solvency capital) divided by the PVNBP.

5. Longevity insurance has been excluded from the Protection and Annuities new business measures as outlined in Note 6.07.

 

 

European Embedded Value                                                                                                                                         Page 82

 

Notes to the Financial Statements

5.03 New business by product



  


  



Present

   



Contri-


  



value of

Capital-  



bution


  


Annual

annual

isation  

Single


from new


  


premiums

premiums

factor

premiums

PVNBP

business

Margin

For the year ended 31 December 2012

£m

£m

   

£m

£m

£m

%

  




   



  


  




   



  


Protection


221 

1,176 

5.3   

1,176 

139 

11.8 

Annuities


-   

2,339 

2,339 

206 

8.8 

Longevity insurance


n/a

n/a

n/a  

n/a

n/a

n/a

Netherlands (LGN)


13 

106 

7.7   

82 

188 

0.9 

France (LGF)


38 

303 

8.1   

233 

536 

0.6 

  




   



  


  




   



  


Total Protection and Annuities


272 

1,585 

5.8   

2,654 

4,239 

350 

8.3 

  




   



  


  




   



  


Unit linked bonds


-   

525 

525 

0.5 

Pensions, stakeholder and other non profit


519 

1,951 

3.8   

2,135 

4,086 

18 

0.4 

With-profits savings


58 

166 

2.9   

342 

508 

1.2 

  




   



  


  




   



  


Total Savings


577 

2,117 

3.7   

3,002 

5,119 

27 

0.5 

  




   



  


  




   



  


US Protection


90 

830 

9.2   

830 

98 

11.8 

  




   



  


  




   



  


Total new business


939 

4,532 

4.8   

5,656 

10,188 

475 

4.7 

Cost of capital




   



60 


  




   



  


  




   



  


Contribution from new business before cost of capital


   



535 


  




   



  


  




   



  


  




   



  


  



Present

   



Contri-


  



value of

Capital-  



bution


  


Annual

annual

isation  

Single


from new


  


premiums

premiums

factor

premiums

PVNBP

business

Margin

For the year ended 31 December 2011

£m

£m

   

£m

£m

£m

%

  




   



  


  




   



  


Protection


177 

931 

5.3   

931 

86 

9.3 

Annuities


-   

2,515 

2,515 

252 

10.0 

Longevity insurance


n/a

n/a

n/a  

n/a

n/a

n/a

Netherlands (LGN)


35 

6.7   

95 

130 

(2)

(1.3)

France (LGF)


24 

175 

7.5   

232 

407 

(2)

(0.4)

  




   



  


  




   



  


Total Protection and Annuities


206 

1,141 

5.5   

2,842 

3,983 

341 

8.4 

  




   



  


  




   



  


Unit linked bonds


-   

623 

623 

1.3 

Pensions, stakeholder and other non profit


244 

902 

3.7   

1,620 

2,522 

10 

0.4 

With-profits savings


69 

226 

3.3   

525 

751 

13 

1.8 

  




   



  


  




   



  


Total Savings


313 

1,128 

3.6   

2,768 

3,896 

31 

0.8 

  




   



  


  




   



  


US Protection


69 

637 

9.3   

637 

69 

10.7 

  




   



  


  




   



  


Total new business


588 

2,906 

4.9   

5,610 

8,516 

441 

5.1 

Cost of capital




   



59 


  




   



  


  




   



  


Contribution from new business before cost of capital


   



500 


  




   



  


  




   



  


1. Covered business only.

2. The capitalisation factor is the present value of annual premiums divided by the amount of annual premiums.

3. The contribution from new business is defined as the present value at point of sale of assumed profits from new business written in the period and then rolled forward to the end of the financial period using the risk discount rate applicable at the end of the reporting period.

4. Annual premium and PVNBP measures are not applicable.

 

 

European Embedded Value                                                                                                                                         Page 83

 

Notes to the Financial Statements

5.04 UK non profit internal rate of return (IRR) and payback periodby product



  









  






Payback


Payback

  





IRR

period

IRR

period

  





2012 

2012 

2011 

2011 

  





%

years

%

years

  









  









Protection





>15

>15

Annuities





>30

<0

>30

<0

Unit linked bonds





10 

Pensions, stakeholder and other non profit





12 

12 

  









  









1. The payback period is calculated on an undiscounted basis.

2. Given negative strain on annuity business and an immediate IFRS payback, the IRR calculation is infinite.

 

 

European Embedded Value                                                                                                                                         Page 84

 

Notes to the Financial Statements

5.05 Analysis of experience variances and operating assumption changes

  


P&A and Savings


US Protection

  



Operating




Operating


  


Experience

assumption



Experience

assumption


  


variances

changes

Total


variances

changes

Total

For the year ended 31 December 2012

£m

£m

£m


£m

£m

£m

  









  









Persistency


(18)

(6)

(24)


(14)

(14)

Mortality/morbidity


12 

(15)

(3)


(4)

(18)

(22)

Expenses


(11)

(17)

(28)


Other


29 

27 

56 


(41)

(41)

  









  









  


12 

(11)


(59)

(18)

(77)

  









  









2012 P&A and Savings negative persistency experience reflects higher than expected lapses in unit linked bonds.

  









2012 operating assumption changes in P&A and Savings have been driven by negative mortality and demographic assumption changes in the annuity business and higher investment expense assumptions, largely offset by positive impacts reflecting changes in UK tax legislation.

  









2012 US Protection modelling and other experience variances mostly relate to additional reserving associated with the introduction of AG38 regulatory requirements.

  









2012 operating assumption changes in US Protection mostly relate to higher mortality assumptions on unit linked secondary guarantee business.

 



P&A and Savings


US Protection




Operating




Operating




Experience

assumption



Experience

assumption




variances

changes

Total


variances

changes

Total

For the year ended 31 December 2011


£m

£m

£m


£m

£m

£m



















Persistency


(1)


(21)

(12)

Mortality/morbidity


(35)

(10)

(45)


(17)

(52)

(69)

Expenses


(7)

56 

49 


Other


130 

43 

173 


158 

11 

169 





















87 

95 

182 


150 

(62)

88 



















2011 P&A and Savings mortality experience variances primarily relates to our group protection business which was impacted by a number of high value claims which predominately occurred during H1 11.

 

2011 P&A and Savings expense operating assumption changes reflects the change in long term expense assumptions in protection business and changes in the modelled long term unit cost and investment expenses assumptions in non profit savings and pensions.

Adverse US Protection persistency and mortality operating assumptions changes mainly relate to term assurances in the period after the end of the guaranteed level premium period when premiums increase.

 

The domicile of a US captive structure was moved from Bermuda to Vermont which results in an acceleration of the emergence of surplus, and as a consequence increases the present value of the in-force business.

 

 

European Embedded Value                                                                                                                                         Page 85

 

Notes to the Financial Statements

5.06 Investment management operating profit

  






2012 

2011 

  






£m

£m

  








  








Pension funds (managed and segregated)






181 

172 

Other non-pension






22 

25 

Investment management services for internal funds






13 

13 

  








  








Total Investment management operating profit






216 

210 

  








  








1. The managed pension funds business within Investment management has been reported on an IFRS basis as is consistent with prior years.

2. Other non-pension includes institutional segregated mandates, private equity and property (both in the UK and overseas). Interest income on shareholder funds of £6m (2011: £9m) on an average asset balance of £0.4bn (2011: £0.4bn) has been included within other non-pension operating profit.

3. Investment management services for internal funds excludes £27m (2011: £24m) of profits arising from the provision of investment management services at market referenced rates to the covered business. These are reported on a look through basis within the Protection and Annuities and Savings covered business on an EEV basis.

 

 

5.07 Group capital and financing operating profit

  







2012 

2011 

  







£m

£m

  









  









Investment return







168 

191 

Interest expense







(127)

(123)

Investment expenses







(5)

(5)

Unallocated corporate expenses







(14)

(12)

Other







(2)

(8)

  









  









Total Group capital and financing operating profit



20 

43 

  









Analysed as:









On an EEV basis







134 

157 

On an IFRS basis







(114)

(114)

  









  









1. Group capital and financing represents operating profit on the shareholder assets held within the covered business, reported on an embedded value basis, and operating profit on the shareholder assets held outside the covered business reported on an IFRS basis.

2. Interest expense excludes non recourse financing (see Note 2.12).

3. Unallocated corporate expenses includes the operating profit/(loss) attributable to our joint venture operations in Egypt and the Gulf.

 

 

5.08 Effect of economic assumption changes







  







2012 

2011 

  







£m

£m

  









  









Business reported on an EEV basis:









Protection and Annuities and Savings







(164)

16 

US Protection







(37)

  









  









  







(162)

(21)

  









  









1. Protection and Annuities and Savings primarily reflect the impact of changes in reinvestment and disinvestment rates, higher costs of capital on increasing reserves mainly due to narrowing credit spreads, and other consequential impacts within lower yielding environments, partially offset by a lower risk discount rate.

 

 

5.09 Time value of financial options and guarantees







  







2012 

2011 

  







£m

£m

  









  









Protection and Annuities and Savings







30 

27 

US Protection







  









  









  







30 

31 

  









  









1. Includes £18m (2011: £16m) relating to UK with-profits business, and £5m (2011: £5m) relating to UK non profit business.

 

 

European Embedded Value                                                                                                                                         Page 86

 

Notes to the Financial Statements

5.10 Tax









  





Profit/

Tax

Profit/

Tax

  





(loss)

(exp-

(loss)

(exp-

  





before

ense)/

before

ense)/

  





tax

credit

tax

credit

  





2012 

2012 

2011 

2011 

  





£m

£m

£m

£m

  









  









From continuing operations









Protection and Annuities





668 

(145)

808 

(189)

Savings





89 

(19)

226 

(54)

Investment management





216 

(40)

210 

(40)

US Protection





98 

(25)

238 

(83)

Group capital and financing





20 

(4)

43 

(6)

Investment projects





(50)

12 

(56)

15 

  









  









Operating profit





1,041 

(221)

1,469 

(357)

Variation from longer term investment return





(32)

14 

(111)

87 

Effect of economic assumption changes





(162)

39 

(21)

11 

Losses attributable to non-controlling interests



(12)

(3)

Effect of tax rate changes and other taxation impacts





67 

156 

  









  









Profit/(loss) before tax / Tax





835 

(101)

1,334 

(103)

  









  









1. Primarily reflects the implementation of the UK planned future reductions in corporation tax to 21% on 1 April 2014, and improvements in the US to the recognition of tax losses and DAC tax assets.

  









The UK EEV calculations assume a tax basis which reflects the annualised current tax rate of 24.5% and the planned future reductions in corporation tax to 23% from 1 April 2013, and 21% from 1 April 2014. The tax rate used for grossing up in the income statement is based on a UK corporation tax rate of 21% (2011: 23%).

US, Netherlands and France covered business profits are also grossed up using the long term corporate tax rates of the respective territories i.e. US is 35% (2011: 35%), France is 34.3% (2011: 34.3%) and Netherlands is 25% (2011: 25%).

 

 

European Embedded Value                                                                                                                                         Page 87

 

Notes to the Financial Statements

5.11 Earnings per share

(a) Earnings per share

 



Tax


  


Tax

  




(exp-


  


(exp-

  



Profit

ense)/

Profit

Per

Profit

ense)/

Profit

Per


before tax

credit

after tax

share

before tax

credit

after tax

share


2012 

2012 

2012 

2012 

2011 

2011 

2011 

2011 


£m

£m

£m

p

£m

£m

£m

p





  



  






  



  


Operating profit

1,041 

(221)

820 

14.01 

1,469 

(357)

1,112 

19.08 

Investment variances

(32)

14 

(18)

(0.30)

(111)

87 

(24)

(0.41)

Effect of economic assumption changes

(162)

39 

(123)

(2.11)

(21)

11 

(10)

(0.17)

Effect of tax rate changes and other taxation




  



  


impacts

-  

67 

67 

1.15 

-  

156 

156 

2.67 





  



  






  



  


Earnings per share based on profit




  



  


attributable to equity holders

847 

(101)

746 

12.75 

1,337 

(103)

1,234 

21.17 





  



  


 

 

(b) Diluted earnings per share

(i) Based on operating profit after tax





  



  





Profit

Number

Per

Profit

Number

Per




after tax

of shares

share

after tax

of shares

share




2012 

2012 

2012 

2011 

2011 

2011 




£m

m

p

£m

m

p





  



  






  



  


Operating profit after tax



820 

5,851 

14.01 

1,112 

5,828 

19.08 

Net shares under options allocable for no further consideration

-  

99 

(0.23)

-  

97 

(0.31)





  



  






  



  


Diluted earnings per share



820 

5,950 

13.78 

1,112 

5,925 

18.77 





  



  






  



  


 

 

(b) Diluted earnings per share

(ii) Based on profit attributable to equity holders of the Company





  



  






Number



Number





Profit

of

Per

Profit

of

Per




after tax

shares

share

after tax

shares

share




2012 

2012 

2012 

2011 

2011 

2011 




£m

m

p

£m

m

p





  



  






  



  


Profit attributable to equity holders of the Company

746 

5,851 

12.75 

1,234 

5,828 

21.17 

Net shares under options allocable for no further consideration

-  

99 

(0.21)

-  

97 

(0.34)





  



  






  



  


Diluted earnings per share



746 

5,950 

12.54 

1,234 

5,925 

20.83 





  



  






  



  


1. Weighted average number of shares.





  



  


The number of shares in issue at 31 December 2012 was 5,912,782,826 (31 December 2011: 5,872,166,893).

 

 

European Embedded Value                                                                                                                                         Page 88

 

Notes to the Financial Statements

5.12 Group embedded value reconciliation - summary




  




Covered business



  





P&A

US

Non-

Total

  




UK

overseas

Prote-

covered


  




business

business

ction

business


For the year ended 31 December 2012




£m

£m

£m

£m

£m

  









  

















Value of in-force business (VIF)




4,247 

217 

913 

-  

5,377 




3,218 

252 

149 

(388)

3,231 

  









  












7,465 

469 

1,062 

(388)

8,608 




-  

(12)

(50)

40 

(22)




653 

19 

77 

71 

820 




(23)

(20)

(18)

(25)

(86)

  









  












630 

(1)

59 

46 

734 




-  

-  

-  

-  

-  




(473)

(14)

(40)

527 

-  




-  

-  

-  

(394)

(394)




(22)

-  

-  

22 

-  




(20)

-  

(57)

51 

(26)

  









  












7,580 

442 

974 

(96)

8,900 

  









  












4,402 

146 

735 

-  

5,283 




3,178 

296 

239 

(96)

3,617 

  









  









 

 

  




Covered business



  





P&A

US

Non-


  




UK

overseas

Prote-

covered


  




business

business

ction

business

Total

For the year ended 31 December 2011




£m

£m

£m

£m

£m

  









  









At 1 January









Value of in-force business (VIF)




3,886 

253 

762 

4,901 

Shareholder net worth (SNW)




3,035 

290 

458 

(954)

2,829 

  









  









  




6,921 

543 

1,220 

(954)

7,730 

Exchange rate movements




(13)

(1)

Operating profit after tax for the year




859 

156 

89 

1,112 

Non-operating profit/(loss) for the year:




222 

(33)

(15)

(55)

119 

  









  









Profit for the year




1,081 

(25)

141 

34 

1,231 

Capital movements




(271)

262 

Intra-group distributions




(437)

(45)

(37)

519 

Dividends to equity holders of the Company




(298)

(298)

Transfer to non-covered business




(19)

19 

Other reserve movements including pension deficit




(81)

27 

(54)

  









  









Embedded value




7,465 

469 

1,062 

(388)

8,608 

  









  









Value of in-force business




4,247 

217 

913 

5,377 

Shareholder net worth




3,218 

252 

149 

(388)

3,231 

  









  









1. The 2011 capital movement of £262m primarily reflects the capital contribution made to LGA to enable the repurchase of Potomac securities of £271m. There is no corresponding movement in 2012.

2. UK intra-group distributions reflect a £525m (2011: £500m) dividend paid from Society to Group and dividends of £40m (2011: £20m) paid to Society from subsidiaries (primarily Nationwide Life). Dividends of $63m from LGA, €15m from LGN and €3m from LGF were also paid to the group (2011: $57m from LGA, €50m from LGN and €2m from LGF).

3. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

4. The other reserve movements reflects the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.

  









Further analysis of the Protection and Annuities and Savings UK covered business can be found in Note 5.13.


 

 

European Embedded Value                                                                                                                                         Page 89

 

Notes to the Financial Statements

5.13 UK embedded value reconciliation

  









  




Free

Required

Shareholder

Value of

Total

  




surplus

capital

net worth

in-force


For the year ended 31 December 2012




£m

£m

£m

£m

£m

  









  









At 1 January









Value of in-force business (VIF)




-  

-  

-  

4,247 

4,247 

Shareholder net worth (SNW)




1,461 

1,757 

3,218 

-  

3,218 

  









  









  




1,461 

1,757 

3,218 

4,247 

7,465 

Operating profit/(loss) for the year:









- New business contribution




(275)

182 

(93)

386 

293 

- Expected return on VIF




-  

-  

-  

270 

270 

- Expected transfer from Non profit VIF to SNW




762 

(171)

591 

(591)

-  

- With-profits transfer  




52 

-  

52 

(52)

-  

- Expected return on SNW




53 

63 

116 

-  

116 

Generation of embedded value




592 

74 

666 

13 

679 

- Experience variances




(26)

18 

(8)

20 

12 

- Operating assumption changes




13 

14 

(23)

(9)

- Development costs




(29)

-  

(29)

-  

(29)

Variances




(42)

19 

(23)

(3)

(26)

  









  









Operating profit after tax for the year




550 

93 

643 

10 

653 

Non-operating profit/(loss) for the year:









- Investment variances




(72)

11 

(61)

(58)

- Economic assumption changes




(110)

96 

(14)

(40)

(54)

- Effect of tax rate changes and other taxation impacts




-  

-  

-  

89 

89 

Non-operating (loss)/profit for the year:




(182)

107 

(75)

52 

(23)

  









  









Profit for the year




368 

200 

568 

62 

630 

Intra-group distributions




(473)

-  

(473)

-  

(473)

Transfer to non-covered business




(22)

-  

(22)

-  

(22)

Other reserve movements including pension deficit




(124)

11 

(113)

93 

(20)

  









  









Embedded value




1,210 

1,968 

3,178 

4,402 

7,580 

  









  









Represented by:









-   Non profit







4,008 


-   With-profits







394 


  









  









Value of in-force business




-  

-  

-  

4,402 

4,402 

Shareholder net worth




1,210 

1,968 

3,178 

-  

3,178 

  









  









1. The free surplus reduction of £275m to finance new business includes £93m IFRS new business strain and £182m additional required capital.

2. The increase in free surplus of £762m from the expected transfer from the in-force non profit business includes £591m of IFRS operational cash generation and a £171m reduction in required capital.

3. UK intra-group dividends reflect a £525m dividend paid from Society to Group and dividends of £40m paid to Society from subsidiaries (primarily Nationwide Life). Dividends of €15m from LGN were also paid to Society (2011: €50m from LGN).

4. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

5. The other reserve movements reflects the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.


 

 

 

European Embedded Value                                                                                                                                         Page 90

 

Notes to the Financial Statements

5.13 UK embedded value reconciliation (continued)

  









  




Free

Required

Shareholder

Value of

Total

  




surplus

capital

net worth

in-force


For the year ended 31 December 2011




£m

£m

£m

£m

£m

  









  









At 1 January









Value of in-force business (VIF)




3,886 

3,886 

Shareholder net worth (SNW)




1,395 

1,640 

3,035 

3,035 

  









  









  




1,395 

1,640 

3,035 

3,886 

6,921 

Operating profit/(loss) for the year:









- New business contribution




(258)

167 

(91)

381 

290 

- Expected return on VIF




298 

298 

- Expected transfer from Non profit VIF to SNW




745 

(185)

560 

(560)

- With-profits transfer  




51 

51 

(51)

- Expected return on SNW




58 

67 

125 

125 

Generation of embedded value




596 

49 

645 

68 

713 

- Experience variances




(52)

20 

(32)

108 

76 

- Operating assumption changes




34 

37 

41 

78 

- Development costs




(8)

(8)

(8)

Variances




(26)

23 

(3)

149 

146 

  









  









Operating profit after tax for the year




570 

72 

642 

217 

859 

Non-operating profit/(loss) for the year:









- Investment variances




81 

81 

(47)

34 

- Economic assumption changes




(65)

45 

(20)

53 

33 

- Effect of tax rate changes and other taxation impacts




155 

155 

Non-operating profit/(loss) for the year:




16 

45 

61 

161 

222 

  









  









Profit for the year




586 

117 

703 

378 

1,081 

Intra-group distributions




(437)

(437)

(437)

Transfer to non-covered business




(19)

(19)

(19)

Other reserve movements including pension deficit




(64)

(64)

(17)

(81)

  









  









Embedded value




1,461 

1,757 

3,218 

4,247 

7,465 

  









  









Represented by:









- Non profit







3,808 


- With-profits







439 


  









  









Value of in-force business




4,247 

4,247 

Shareholder net worth




1,461 

1,757 

3,218 

3,218 

  









  









1. The free surplus reduction of £258m to finance new business includes £94m IFRS new business strain and £167m additional required capital. Other items have a net negative impact of £3m.

2. The increase in free surplus of £745m from the expected transfer from the in-force non profit business includes £560m of IFRS operational cash generation and a £185m reduction in required capital.

3. UK intra-group distributions reflect a £500m dividend paid from Society to Group and dividends of £20m paid to Society from subsidiaries (primarily Nationwide Life). Dividends of €50m from LGN were also paid to Society.

4. The transfer to non-covered business represents the IFRS profits arising in the period from the provisions of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

5. The other reserve movements reflects the pension deficit movement, the movement of investment project costs from covered to non-covered business and the effect of reinsurance arrangement transactions between UK and US covered business.

 

 

European Embedded Value                                                                                                                                         Page 91

 

Notes to the Financial Statements

5.14 Analysis of shareholders' equity





 

  





Invest-


Group


 

  





ment


capital


 

  




P&A and

manage-

US

and


 

  




Savings

ment

Protection

financing

Total

 

As at 31 December 2012




£m

£m

£m

£m

£m

 

  









 

  









 

Analysed as:









 

IFRS basis shareholders' equity




740 

360 

919 

3,422 

5,441 

 

Additional retained profit/(loss) on an EEV basis



4,484 

55 

(1,080)

3,459 

 

  









 

  









 

Shareholders' equity on an EEV basis




5,224 

360 

974 

2,342 

8,900 

 

  









 

  









 

Comprising:









 

Business reported on an IFRS basis




380 

360 

(836)

(96)

 

  









 

Business reported on an EEV basis:









 

Shareholder net worth









 

 - Free surplus




57 


206 

1,210 

1,473 

 

 - Required capital to cover solvency margin




239 


33 

1,968 

2,240 

 

Value of in-force  









 

 - Value of in-force business




5,054 


745 


5,799 

 

 - Cost of capital




(506)


(10)


(516)

 

  









 

  









 

  









 

  





Invest-


Group


  





ment


capital


  




P&A and

manage-

US

and


  




Savings

ment

Protection

financing

Total

As at 31 December 2011 (Restated)




£m

£m

£m

£m

£m

  









  









Analysed as:









IFRS basis shareholders' equity




652 

351 

910 

3,143 

5,056 

Additional retained profit/(loss) on an EEV basis



4,402 

152 

(1,002)

3,552 

  









  









Shareholders' equity on an EEV basis




5,054 

351 

1,062 

2,141 

8,608 

  









  









Comprising:









Business reported on an IFRS basis




338 

351 

(1,077)

(388)

  









Business reported on an EEV basis:









Shareholder net worth









 - Free surplus




37 


111 

1,461 

1,609 

 - Required capital to cover solvency margin




215 


38 

1,757 

2,010 

Value of in-force  









 - Value of in-force business




4,907 


924 


5,831 

 - Cost of capital




(443)


(11)


(454)

  









  









1. Shareholders' equity supporting the UK non profit Protection and Annuities and Savings businesses is held within Legal & General Assurance Society Limited and Legal & General Pensions Limited and is managed on a groupwide basis within the Group capital and financing segment.

2. Free surplus is the value of any capital and surplus allocated to, but not required to support, the in-force covered business at the valuation date.

  









Further analysis of shareholders' equity is included in Note 5.15.



 

 

European Embedded Value                                                                                                                                         Page 92

 

Notes to the Financial Statements

5.15 Segmental analysis of shareholders' equity








Covered

Other


Covered

Other





business

business


business

business





EEV

IFRS


EEV

IFRS





basis

basis

Total

basis

basis

Total




2012 

2012 

2012 

2011 

2011 

2011 




£m

£m

£m

£m

£m

£m



















Protection and Annuities









 - P&A reported on an EEV basis



3,131 

3,131 

2,995 

2,995 

 - General insurance



180 

180 

148 

148 

 - Netherlands (LGN)



248 

248 

271 

271 

 - France (LGF)



194 

194 

198 

198 

 - Other



10 

10 



















Total Protection and Annuities



3,573 

190 

3,763 

3,464 

154 

3,618 




























Savings









 - Savings reported on an EEV basis



1,271 

1,271 

1,252 

1,252 

 - Savings investments



138 

138 

136 

136 

 - Other



52 

52 

48 

48 



















Total Savings



1,271 

190 

1,461 

1,252 

184 

1,436 




























Investment management



360 

360 

351 

351 




























US Protection



974 

974 

1,062 

1,062 




























Group capital and financing



3,178 

(836)

2,342 

3,218 

(1,077)

2,141 






















8,996 

(96)

8,900 

8,996 

(388)

8,608 



















 

 

5.16 Reconciliation of shareholder net worth







  









  





UK


UK


  





covered


covered


  





business

Total

business

Total

  





2012 

2012 

2011 

2011 

  








Restated

  





£m

£m

£m

£m

  









  









SNW of long term operations (IFRS basis)





4,294 

5,537 

4,209 

5,444 

Other liabilities (IFRS basis)





(96)

(388)

  









  









Shareholders' equity on the IFRS basis





4,294 

5,441 

4,209 

5,056 

Purchased interest in long term business





(63)

(64)

(76)

(77)

Deferred acquisition costs/deferred income liabilities




(235)

(1,093)

(252)

(1,071)

Contingent loan





(210)

(210)

Deferred tax





(253)

74 

(235)

87 

Other





(565)

(741)

(218)

(554)

  









  









Shareholder net worth on the EEV basis





3,178 

3,617 

3,218 

3,231 

  









  









1. During H1 12, the contingent loan was settled between Society and LGPL. On an EEV basis, the contingent loan was modelled within the VIF. On an IFRS basis, the contingent loan asset was included within the Group capital and financing net assets.

2. Deferred tax represents all tax which is expected to be paid under current legislation.

3. Other in the P&A and Savings covered business relates primarily to the different treatment of annuities and non profit pension results under EEV compared with IFRS. Other total business also includes the different treatment of the LGA Triple X securitisation on an EEV and IFRS basis.

 

 

European Embedded Value                                                                                                                                         Page 93

 

Notes to the Financial Statements

5.17 Sensitivities









In accordance with the guidance issued by the European Insurance CFO Forum in October 2005 the table below shows the effect of alternative assumptions on the long term embedded value and new business contribution.

  









Effect on embedded value as at 31 December 2012








  









  




1%

1%



1%

  




lower

higher

1%

1%

higher

  



As

risk

risk

lower

higher

equity/

  



pub-

discount

discount

interest

interest

property

  



lished

rate

rate

rate

rate

yields

  



£m

£m

£m

£m

£m

£m

  









  









Protection and Annuities and Savings



8,022 

595 

(507)

230 

(191)

109 

US Protection



974 

119 

(99)

40 

(41)

-  

  









  









Total covered business



8,996 

714 

(606)

270 

(232)

109 

  









  









  









  









  







5%

5%

  




10%

10%


lower

lower

  




 lower

lower

10%

mortality

mortality

  



As

equity/

main-

lower

(UK

(other

  



pub-

property

tenance

lapse

annu-

busi-

  



lished

values

expenses

rates

ities)

ness)

  



£m

£m

£m

£m

£m

£m

  









  









Protection and Annuities and Savings



8,022 

(240)

106 

83 

(260)

83 

US Protection



974 

-  

n/a

137 

  









  









Total covered business



8,996 

(240)

115 

84 

(260)

220 

  









  









  









Effect on new business contribution for the year







  









  




1%

1%



1%

  




lower

higher

1%

1%

higher

  



As

risk

risk

lower

higher

equity/

  



pub-

discount

discount

interest

interest

property

  



lished

rate

rate

rate

rate

yields

  



£m

£m

£m

£m

£m

£m

  









  









Protection and Annuities and Savings



377 

59 

(49)

12 

US Protection



98 

19 

(16)

(3)

-  

  









  









Total covered business



475 

78 

(65)

(1)

12 

  









  









  









  









  







5%

5%

  




10%

10%


lower

lower

  




 lower

lower

10%

mortality

mortality

  



As

equity/

main-

lower

(UK

(other

  



pub-

property

tenance

lapse

annu-

busi-

  



lished

values

expenses

rates

ities)

ness)

  



£m

£m

£m

£m

£m

£m

  









  









Protection and Annuities and Savings



377 

(6)

16 

18 

(14)

14 

US Protection



98 

-  

n/a

17 

  









  









Total covered business



475 

(6)

17 

21 

(14)

31 

  









  









1. Includes Group capital and financing.









  









Opposite sensitivities are broadly symmetrical.









  









Sensitivity to changes in assumptions may not be linear, and as such, they should not be extrapolated to changes of a much larger order. A 2% higher risk discount rate would result in a £888m negative impact on UK embedded value and a £82m negative impact on UK new business contribution for the year.

 

 

European Embedded Value                                                                                                                                         Page 94

 

Notes to the Financial Statements

 

5.18 Assumptions

 

UK assumptions

 

The assumed future pre-tax returns on fixed interest and RPI linked securities are set by reference to the portfolio yield on the relevant backing assets held at market value at the end of the reporting period.  The calculated return takes account of derivatives and other credit instruments in the investment portfolio. Indicative yields on the portfolio, excluding annuities within Legal & General Pensions Limited (LGPL), but after allowance for long term default risk, are shown below.

 

For LGPL annuities, separate returns are calculated for new and existing business. Indicative combined yields, after allowance for long term default risk and the following additional assumptions, are also shown below. These additional assumptions are:

 

i.     Where cash balances and debt securities are held at the reporting date in excess of, or below strategic investment guidelines, then it is assumed that these cash balances or debt securities are immediately invested or disinvested at current yields.

 

ii.    Where interest rate swaps are used to reduce risk, it is assumed that these swaps will be sold before expiry and the proceeds reinvested in corporate bonds with a redemption yield 0.70% p.a. (0.70% p.a. at 31 December 2011) greater than the swap rate at that time (i.e. the long term credit rate).

 

iii.   Where reinvestment or disinvestment is necessary to rebalance the asset portfolio in line with projected outgo, this is also assumed to take place at the long term credit rate above the swap rate at that time.

 

The returns on fixed and index-linked securities are calculated net of an allowance for default risk which takes account of the credit rating, outstanding term of the securities, and increase in the expectation of credit defaults over the economic cycle.  The allowance for corporate securities expressed as a level rate deduction from the expected returns for annuities was 26bps at 31 December 2012 (26bps at 31 December 2011).

 

 

UK covered business

 

i.           Assets are valued at market value.

 

ii.          Future bonus rates have been set at levels which would fully utilise the assets supporting the policyholders' portion of the with-profits business in accordance with established practice. The proportion of profits derived from with-profits business allocated to shareholders amounts to almost 10% throughout the projection.

 

iii.          The value of in-force business reflects the cost, including administration expenses, of providing for benefit enhancement or compensation in relation to certain products.

 

iv.         Other actuarial assumptions have been set at levels commensurate with recent operating experience, including those for mortality, morbidity, persistency and maintenance expenses (excluding the development costs referred to below). These are normally reviewed annually.

 

An allowance is made for future mortality improvement, commencing 1 January 2009 as per CMIB's mortality improvement model (CMI 2011) with the following parameters:

Males: Long Term Rate of 1.5% p.a. for future experience and 2.0% p.a. for statutory reserving, up to age 85 tapering to 0% at 120;

Females: Long Term Rate of 1.0% p.a. for future experience and 1.5% p.a. for statutory reserving, up to age 85 tapering to 0% at 120.

Future improvements are generally assumed to converge to the long term rate in 2026.

 

On this basis, the best estimate of the expectation of life for a new 65 year old Male CPA annuitant is 24.1 years (31 December 2011: 24.2 years). The expectation of life on the regulatory reserving basis is 25.7 years (31 December 2011: 25.8 years).

 

v.          Development costs relate to investment in strategic systems and development capability that are charged to the covered business.  Projects charged to the non-covered business are included within Investment projects in Group capital and financing.

 

 

Overseas covered business

 

vi.         Other actuarial assumptions have been set at levels commensurate with recent operating experience, including those for mortality, morbidity, persistency and maintenance expenses.

 

 

 

European Embedded Value                                                                                                                                         Page 95

 

Notes to the Financial Statements

5.18 Assumptions (continued)

 

 

Economic assumptions

 





As at 31 December

2012

2011

2010


% p.a.

% p.a.

% p.a.

 

Risk Margin

3.7

3.7

3.3

Risk free rate1




- UK

2.3

2.5

4.0

- Europe

1.7

2.6

3.2

- US

1.8

1.9

3.3

Risk discount rate (net of tax)




- UK

6.0

6.2

7.3

- Europe

5.4

6.3

6.5

- US

5.5

5.6

6.6

Reinvestment rate (US)

4.3

4.2

5.5

 

Other UK business assumptions




Equity risk premium

3.3

3.3

3.5

Property risk premium

2.0

2.0

2.0





Investment return (excluding annuities in LGPL)




- Gilts:




      - Fixed interest

1.9 - 2.3

1.8 - 2.5

3.4 - 4.0

      - RPI linked

2.7

2.6

4.1

- Non gilts:




      - Fixed interest

1.9 - 2.9

3.0 - 4.6

3.6 - 5.0

- Equities

5.6

5.8

7.5

- Property

4.3

4.5

6.0





Long-term rate of return on non profit annuities in LGPL

4.3

5.0

5.5





Inflation




- Expenses/earnings

3.4

3.5

4.1

- Indexation

2.9

3.0

3.6

 

1.  The risk free rate is the gross redemption yield on the 15 year gilt index. The Europe risk free rate is the 10 year ECB AAA-rated euro area central government bond par yield. The LGA risk free rate is the 10 year US Treasury effective yield.

 

 

Tax

 

vii.        The profits on the covered business, except for the profits on the Society shareholder capital held outside the long term fund, are calculated on an after tax basis and are grossed up by the notional attributed tax rate for presentation in the income statement. For the UK, the after tax basis assumes the annualised current tax rate of 24.5% and the subsequent planned future reductions in corporation tax to 23% from 1 April 2013, and 21% from 1 April 2014. The tax rate used for grossing up is the long term corporate tax rate in the territory concerned, which for the UK is 21% (31 December 2011: 23%) taking into account the expected further rate reductions to 21% by 1 April 2014. The profits on the Society shareholder capital held outside the long term fund are calculated before tax and therefore tax is calculated on an actual basis. 

 

US, Netherlands and France covered business profits are also grossed up using the long term corporate tax rates of the respective territories i.e. US is 35% (2011: 35%), France is 34.3% (34.3%) and Netherlands is 25% (25%).

 

 

 

European Embedded Value                                                                                                                                         Page 96

 

Notes to the Financial Statements

5.18 Assumptions (continued)

 

Stochastic calculations

 

viii.        The time value of options and guarantees is calculated using economic and non-economic assumptions consistent with those used for the deterministic embedded value calculations.

 

This section describes the models used to generate future investment simulations, and gives some sample statistics for the simulations used. A single model has been used for UK and international business, with different economic assumptions for each territory.

 

Government nominal interest rates are generated using a LIBOR Market Model projecting full yield curves at annual intervals. The model provides a good fit to the initial yield curve.

 

The total annual returns on equities and property are calculated as the return on 1 year bonds plus an excess return. The excess return is assumed to have a lognormal distribution. Corporate bonds are modelled separately by credit rating using stochastic credit spreads over the risk free rates, transition matrices and default recovery rates. The real yield curve model assumes that the real short rate follows a mean-reverting process subject to two normally distributed random shocks.

Asset classes

The significant asset classes are:

-           UK with-profits business - equities, property and fixed rate bonds of various durations;

-           UK annuity business - fixed rate and index-linked bonds of various durations; and

-           International business - fixed rate bonds of various durations.

Summary statistics:

The following table sets out means and standard deviations (StDev) of future returns as at 31 December 2012 for the most significant asset classes. Correlations between asset classes have been set based on an internal assessment of historical data.

 


10-year return

20-year return


Mean1

StDev2

Mean1

StDev2

UK Business (Sterling)





Government bonds

1.9%

3.2%

3.3%

3.6%

Corporate bonds

3.5%

3.7%

4.6%

4.0%

    Property (excess returns)

2.0%

14.9%

2.1%

15.1%

Equities (excess returns)

3.2%

20.0%

3.4%

20.5%






European Business (Euro)





Long Government bonds3

1.8%

3.2%

2.7%

3.3%

Short Government bonds4

1.8%

2.3%

2.7%

5.3%






US Business (US Dollar)





Long Government bonds3

1.9%

4.3%

3.0%

4.5%






1.    For asset classes other than for equities and property, mean returns are calculated as the mean return in excess of 1 year government bonds plus the mean return on 1 year government bonds. Mean excess returns for the equities and property are calculated as the mean return in excess of 1 year government bonds. Each mean return is derived by calculating the accumulated value of a unit asset invested to time n years for each simulation, averaging the resultant values across all simulations, then calculating the equivalent annual return required to give this average accumulation (by taking the nth root of the average accumulation and deducting 1).

2.    Standard deviations are calculated by accumulating a unit investment for n years in each simulation, taking the natural logarithm of the result, calculating the variance of this statistic, dividing by n and taking the square root. Equities and property values use excess returns. The results are comparable to implied volatilities quoted in investment markets.

3.    Long term bonds are defined to be 10 year par-coupon bonds.

4.    Short term bonds are defined to be 1 year duration bonds.

Risk discount rate:

The risk discount rate is scenario dependent within the stochastic projection. It is calculated by applying the deterministic risk margin to the risk free rate in each stochastic projection.

 

 

 

European Embedded Value                                                                                                                                         Page 97

 

Notes to the Financial Statements

5.18 Assumptions (continued)

 

Sensitivity calculations

 

ix.         A number of sensitivities have been produced on alternative assumption sets to reflect the sensitivity of the embedded value and the new business contribution to changes in key assumptions. Relevant details relating to each sensitivity are:

·    1% variation in discount rate - a one percentage point increase/decrease in the risk margin has been assumed in each case (for example a 1% increase in the risk margin would result in a 4.7% risk margin).

·    1% variation in interest rate environment - a one percentage point increased/decreased parallel shift in the risk free curve with consequential impacts on fixed asset market values, investment return assumptions, risk discount rate, including consequential changes to valuation bases.

·    1% higher equity/property yields - a one percentage point increase in the assumed equity/property investment returns, excluding any consequential changes, for example, to risk discount rates or valuation bases, has been assumed in each case (for example a 1% increase in equity returns would increase assumed total equity returns from 5.6% to 6.6%).

·    10% lower equity/property market values - an immediate 10% reduction in equity and property asset values.

·    10% lower maintenance expenses, excluding any consequential changes, for example, to valuation expense bases or potentially reviewable policy fees (a 10% decrease on a base assumption of £10 per annum would result in a £9 per annum expense assumption).

·    10% lower assumed persistency experience rates, excluding any consequential changes to valuation bases, incorporating a 10% decrease in lapse, surrender and premium cessation assumptions (a 10% decrease on a base assumption of 7% would result in a 6.3% lapse assumption).

·    5% lower mortality and morbidity rates, excluding any consequential changes to valuation bases but including assumed product repricing action where appropriate (for example if base experienced mortality is 90% of a standard mortality table then, for this sensitivity, the assumption is set to 85.5% of the standard table).

The sensitivities for covered business allow for any material changes to the cost of financial options and guarantees but do not allow for any changes to reserving bases or capital requirements within the sensitivity calculation, unless indicated otherwise above.

 

 

European Embedded Value                                                                                                                                         Page 98

 

Notes to the Financial Statements

5.19 Methodology

 

Basis of preparation

 

The supplementary financial statements have been prepared in accordance with the European Embedded Value (EEV) Principles issued in May 2004 by the European Insurance CFO Forum. 

 

The supplementary financial statements have been audited by PricewaterhouseCoopers LLP and prepared with assistance from our consulting actuaries; Towers Watson in the UK and Milliman in the USA.

 

Change to accounting policy - US deferred acquisition costs

 

During 2012 the Group has changed its accounting policy for deferred acquisition costs in the US, details of which can be found within Note 2.19. There is no impact on European embedded value reported profit resulting from this change. The impact on the Consolidated Balance Sheet is outlined below for 2011:





As reported

2011

 

 

 

Change in US DAC treatment     2011

Restated

2011

Consolidated Balance Sheet




£m

£m

£m

  

 






  

 






Assets

 






Long term in-force business asset  




3,556

144

3,700

Other assets (Deferred acquisition costs)




6,900

(220)

6,680

Liabilities  







Other liabilities and provisions (Deferred tax)




16,030

(76)

15,954

Total equity




8,674

-

8,674

  







 

 

 

Covered business

 

The Group uses EEV methodology to value individual and group life assurance, pensions and annuity business written in the UK, Continental Europe and the US. The UK covered business also includes non-insured self invested personal pension (SIPP) business.

 

The managed pension funds business has been excluded from covered business and is reported on an IFRS basis.

 

All other businesses are accounted for on the IFRS basis adopted in the primary financial statements.

 

There is no distinction made between insurance and investment contracts in our covered business as there is under IFRS.

 

Description of methodology

 

The objective of EEV is to provide shareholders with realistic information on the financial position and current performance of the Group. 

 

The methodology requires assets of an insurance company, as reported in the primary financial statements, to be attributed between those supporting the covered business and the remainder. The method accounts for assets in the covered business on an EEV basis and the remainder of the Group's assets on the IFRS basis adopted in the primary financial statements.

 

The EEV methodology recognises profit from the covered business as the total of:

i.  cash transfers during the relevant period from the covered business to the remainder of the Group's assets; and

ii.  the movement in the present value of future distributable profits to shareholders arising from the covered business over the relevant reporting period.

 

Embedded value

 

Shareholders' equity on the EEV basis comprises the embedded value of the covered business plus the shareholders' equity of other businesses, less the value included for purchased interests in long term business. 

 

The embedded value is the sum of the shareholder net worth (SNW) and the value of the in-force business (VIF). SNW is defined as those amounts, within covered business (both within the long term fund and held outside the long term fund but used to support long term business), which are regarded either as required capital or which represent free surplus.

 

The VIF is the present value of future shareholder profits arising from the covered business, projected using best estimate assumptions, less an appropriate deduction for the cost of holding the required level of capital and the time value of financial options and guarantees (FOGs).

 

 

 

European Embedded Value                                                                                                                                         Page 99

 

Notes to the Financial Statements

5.19 Methodology (continued)

 

Service companies

 

All services relating to the UK covered business are charged on a cost recovery basis, with the exception of investment management services provided to Legal & General Pensions Limited (LGPL) and to Legal & General Assurance Society Limited (Society). Profits arising on the provision of these services are valued on a look through basis.

 

As the EEV methodology incorporates the future capitalised cost of these internal investment management services, the equivalent IFRS profits have been removed from the Investment management segment and are instead included in the results of the Protection and Annuities and Savings segments on an EEV basis.

 

The capitalised value of future profits emerging from internal investment management services are therefore included in the embedded value and new business contribution calculations for the Protection and Annuities and Savings segments. However, the historical profits which have emerged continue to be reported in the shareholders' equity of the Investment management segment on an IFRS basis. Since the look through into service companies includes only future profits and losses, current intra-group profits or losses must be eliminated from the closing embedded value and in order to reconcile the profits arising in the financial period within each segment with the net assets on the opening and closing balance sheet, a transfer of IFRS profits for the period from the UK SNW is deemed to occur.

 

New business

 

New business premiums reflect income arising from the sale of new contracts during the reporting period and any changes to existing contracts, which were not anticipated at the outset of the contract. 

 

In-force business comprises previously written single premium, regular premium, recurrent single premium contracts and payments in relation to existing longevity insurance. Department of Work and Pensions rebates have not been treated as recurring and are included in single premium new business when received.  Longevity insurance product comprises the exchange of a stream of fixed leg payments for a stream of floating payments, with the value of the income stream being the difference between the two legs. New business annual premiums have been excluded for longevity insurance due to the unpredictable deal flow from this type of business.

 

New business contribution arising from the new business premiums written during the reporting period has been calculated on the same economic and operating assumptions used in the embedded value at the end of the financial period. This has then been rolled forward to the end of the financial period using the risk discount rate applicable at the end of the reporting period.

 

The present value of future new business premiums (PVNBP) has been calculated and expressed at the point of sale. The PVNBP is equivalent to the total single premiums plus the discounted value of regular premiums expected to be received over the term of the contracts using the same economic and operating assumptions used for the embedded value at the end of the financial period, with the exception of longevity insurance.  For longevity insurance, PVNBP is not an appropriate measure of expected income stream and as such, the PVNBP has not been applied for this product.

 

The new business margin is defined as new business contribution at the end of the reporting period divided by the PVNBP, with the exception of longevity insurance.  The new business margin has not been applied to longevity insurance for the reason above.  The premium volumes and projection assumptions used to calculate the PVNBP are the same as those used to calculate new business contribution.

 

Intra-group reinsurance arrangements are in place between the US and UK businesses, and it is expected that these arrangements will be periodically extended to cover recent new business. US new business premiums and contribution reflect the groupwide expected impact of US directly-written business.

 

Projection assumptions

 

Cash flow projections are determined using best estimate assumptions for each component of cash flow and for each policy group. Future economic and investment return assumptions are based on conditions at the end of the financial period. Future investment returns are projected by one of two methods. The first method is based on an assumed investment return attributed to assets at their market value. The second, which is used by US Protection, where the investments of that subsidiary are substantially all fixed interest, projects the cash flows from the current portfolio of assets and assumes an investment return on reinvestment of surplus cash flows. The assumed discount and inflation rates are consistent with the investment return assumptions.

 

Detailed projection assumptions including mortality, morbidity, persistency and expenses reflect recent operating experience and are normally reviewed annually. Allowance is made for future improvements in annuitant mortality based on experience and externally published data. Favourable changes in operating experience are not anticipated until the improvement in experience has been observed.

 

All costs relating to the covered business, whether incurred in the covered business or elsewhere in the Group, are allocated to that business. The expense assumptions used for the cash flow projections therefore include the full cost of servicing this business.

 

Tax

 

The projections take into account all tax which is expected to be paid, based on best estimate assumptions, applying current legislation and practice together with known future changes. The impact of the changes to the UK taxation regime for life assurance companies has been calculated to increase embedded value by £14m.

 

 

 

European Embedded Value                                                                                                                                       Page 100

 

Notes to the Financial Statements

5.19 Methodology (continued)

 

Allowance for risk

 

Aggregate risks within the covered business are allowed for through the following principal mechanisms:

i.  setting required capital levels with reference to both the Group's internal risk based capital models, and an assessment of the strength of regulatory reserves in the covered business;

ii.  allowing explicitly for the time value of financial options and guarantees within the Group's products; and

iii. setting risk discount rates by deriving a Group level risk margin to be applied consistently to local risk free rates.

 

Required capital and free surplus

 

Regulatory capital for the UK Protection and Annuities and Savings businesses is provided by assets backing the with-profits business or by the SNW. The SNW comprises all shareholders' capital within Society, including those funds retained within the long term fund and the excess assets in LGPL (collectively Society shareholder capital).

 

Society shareholder capital is either required to cover EU solvency margin or is free surplus as its distribution to shareholders is not restricted.

 

For UK with-profits business, the required capital is covered by the surplus within the with-profits part of the fund and no effect is attributed to shareholders except for the burn-through cost, which is described later. This treatment is consistent with the Principles and Practices of Financial Management for this part of the fund.

 

For UK non profit business, the required capital will be maintained at no less than the level of the EU minimum solvency requirement. This level, together with the margins for adverse deviation in the regulatory reserves, is, in aggregate, in excess of internal capital targets assessed in conjunction with the Individual Capital Assessment (ICA) and the with-profits support account. 

 

The initial strains relating to new non profit business, together with the related EU solvency margin, are supported by releases from existing non profit business and the Society shareholder capital. As a consequence, the writing of new business defers the release of capital to free surplus. The cost of holding required capital is defined as the difference between the value of the required capital and the present value of future releases of that capital. For new business, the cost of capital is taken as the difference in the value of that capital assuming it was available for release immediately and the present value of the future releases of that capital. As the investment return, net of tax, on that capital is less than the risk discount rate, there is a resulting cost of capital which is reflected in the value of new business. 

 

For US Protection, the Company Action Level (CAL) of capital has been treated as required capital for modelling purposes. The CAL is the regulatory capital level at which the company would have to take prescribed action, such as submission of plans to the State insurance regulator, but would be able to continue operating on the existing basis. The CAL is currently twice the level of capital at which the regulator is permitted to take control of the business.

 

For LGN, required capital has been set at 100% of EU minimum solvency margin for all products without FOGs.  For those products with FOGs, capital of between 100% and 281% of the EU minimum solvency margin has been used. The level of capital has been determined using risk based capital techniques.

 

For LGF, 100% of EU minimum solvency margin has been used for EV modelling purposes for all products both with and without FOGs. The level of capital has been determined using risk based capital techniques. 

 

The contribution from new business for our International businesses reflects an appropriate allowance for the cost of holding the required capital.

 

Financial options and guarantees

 

Under the EEV Principles an allowance for time value of FOGs is required where a financial option exists which is exercisable at the discretion of the policyholder. These types of option principally arise within the with-profits part of the fund and their time value is recognised within the with-profits burn-through cost described below. Additional financial options for non profit business exist only for a small amount of deferred annuity business where guaranteed early retirement and cash commutation terms apply when the policyholders choose their actual retirement date.

 

Further financial guarantees exist for non profit business, in relation to index-linked annuities where capped or collared restrictions apply. Due to the nature of these restrictions and the manner in which they vary depending on the prevailing inflation conditions, they are also treated as FOGs and a time value cost recognised accordingly.

 

The time value of FOGs has been calculated stochastically using a large number of real world economic scenarios derived from assumptions consistent with the deterministic EEV assumptions and allowing for appropriate management actions where applicable. The management action primarily relates to the setting of bonus rates. Future regular and terminal bonuses on participating business within the projections are set in a manner consistent with expected future returns available on assets deemed to back the policies within the stochastic scenarios.

 

 

European Embedded Value                                                                                                                                       Page 101

 

Notes to the Financial Statements

 

5.19 Methodology (continued)

 

In recognising the residual value of any projected surplus assets within the with-profits part of the fund in the deterministic projection, it is assumed that terminal bonuses are increased to exhaust all of the assets in the part of the fund over the future lifetime of the in-force with-profits policies. However, under stochastic modelling, there may be some extreme economic scenarios when the total projected assets within the with-profits part of the fund are insufficient to pay all projected policyholder claims and associated costs. The average additional shareholder cost arising from this shortfall has been included in the time value cost of financial options and guarantees and is referred to as the with-profits burn-through cost.

 

Economic scenarios have been used to assess the time value of the financial guarantees for non profit business by using the inflation rate generated in each scenario. The inflation rate used to project index-linked annuities will be constrained in certain real world scenarios, for example, where negative inflation occurs but the annuity payments do not reduce below pre-existing levels. The time value cost of FOGs allows for the projected average cost of these constrained payments for the index-linked annuities. It also allows for the small additional cost of the guaranteed early retirement and cash commutation terms for the minority of deferred annuity business where such guarantees have been written.

 

US Protection FOGs relate to guaranteed minimum crediting rates and surrender values on a range of contracts. The guaranteed surrender value of the contract is based on the accumulated value of the contract including accrued interest. The crediting rates are discretionary but related to the accounting income for the amortising bond portfolio. The majority of the guaranteed minimum crediting rates are between 3% and 4%. The assets backing these contracts are invested in US Dollar denominated fixed interest securities.

 

LGN separately provides for two types of guarantees: interest rate guarantees and maturity guarantees. Certain contracts provide an interest rate guarantee where there is a minimum crediting rate based on the higher of 1-year Euribor and the policy guarantee rate. This guarantee applies on a monthly basis. Certain unit linked contracts provide a guaranteed minimum value at maturity where the maturity amount is the higher of the fund value and a guarantee amount. The fund values for both these contracts are invested in Euro denominated fixed interest securities.

 

For LGF, FOGs which have been separately provided for relate to guaranteed minimum crediting rates and surrender values on a range of contracts. The guaranteed surrender value of the contract is the accumulated value of the contract including accrued bonuses. The bonuses are based on the accounting income for the amortising bond portfolios plus income and releases from realised gains on any equity type investments. Policy liabilities equal guaranteed surrender values. Local statutory accounting rules require the establishment of a specific liability when the accounting income for a company is less than 125% of the guaranteed minimum credited returns, although this has never been required. In general, the guaranteed annual bonus rates are between 0% and 4.5%.

 

Risk free rate

 

The risk free rate is set to reflect both the pattern of the emerging profits under EEV and the relevant duration of the liabilities where backing assets reflect this assumption (e.g. equity returns). For the UK, it is set by reference to the gross redemption yield on the 15 year gilt index. For LGA, the risk free rate is the 10 year US Treasury effective yield, while the 10 year ECB AAA-rated Euro area central government bond par yield is used for LGN and LGF.

 

Risk discount rate

 

The risk discount rate (RDR) is a combination of the risk free rate and a risk margin, which reflects the residual risks inherent in the Group's covered businesses, after taking account of prudential margins in the statutory provisions, the required capital and the specific allowance for FOGs.

 

The risk margin has been determined based on an assessment of the Group's weighted average cost of capital (WACC). This assessment incorporates a beta for the Group, which measures the correlation of movements in the Group's share price to movements in a relevant index. Beta values therefore allow for the market's assessment of the risks inherent in the business relative to other companies in the chosen index.

 

The WACC is derived from the Group's cost of equity and debt, and the proportion of equity to debt in the Group's capital structure measured using market values. Each of these three parameters is forward looking, although informed by historic information and appropriate judgements where necessary. The cost of equity is calculated as the risk free rate plus the equity risk premium for the chosen index multiplied by the Company's beta. Forward-looking or adjusted betas make allowance for the observed tendency for betas to revert to 1 and therefore a weighted average of the historic beta and 1 tends to be a better estimate of the Company's beta for the future period. We have computed the WACC using an arithmetical average of forward-looking betas against the FTSE 100 index.    

 

 

European Embedded Value                                                                                                                                       Page 102

 

Notes to the Financial Statements

 

5.19 Methodology (continued)

 

The cost of debt used in the WACC calculations takes account of the actual locked-in rates for our senior and subordinated long term debt. All debt interest attracts tax relief at a rate of 21.3%.

 

Whilst the WACC approach is a relatively simple and transparent calculation to apply, subjectivity remains within a number of the assumptions. Management believes that the chosen margin, together with the levels of required capital, the inherent strength of the Group's regulatory reserves and the explicit deduction for the cost of options and guarantees, is appropriate to reflect the risks within the covered business.

 

Analysis of profit

 

Operating profit is identified at a level which reflects an assumed longer term level of investment return.

 

The contribution to operating profit in a period is attributed to four sources:

i.  new business;

ii.  the management of in-force business;

iii. development costs; and

iv.    return on shareholder net worth.

 

Further profit contributions arise from actual investment return differing from the assumed long term investment return (investment return variances), and from the effect of economic assumption changes.

 

The contribution from new business represents the value recognised at the end of each period from new business written in that period, after allowing for the actual cost of acquiring the business and of establishing the required technical provisions and reserves and after making allowance for the cost of capital. New business contributions are calculated using closing assumptions.

 

The contribution from in-force business is calculated using opening assumptions and comprises:

i.  expected return - the discount earned from the value of business in-force at the start of the year;

ii.  experience variances - the variance in the actual experience over the reporting period from that assumed in the value of business in-force as at the start of the year; and

iii. operating assumption changes - the effects of changes in future assumptions, other than changes in economic assumptions from those used in valuing the business at the start of the year. These changes are made prospectively from the end of the year.

 

Development costs relate to investment in strategic systems and development capability.

 

The contribution from shareholder net worth comprises the increase in embedded value based on assumptions at the start of the year in respect of the expected investment return on the Society shareholder capital.

 

Further profit contributions arise from investment return variances and the effect of economic assumption changes.

 

Investment return variances represent the effect of actual investment performance and changes to investment policy on SNW and VIF business from that assumed at the beginning of the period.

 

Economic assumption changes comprise the effect of changes in economic variables on SNW and VIF business from that assumed at the beginning of the period, which are beyond the control of management, including associated changes to valuation bases to the extent that they are reflected in revised assumptions.

 

 

New Business                                                                                                                                                                 Page 103

 

6.01 Investment management new business  






  








Increase/

  






2012 

2011 

(decrease)

  






£m

£m

%

  









  









Index funds






22,400 

22,182 

Liability driven investments






5,678 

5,809 

(2)

Active









 - Active fixed income






6,042 

4,580 

32 

 - Property






125 

265 

(53)

 - Equity






(88)

  









  









Total LGIM new funds






34,246 

32,844 

Institutional unit trust






424 

637 

(33)

  









  









Total new funds






34,670 

33,481 

  









  









Attributable to:









LGIM UK customers





25,096 

26,305 

(5)

LGIM International customers






9,150 

6,539 

40 

Legal & General Retail Investments






424 

637 

(33)

  









  









  









  









  









LGIM net flows






7,144 

2,983 

139 

  









  









1. New monies from Legal & General Investment Management (LGIM) exclude £4.8bn (2011: £4.1bn) received during the year on a temporary basis, generally as part of portfolio reconstructions.

 

 

 

New Business                                                                                                                                                                 Page 104

 

6.02 Investment management new business quarterly progression  

  









  

  

months to

months to

months to

months to

months to

months to

months to

months to

  

31.12.12

30.09.12

30.06.12

31.03.12

31.12.11

30.09.11

30.06.11

31.03.11

  

£m

£m

£m

£m

£m

£m

£m

£m

  









  









  









Index funds

7,762 

6,473 

3,979 

4,186 

4,555 

4,691 

6,067 

6,869 

Liability driven investments

1,946 

432 

1,620 

1,680 

1,085 

1,985 

780 

1,959 

Active









 - Active fixed income

1,288 

1,299 

1,838 

1,617 

2,014 

505 

900 

1,161 

 - Property

69 

11 

11 

34 

87 

63 

17 

98 

 - Equity

  









  









Total LGIM new funds

11,065 

8,215 

7,449 

7,517 

7,741 

7,251 

7,764 

10,088 

Institutional unit trust

47 

266 

48 

63 

123 

109 

123 

282 

  









Total new funds

11,112 

8,481 

7,497 

7,580 

7,864 

7,360 

7,887 

10,370 

  









  









Attributable to:









LGIM UK customers

8,562 

4,628 

5,859 

6,047 

4,745 

6,935 

6,904 

7,721 

LGIM International customers

2,503 

3,587 

1,590 

1,470 

2,996 

316 

860 

2,367 

Legal & General Retail Investments

47 

266 

48 

63 

123 

109 

123 

282 

  









  









  









  









  









LGIM net flows

2,563 

618 

1,376 

2,587 

(607)

586 

1,005 

1,999 

  









  









 

 

6.03 Legal & General Investment Management new business by investment approach   

  









  







2012 

2011 

  







%

%

  









  









Indexed equities







40 

44 

Indexed bonds (including index linked funds and cash)


26 

23 

Active bonds (including index linked funds and cash)



18 

14 

Liability driven investments







16 

18 

Property







-  

  









  









Total







100 

100 

  









  









 

 

New Business                                                                                                                                                                 Page 105

 

6.04 Assets under management   









   









   









   






At

At


   






2012 

2011 


   






£m

£m


   









   








Legal & General Investment Management assets under management



405,972 

371,211 

Other assets under management






7,180 

7,362 


   









   








Worldwide assets under management






413,152 

378,573 


   









   








1. Other assets under management comprises retail investments and additional funds managed overseas.


   









   









   








Legal & General Investment Management's assets under management are analysed below:


   








Represented by

   








Index tracking funds:

   








- UK equities

   






64,159 

63,228 

- Overseas equities

   






98,775 

82,200 

- Fixed interest

   






43,758 

37,515 

- Index linked

   






35,679 

40,554 

- Cash/deposits

   






814 

671 


   









   








Total index tracking funds

   






243,185 

224,168 

Actively managed funds

   






98,830 

88,684 

Liability driven investments

   






63,957 

58,359 


   









   









   






405,972 

371,211 


   









   









   








By investment approach

   








Index equities

   






162,934 

145,428 

Index bonds (including index linked funds and cash)


80,251 

78,740 

Active bonds (including index linked funds and cash)


82,170 

72,355 

Liability driven investments

   






63,957 

58,359 

Active equities

   






7,698 

7,229 

Property

   






8,625 

8,757 

Private equity

   






337 

343 


   









   









   






405,972 

371,211 


   









   









   








By source of business

   








Institutional assets under management:








- Managed pension funds pooled

   






216,979 

205,174 

- Liability driven investments

   






63,968 

58,367 

- Other