10/21/2021 | Press release | Distributed by Public on 10/21/2021 04:59
6 months | 6 months1 | Full year1 | ||
2020 | 2019 | 2019 | ||
Notes | £m | £m | £m | |
From continuing operations | ||||
Legal & General Retirement (LGR) | 2.03 | 721 | 655 | 1,569 |
- LGR Institutional (LGRI) | 585 | 524 | 1,216 | |
- LGR Retail (LGRR) | 136 | 131 | 353 | |
Legal & General Investment Management (LGIM) | 2.04 | 196 | 192 | 394 |
Legal & General Capital (LGC) | 2.05 | 123 | 173 | 363 |
Legal & General Insurance (LGI) | 2.03 | 88 | 134 | 314 |
- UK and Other | 57 | 93 | 223 | |
- US (LGIA) | 31 | 41 | 91 | |
Operating profit from divisions: | ||||
From continuing operations | 1,128 | 1,154 | 2,640 | |
From discontinued operations2 | 26 | 19 | 11 | |
Operating profit from divisions | 1,154 | 1,173 | 2,651 | |
Group debt costs3 | (115) | (108) | (208) | |
Group investment projects and expenses | (72) | (60) | (157) | |
COVID-19 costs4 | (21) | - | - | |
Operating profit | 946 | 1,005 | 2,286 | |
Investment and other variances | 2.06 | (644) | 57 | (150) |
Losses on non-controlling interests | (17) | (9) | (24) | |
Adjusted profit before tax attributable to equity holders | 285 | 1,053 | 2,112 | |
Tax expense attributable to equity holders | 4.05 | (12) | (188) | (302) |
Profit for the period | 273 | 865 | 1,810 | |
Profit attributable to equity holders | 290 | 874 | 1,834 | |
Earnings per share: | ||||
Basic (pence per share)5 | 2.07 | 4.89p | 14.74p | 30.92p |
Diluted (pence per share)5 | 2.07 | 4.63p | 14.66p | 30.75p |
1. 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to Legal & General Investment Management (LGIM) within Operating profit from divisions. This has reduced LGIM operating profit by £13m for the six months ended 30 June 2020, and by £29m for the full year 2019. | ||||
2. Discontinued operations include the results of the Mature Savings division following the group's announcement to sell the business to ReAssure Limited (2019 included the results of the General Insurance division following its sale to Allianz, which completed on 31 December 2019). | ||||
3. Group debt costs exclude interest on non recourse financing. | ||||
4. COVID-19 costs reflect incremental operational expenses incurred as a result of COVID-19 and include the provision of IT spend on remote working solutions. | ||||
5. All earnings per share calculations are based on profit attributable to equity holders of the company. |
Changes in valuation assump- tions | Operating profit/ (loss) after tax | Operating profit/ (loss) before tax | ||||||||
New business surplus/ (strain) | Net release from operations | |||||||||
Release from operations1 | Exper- ience variances | Non-cash items | Other | Tax expense/ (credit) | ||||||
For the six month period | ||||||||||
to 30 June 2020 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
LGR | 329 | 98 | 427 | 27 | 143 | 21 | - | 618 | 103 | 721 |
- LGRI | 246 | 71 | 317 | 20 | 143 | 21 | - | 501 | 84 | 585 |
- LGRR | 83 | 27 | 110 | 7 | - | - | - | 117 | 19 | 136 |
LGIM | 173 | (11) | 162 | (5) | - | - | - | 157 | 39 | 196 |
- LGIM (excluding | ||||||||||
Workplace Savings)2 | 158 | - | 158 | - | - | - | - | 158 | 39 | 197 |
- Workplace Savings3 | 15 | (11) | 4 | (5) | - | - | - | (1) | - | (1) |
LGC | 97 | - | 97 | - | - | - | - | 97 | 26 | 123 |
LGI | 163 | (1) | 162 | (25) | 8 | (5) | (81) | 59 | 29 | 88 |
- UK and Other | 69 | (1) | 68 | (25) | 8 | (5) | - | 46 | 11 | 57 |
- US (LGIA) | 94 | - | 94 | - | - | - | (81) | 13 | 18 | 31 |
From continuing operations | 762 | 86 | 848 | (3) | 151 | 16 | (81) | 931 | 197 | 1,128 |
From discontinued operations4 | 21 | - | 21 | - | - | - | - | 21 | 5 | 26 |
Total from divisions | 783 | 86 | 869 | (3) | 151 | 16 | (81) | 952 | 202 | 1,154 |
Group debt costs | (93) | - | (93) | - | - | - | - | (93) | (22) | (115) |
Group investment projects and expenses | (25) | - | (25) | - | - | - | (30) | (55) | (17) | (72) |
COVID-19 costs5 | - | - | - | - | - | - | (17) | (17) | (4) | (21) |
Total | 665 | 86 | 751 | (3) | 151 | 16 | (128) | 787 | 159 | 946 |
1. Release from operations within US (LGIA) includes £84m of dividends from the US. | ||||||||||
2. LGIM (excluding Workplace Savings) includes profits on fund management services. | ||||||||||
3. Workplace Savings represents administration business only. | ||||||||||
4. Discontinued operations include the results of the Mature Savings division following the group's announcement to sell the business to ReAssure Limited. | ||||||||||
5. COVID-19 costs reflect incremental operational expenses incurred as a result of COVID-19 and include the provision of IT spend on remote working solutions. | ||||||||||
Release from operations for LGR, LGIM - Workplace Savings and LGI UK and Other represents the expected IFRS surplus generated in the period from the in-force non-profit annuities, workplace savings and UK protection businesses using best estimate assumptions. The LGIM release from operations also includes operating profit after tax from the institutional and retail investment management businesses. The LGI release from operations also includes dividends remitted from LGIA. The release from operations within discontinued operations primarily reflects the unwind of expected profits after tax under the risk transfer agreement with ReAssure Limited from the Mature Savings business. | ||||||||||
New business surplus/strain for LGR, LGIM - Workplace Savings and LGI UK and Other represents the cost of acquiring new business and setting up prudent reserves in respect of the new business for UK non-profit annuities, workplace savings and protection, net of tax. The new business surplus and release from operations for LGR, LGIM and LGI excludes any capital held in excess of the prudent reserves from the liability calculation. | ||||||||||
LGR's new business metrics are presented based on a target long-term asset portfolio. At certain period ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may continue to source high quality assets to support that business after the period end, as appropriate, taking into account the alternative risks and rewards of traded credit. At period end, any difference between the actual assets and the long-term asset mix is reflected in investment variance. | ||||||||||
Net release from operations for LGR, LGIM - Workplace Savings, LGI and discontinued operations is defined as release from operations plus new business surplus/(strain). | ||||||||||
Release from operations and net release from operations for LGC and LGIM (excluding workplace savings) represents the operating profit (net of tax). | ||||||||||
See Note 2.03 for more detail on experience variances, changes to valuation assumptions and non-cash items. | ||||||||||
# All references to 'Operating profit' throughout this report represent 'Group adjusted operating profit', an alternative performance measure defined in the glossary. |
Changes in valuation assump- tions | Operating profit/ (loss) after tax | Operating profit/ (loss) before tax | ||||||||
New business surplus/ (strain) | Net release from operations | |||||||||
Release from operations1 | Exper- ience variances | Non-cash items | Other | Tax expense/ (credit) | ||||||
For the six month period | ||||||||||
to 30 June 2019 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
LGR | 303 | 185 | 488 | (37) | 33 | 58 | - | 542 | 113 | 655 |
- LGRI | 212 | 165 | 377 | (37) | 33 | 61 | - | 434 | 90 | 524 |
- LGRR | 91 | 20 | 111 | - | - | (3) | - | 108 | 23 | 131 |
LGIM2 | 168 | (11) | 157 | (3) | - | (1) | - | 153 | 39 | 192 |
- LGIM (excluding | ||||||||||
Workplace Savings)3 | 155 | - | 155 | - | - | - | - | 155 | 39 | 194 |
- Workplace Savings4 | 13 | (11) | 2 | (3) | - | (1) | - | (2) | - | (2) |
LGC | 142 | - | 142 | - | - | - | - | 142 | 31 | 173 |
LGI | 171 | (1) | 170 | (21) | 18 | (2) | (59) | 106 | 28 | 134 |
- UK and Other | 84 | (1) | 83 | (21) | 18 | (2) | - | 78 | 15 | 93 |
- US (LGIA) | 87 | - | 87 | - | - | - | (59) | 28 | 13 | 41 |
From continuing operations | 784 | 173 | 957 | (61) | 51 | 55 | (59) | 943 | 211 | 1,154 |
From discontinued operations5 | 15 | - | 15 | - | - | - | - | 15 | 4 | 19 |
Total from divisions | 799 | 173 | 972 | (61) | 51 | 55 | (59) | 958 | 215 | 1,173 |
Group debt costs | (87) | - | (87) | - | - | - | - | (87) | (21) | (108) |
Group investment projects and expenses2 | (19) | - | (19) | - | - | - | (26) | (45) | (15) | (60) |
Total | 693 | 173 | 866 | (61) | 51 | 55 | (85) | 826 | 179 | 1,005 |
1. Release from operations within US (LGIA) includes £81m of dividends from the US. | ||||||||||
2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £10m and Workplace Savings operating profit by £3m. | ||||||||||
3. LGIM (excluding Workplace Savings) includes profits on fund management services. | ||||||||||
4. Workplace Savings represents administration business only. | ||||||||||
5. Discontinued operations include the results of the Mature Savings and General Insurance divisions following the group's announcements to sell these businesses to ReAssure Limited and Allianz respectively. The sale of the General Insurance division completed on 31 December 2019. |
Changes | Operating | |||||||||
New | Net | in | Operating | profit/ | ||||||
Release | business | release | Exper- | valuation | profit/ | Tax | (loss) | |||
from | surplus/ | from | ience | assump- | Non-cash | (loss) | expense/ | before | ||
For the year ended | operations1 | (strain) | operations | variances | tions | items | Other | after tax | (credit) | tax |
31 December 2019 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
LGR | 598 | 327 | 925 | (53) | 390 | 91 | - | 1,353 | 216 | 1,569 |
- LGRI | 418 | 265 | 683 | (40) | 313 | 88 | - | 1,044 | 172 | 1,216 |
- LGRR | 180 | 62 | 242 | (13) | 77 | 3 | - | 309 | 44 | 353 |
LGIM2 | 348 | (20) | 328 | (6) | - | (4) | - | 318 | 76 | 394 |
- LGIM (excluding Workplace | ||||||||||
Savings)3 | 321 | - | 321 | - | - | - | - | 321 | 77 | 398 |
- Workplace Savings4 | 27 | (20) | 7 | (6) | - | (4) | - | (3) | (1) | (4) |
LGC | 295 | - | 295 | - | - | - | - | 295 | 68 | 363 |
LGI | 259 | (7) | 252 | (11) | 44 | (12) | 4 | 277 | 37 | 314 |
- UK and Other | 165 | (7) | 158 | (11) | 44 | (12) | 4 | 183 | 40 | 223 |
- US (LGIA) | 94 | - | 94 | - | - | - | - | 94 | (3) | 91 |
From continuing operations | 1,500 | 300 | 1,800 | (70) | 434 | 75 | 4 | 2,243 | 397 | 2,640 |
From discontinued operations5 | 9 | - | 9 | - | - | - | - | 9 | 2 | 11 |
Total from divisions | 1,509 | 300 | 1,809 | (70) | 434 | 75 | 4 | 2,252 | 399 | 2,651 |
Group debt costs | (168) | - | (168) | - | - | - | - | (168) | (40) | (208) |
Group investment projects | ||||||||||
and expenses2 | (44) | - | (44) | - | - | - | (79) | (123) | (34) | (157) |
Total | 1,297 | 300 | 1,597 | (70) | 434 | 75 | (75) | 1,961 | 325 | 2,286 |
1. Release from operations within US (LGIA) includes £81m of dividends from the US. | ||||||||||
2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £23m and Workplace Savings operating profit by £6m. | ||||||||||
3. LGIM (excluding Workplace Savings) includes profits on fund management services. | ||||||||||
4. Workplace Savings represents administration business only. | ||||||||||
5. Discontinued operations include the results of the Mature Savings and General Insurance divisions following the group's announcement to sell these businesses to ReAssure Limited and Allianz respectively. The sale of the General Insurance business completed on 31 December 2019. |
LGR | LGI | LGR | LGI | LGR | LGI | |
6 months | 6 months | 6 months | 6 months | Full year | Full year | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | |
Net release from operations | 427 | 162 | 488 | 170 | 925 | 252 |
Experience variances | ||||||
- Persistency | 3 | (11) | - | (13) | (4) | (9) |
- Mortality/morbidity | 33 | (17) | 5 | (8) | 6 | (5) |
- Expenses | (3) | (5) | (9) | (1) | (23) | - |
- Project and development costs | (4) | - | (4) | (1) | (12) | - |
- Other | (2) | 8 | (29) | 2 | (20) | 3 |
Total experience variances | 27 | (25) | (37) | (21) | (53) | (11) |
Changes to valuation assumptions | ||||||
- Persistency | - | - | - | - | - | (16) |
- Mortality/morbidity | 19 | 4 | - | 5 | 352 | 39 |
- Expenses | - | - | - | - | 5 | - |
- Other1 | 124 | 4 | 33 | 13 | 33 | 21 |
Total changes to valuation assumptions | 143 | 8 | 33 | 18 | 390 | 44 |
Movement in non-cash items | ||||||
- Acquisition expense tax relief | - | (2) | - | (1) | - | (2) |
- Other2 | 21 | (3) | 58 | (1) | 91 | (10) |
Total movement in non-cash items | 21 | (5) | 58 | (2) | 91 | (12) |
Other | - | (81) | - | (59) | - | 4 |
Operating profit after tax | 618 | 59 | 542 | 106 | 1,353 | 277 |
Tax gross up | 103 | 29 | 113 | 28 | 216 | 37 |
Operating profit before tax | 721 | 88 | 655 | 134 | 1,569 | 314 |
1. The £124m positive Other assumption change in LGR reflects a reduction in the assumed late retirement factors applied to deferred annuities. | ||||||
2. LGR Other movement in non-cash items is driven by the net effect of the capitalisation and unwind of future asset management profits on activity managed by LGIM, and is a function of new business volumes and movements in the main unit cost assumptions. | ||||||
6 months | 6 months | Full year | |
2020 | 20195 | 20195 | |
£m | £m | £m | |
Asset management revenue (excluding 3rd party market data)1,2 | 458 | 425 | 889 |
Asset management transactional revenue3 | 9 | 9 | 23 |
Asset management expenses (excluding 3rd party market data)1,2 | (270) | (240) | (514) |
Workplace Savings operating loss4 | (1) | (2) | (4) |
Total LGIM operating profit | 196 | 192 | 394 |
1. Asset management revenue and expenses exclude income and costs of £13m in relation to the provision of third party market data (H1 19: £11m, FY 19: £24m). | |||
2. The ETF operating result is included as part of asset management revenue and expenses. | |||
3. Transactional revenue from external clients includes execution fees, asset transition income, trigger fees, arrangement fees on property transactions and performance fees. | |||
4. Workplace Savings represents administration business. | |||
5. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. For the respective 2019 periods this has increased Asset management expenses (H1 19: £10m; FY19: £23m) and reduced the Workplace Savings operating result (H1 19: £3m; FY19: £6m). |
6 months | 6 months | Full year | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Direct investments1 | 36 | 99 | 217 |
Traded investment portfolio including treasury assets2 | 87 | 74 | 146 |
Total LGC operating profit | 123 | 173 | 363 |
1. Direct Investments represents LGC's portfolio of assets across future cities (including urban regeneration and clean energy), housing and SME finance. | |||
2. The traded investment portfolio holds a diversified set of exposures across equities, fixed income, multi-asset funds and cash. |
6 months | 6 months | Full year | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Investment variance1 | (599) | 84 | (27) |
M&A related and other variances | (45) | (27) | (123) |
Total investment and other variances | (644) | 57 | (150) |
1. Investment variance includes differences between actual and long term expected investment return on traded and real assets, economic assumption changes (e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business, and excludes the yield associated with assets held for future new pension risk transfer business from the valuation discount rate. The investment variance for the six months ended 30 June 2020 is a loss of £599m which is broadly made up of three significant items: 1) £483m in LGI, reflecting a reduction in the discount rate used to calculate protection liabilities, the rate being linked to UK government bond and US Treasury yields rates; 2) £307m in LGC, reflecting unrealised losses on our traded equity portfolio and valuation markdowns on certain retail assets; 3) offset partially by a positive variance of £96m in respect of the defined benefit pension scheme, reflecting the impact of the acquisition of annuity assets from LGR, and the beneficial rate difference between the IAS19 and annuity discount rates. |
After tax | Per share1 | After tax | Per share1 | After tax | Per share1 | |
6 months | 6 months | 6 months | 6 months | Full year | Full year | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | p | £m | p | £m | p | |
Profit for the period attributable to equity holders | 290 | 4.89 | 874 | 14.74 | 1,834 | 30.92 |
Less: earnings derived from discontinued operations | (19) | (0.32) | (27) | (0.46) | (23) | (0.39) |
Basic earnings derived from continuing operations | 271 | 4.57 | 847 | 14.28 | 1,811 | 30.53 |
1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the period, excluding employee scheme treasury shares. |
After tax | Weighted average number of shares | Per share1 | |
For the six month period to 30 June 2020 | £m | m | p |
Profit for the period attributable to equity holders | 290 | 5,930 | 4.89 |
Net shares under options allocable for no further consideration | - | 33 | (0.03) |
Conversion of restricted tier 1 notes | - | 307 | (0.23) |
Total diluted earnings | 290 | 6,270 | 4.63 |
Less: diluted earnings derived from discontinued operations | (19) | - | (0.30) |
Diluted earnings derived from continuing operations | 271 | 6,270 | 4.33 |
After tax | Weighted average number of shares | Per share1 | |
For the six month period to 30 June 2019 | £m | m | p |
Profit for the period attributable to equity holders | 874 | 5,931 | 14.74 |
Net shares under options allocable for no further consideration | - | 30 | (0.08) |
Total diluted earnings | 874 | 5,961 | 14.66 |
Less: diluted earnings derived from discontinued operations | (27) | - | (0.45) |
Diluted earnings derived from continuing operations | 847 | 5,961 | 14.21 |
After tax | Weighted average number of shares | Per share1 | |
For the six month period to 31 December 2019 | £m | m | p |
Profit for the period attributable to equity holders | 1,834 | 5,932 | 30.92 |
Net shares under options allocable for no further consideration | - | 33 | (0.17) |
Total diluted earnings | 1,834 | 5,965 | 30.75 |
Less: diluted earnings derived from discontinued operations | (23) | - | (0.39) |
Diluted earnings derived from continuing operations | 1,811 | 5,965 | 30.36 |
1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees and conversion of restricted tier 1 notes. |
(i) Profit/(loss) for the period | ||||||
Group | ||||||
expenses | Total | |||||
and debt | continuing | |||||
LGR | LGIM | LGC | LGI | costs1 | operations | |
For the six month period to 30 June 2020 | £m | £m | £m | £m | £m | £m |
Operating profit/(loss)# | 721 | 196 | 123 | 88 | (208) | 920 |
Investment and other variances | 80 | (3) | (307) | (483) | 71 | (642) |
Losses attributable to non-controlling interests | - | - | - | - | (17) | (17) |
Profit/(loss) before tax attributable to equity holders | 801 | 193 | (184) | (395) | (154) | 261 |
Tax (expense)/credit attributable to equity holders | (99) | (21) | 33 | 70 | 10 | (7) |
Profit/(loss) for the period | 702 | 172 | (151) | (325) | (144) | 254 |
Group | ||||||
expenses | Total | |||||
and debt | continuing | |||||
LGR | LGIM2 | LGC | LGI | costs2 | operations | |
For the six month period to 30 June 2019 | £m | £m | £m | £m | £m | £m |
Operating profit/(loss)# | 655 | 192 | 173 | 134 | (168) | 986 |
Investment and other variances | (17) | (5) | 105 | (134) | 94 | 43 |
Losses attributable to non-controlling interests | - | - | - | - | (9) | (9) |
Profit/(loss) before tax attributable to equity holders | 638 | 187 | 278 | - | (83) | 1,020 |
Tax (expense)/credit attributable to equity holders | (110) | (39) | (36) | - | 3 | (182) |
Profit/(loss) for the period | 528 | 148 | 242 | - | (80) | 838 |
Group | ||||||
expenses | Total | |||||
and debt | continuing | |||||
LGR | LGIM2 | LGC | LGI | costs2 | operations | |
For the year ended 31 December 2019 | £m | £m | £m | £m | £m | £m |
Operating profit/(loss)# | 1,569 | 394 | 363 | 314 | (365) | 2,275 |
Investment and other variances | 43 | (9) | 91 | (234) | (58) | (167) |
Losses attributable to non-controlling interests | - | - | - | - | (24) | (24) |
Profit/(loss) before tax attributable to equity holders | 1,612 | 385 | 454 | 80 | (447) | 2,084 |
Tax (expense)/credit attributable to equity holders | (234) | (75) | (75) | 12 | 75 | (297) |
Profit/(loss) for the year | 1,378 | 310 | 379 | 92 | (372) | 1,787 |
1. Group expenses and debt costs include £21m of incremental costs incurred as a result of COVID-19. | ||||||
2. As described in Note 2.01, 2019 has been restated to reflect a reallocation of divisional-related project expenditure from Group investment projects and expenses to LGIM. This has reduced LGIM operating profit by £13m for the six months ended 30 June 2020, and by £29m for the full year 2019. | ||||||
# Operating profit for total continuing operations represents 'Group adjusted operating profit', an alternative performance measure defined in the glossary. |
(a) Total revenue | |||
6 months | 6 months | Full year | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Total income | 17,419 | 48,450 | 66,786 |
Adjusted for: | |||
Share of loss/(profit) from associates and joint ventures, net of tax | 23 | (6) | (17) |
Gain on acquisition and disposal of subsidiaries, associates and joint ventures | - | (43) | (51) |
Total revenue from continuing operations1 | 17,442 | 48,401 | 66,718 |
1. Continuing operations exclude the results of the Mature Savings division, and for 2019 the General Insurance division, which have been classified as discontinued operations. | |||
(b) Total income | |||||
LGC and | Total continuing | ||||
LGR | LGIM1,2 | LGI | other3 | operations | |
For the six month period to 30 June 2020 | £m | £m | £m | £m | £m |
Internal income | - | 102 | - | (102) | - |
External income | 6,530 | (1,812) | 1,016 | 11,685 | 17,419 |
Total income | 6,530 | (1,710) | 1,016 | 11,583 | 17,419 |
LGC and | Total continuing | ||||
LGR | LGIM1,2 | LGI | other3 | operations | |
For the six month period to 30 June 2019 | £m | £m | £m | £m | £m |
Internal income | - | 89 | - | (89) | - |
External income | 10,602 | 25,376 | 1,141 | 11,331 | 48,450 |
Total income | 10,602 | 25,465 | 1,141 | 11,242 | 48,450 |
LGC and | Total continuing | ||||
LGR | LGIM1,2 | LGI | other3 | operations | |
For the year ended 31 December 2019 | £m | £m | £m | £m | £m |
Internal income | - | 188 | - | (188) | - |
External income | 16,385 | 43,836 | 1,593 | 4,972 | 66,786 |
Total income | 16,385 | 44,024 | 1,593 | 4,784 | 66,786 |
1. LGIM internal income relates to investment management services provided to other segments. | |||||
2. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds. | |||||
3. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. | |||||
2.08 Segmental analysis (continued) | ||||
(c) Fees from fund management and investment contracts | ||||
LGC and other1 | Total continuing | |||
LGIM | LGI | operations | ||
For the six month period to 30 June 2020 | £m | £m | £m | £m |
Investment contracts | 38 | - | - | 38 |
Investment management fees | 467 | - | (96) | 371 |
Transaction fees | 9 | - | - | 9 |
Total fees from fund management and investment contracts2 | 514 | - | (96) | 418 |
LGC and other1 | Total continuing | |||
LGIM | LGI | operations | ||
For the six month period to 30 June 2019 | £m | £m | £m | £m |
Investment contracts | 34 | - | - | 34 |
Investment management fees | 431 | - | (74) | 357 |
Transaction fees | 10 | - | (1) | 9 |
Total fees from fund management and investment contracts2 | 475 | - | (75) | 400 |
LGC and other1 | Total continuing | |||
LGIM | LGI | operations | ||
For the year ended 31 December 2019 | £m | £m | £m | £m |
Investment contracts | 73 | 1 | - | 74 |
Investment management fees | 903 | - | (166) | 737 |
Transaction fees | 23 | - | - | 23 |
Total fees from fund management and investment contracts2 | 999 | 1 | (166) | 834 |
1. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. | ||||
2. Fees from fund management and investment contracts are a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a). | ||||
2.08 Segmental analysis (continued) | |||||
(d) Other operational income from contracts with customers | |||||
LGC and other | Total continuing | ||||
LGR | LGIM | LGI | operations | ||
For the six month period to 30 June 2020 | £m | £m | £m | £m | £m |
House building | - | - | - | 220 | 220 |
Professional services fees | 1 | 1 | 33 | - | 35 |
Insurance broker | - | - | 13 | - | 13 |
Total other operational income from contracts with customers1 | 1 | 1 | 46 | 220 | 268 |
LGC and other | Total continuing | ||||
LGR | LGIM | LGI | operations | ||
For the six month period to 30 June 2019 | £m | £m | £m | £m | £m |
House building | - | - | - | 454 | 454 |
Professional services fees | 1 | 1 | 43 | - | 45 |
Insurance broker | - | - | 17 | - | 17 |
Total other operational income from contracts with customers1 | 1 | 1 | 60 | 454 | 516 |
LGC and other | Total continuing | ||||
LGR | LGIM | LGI | operations | ||
For the year ended 31 December 2019 | £m | £m | £m | £m | £m |
House building | - | - | - | 1,056 | 1,056 |
Professional services fees | 2 | 2 | 91 | - | 95 |
Insurance broker | - | - | 34 | - | 34 |
Total other operational income from contracts with customers1 | 2 | 2 | 125 | 1,056 | 1,185 |
1. Total other operational income from contract with customers is a component of Total revenue from continuing operations disclosed in Note 2.08 (ii)(a) and excludes the share of profit/loss from associates and joint ventures and gain on acquisition and disposal of subsidiaries, associates and joint ventures. | |||||
6 months | 6 months | Full year | ||
2020 | 2019 | 2019 | ||
For the six month period to 30 June 2020 | Notes | £m | £m | £m |
Income | ||||
Gross written premiums | 5,497 | 8,745 | 15,203 | |
Outward reinsurance premiums | (1,303) | (1,522) | (3,452) | |
Net change in provision for unearned premiums | 10 | - | (66) | |
Net premiums earned | 4,204 | 7,223 | 11,685 | |
Fees from fund management and investment contracts | 418 | 400 | 834 | |
Investment return | 12,552 | 40,262 | 53,014 | |
Other operational income | 245 | 565 | 1,253 | |
Total income | 2.08 | 17,419 | 48,450 | 66,786 |
Expenses | ||||
Claims and change in insurance contract liabilities | 8,366 | 12,368 | 19,005 | |
Reinsurance recoveries | (1,957) | (1,971) | (3,502) | |
Net claims and change in insurance contract liabilities | 6,409 | 10,397 | 15,503 | |
Change in investment contract liabilities | 9,190 | 35,412 | 45,809 | |
Acquisition costs | 438 | 395 | 805 | |
Finance costs | 155 | 137 | 269 | |
Other expenses | 885 | 1,048 | 2,244 | |
Total expenses | 17,077 | 47,389 | 64,630 | |
Profit before tax | 342 | 1,061 | 2,156 | |
Tax expense attributable to policyholder returns | (81) | (41) | (72) | |
Profit before tax attributable to equity holders | 261 | 1,020 | 2,084 | |
Total tax expense | (88) | (223) | (369) | |
Tax expense attributable to policyholder returns | 81 | 41 | 72 | |
Tax expense attributable to equity holders | 4.05 | (7) | (182) | (297) |
Profit after tax from continuing operations | 2.08 | 254 | 838 | 1,787 |
Profit after tax from discontinued operations1 | 4.02 | 19 | 27 | 23 |
Profit for the period | 273 | 865 | 1,810 | |
Attributable to: | ||||
Non-controlling interests | (17) | (9) | (24) | |
Equity holders | 290 | 874 | 1,834 | |
Dividend distributions to equity holders during the period | 4.03 | 754 | 704 | 998 |
Dividend distributions to equity holders proposed after the period end | 4.03 | 294 | 294 | 753 |
p | p | p | ||
Total basic earnings per share2 | 2.07 | 4.89 | 14.74 | 30.92 |
Total diluted earnings per share2 | 2.07 | 4.63 | 14.66 | 30.75 |
Basic earnings per share derived from continuing operations2 | 2.07 | 4.57 | 14.28 | 30.53 |
Diluted earnings per share derived from continuing operations2 | 2.07 | 4.33 | 14.21 | 30.36 |
1. Discontinued operations include the results of the Mature Savings division, following the group's announcement to sell the business to ReAssure Limited (2019 included the results of the General Insurance division following its sale to Allianz, which completed on 31 December 2019). | ||||
2. All earnings per share calculations are based on profit attributable to equity holders of the company. |
6 months | 6 months | Full year | |
2020 | 2019 | 2019 | |
For the six month period to 30 June 2020 | £m | £m | £m |
Profit for the period | 273 | 865 | 1,810 |
Items that will not be reclassified subsequently to profit or loss | |||
Actuarial losses on defined benefit pension schemes | (146) | (69) | (62) |
Tax on actuarial losses on defined benefit pension schemes | 45 | 13 | 11 |
Total items that will not be reclassified subsequently to profit or loss | (101) | (56) | (51) |
Items that may be reclassified subsequently to profit or loss | |||
Exchange differences on translation of overseas operations | 56 | 3 | (67) |
Movement in cross-currency hedge | 75 | 27 | 13 |
Tax on movement in cross-currency hedge | (11) | (5) | (1) |
Movement in financial investments designated as available-for-sale | (8) | 65 | 72 |
Tax on movement in financial investments designated as available-for-sale | 1 | (11) | (15) |
Total items that may be reclassified subsequently to profit or loss | 113 | 79 | 2 |
Other comprehensive income/(expense) after tax | 12 | 23 | (49) |
Total comprehensive income for the period | 285 | 888 | 1,761 |
Total comprehensive income for the period attributable to: | |||
Continuing operations | 266 | 861 | 1,738 |
Discontinued operations | 19 | 27 | 23 |
Total comprehensive income/(expense) for the period attributable to: | |||
Non-controlling interests | (17) | (9) | (24) |
Equity holders | 302 | 897 | 1,785 |
As at | As at | As at | ||
30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | ||
Notes | £m | £m | £m | |
Assets | ||||
Goodwill | 68 | 62 | 64 | |
Purchased interest in long term businesses and other intangible assets | 221 | 158 | 190 | |
Deferred acquisition costs | 49 | 74 | 75 | |
Investment in associates and joint ventures accounted for using the equity method | 328 | 362 | 324 | |
Property, plant and equipment | 291 | 291 | 298 | |
Investment property | 4.04 | 8,041 | 7,140 | 7,695 |
Financial investments | 4.04 | 513,584 | 471,118 | 498,376 |
Reinsurers' share of contract liabilities | 6,530 | 5,413 | 5,810 | |
Deferred tax assets | 4.05 | 10 | 7 | 8 |
Current tax assets | 508 | 476 | 468 | |
Receivables and other assets | 15,986 | 10,706 | 8,532 | |
Assets of operations classified as held for sale | 4.02 | 23,968 | 27,194 | 24,844 |
Cash and cash equivalents | 21,700 | 14,224 | 13,923 | |
Total assets | 591,284 | 537,225 | 560,607 | |
Equity | ||||
Share capital | 4.06 | 149 | 149 | 149 |
Share premium | 4.06 | 1,003 | 998 | 1,000 |
Employee scheme treasury shares | (76) | (62) | (65) | |
Capital redemption and other reserves | 383 | 300 | 250 | |
Retained earnings | 7,453 | 7,376 | 8,033 | |
Attributable to owners of the parent | 8,912 | 8,761 | 9,367 | |
Restricted tier 1 convertible notes | 4.07 | 495 | - | - |
Non-controlling interests | 4.08 | 34 | 66 | 55 |
Total equity | 9,441 | 8,827 | 9,422 | |
Liabilities | ||||
Non-participating insurance contract liabilities | 82,792 | 73,869 | 77,317 | |
Non-participating investment contract liabilities | 327,380 | 315,603 | 320,594 | |
Core borrowings | 4.09 | 4,651 | 3,514 | 4,091 |
Operational borrowings | 4.10 | 1,195 | 1,051 | 1,020 |
Provisions | 4.13 | 1,336 | 1,202 | 1,220 |
UK deferred tax liabilities | 4.05 | 186 | 193 | 189 |
Overseas deferred tax liabilities | 4.05 | 184 | 197 | 182 |
Current tax liabilities | - | 175 | 107 | |
Payables and other financial liabilities | 4.11 | 101,665 | 75,527 | 84,039 |
Other liabilities | 540 | 719 | 804 | |
Net asset value attributable to unit holders | 33,883 | 24,909 | 31,507 | |
Liabilities of operations classified as held for sale | 4.02 | 28,031 | 31,439 | 30,115 |
Total liabilities | 581,843 | 528,398 | 551,185 | |
Total equity and liabilities | 591,284 | 537,225 | 560,607 | |
Employee | Capital | Equity | Restricted | ||||||
scheme | redemption | attributable | Tier 1 | Non- | |||||
Share | Share | treasury | and other | Retained | to owners | convertible | controlling | Total | |
For the six month period to 30 June 2020 | capital | premium | shares | reserves1 | earnings | of the parent | notes | interests | equity |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
As at 1 January 2020 | 149 | 1,000 | (65) | 250 | 8,033 | 9,367 | - | 55 | 9,422 |
Total comprehensive income for the period | - | - | - | 113 | 189 | 302 | - | (17) | 285 |
Options exercised under share option schemes | - | 3 | - | - | - | 3 | - | - | 3 |
Net movement in employee scheme treasury shares | - | - | (11) | (6) | 11 | (6) | - | - | (6) |
Dividends | - | - | - | - | (754) | (754) | - | - | (754) |
Restricted tier 1 convertible notes2 | - | - | - | - | - | - | 495 | - | 495 |
Movement in third party interests | - | - | - | - | - | - | - | (4) | (4) |
Currency translation differences | - | - | - | 26 | (26) | - | - | - | - |
As at 30 June 2020 | 149 | 1,003 | (76) | 383 | 7,453 | 8,912 | 495 | 34 | 9,441 |
1. Capital redemption and other reserves as at 30 June 2020 include share-based payments £79m, foreign exchange £150m, capital redemption £17m, hedging reserves £96m and available-for-sale reserves £41m. | |||||||||
2. See Note 4.07 for details. |
Employee | Capital | Equity | ||||||
scheme | redemption | attributable | Non- | |||||
Share | Share | treasury | and other | Retained | to owners | controlling | Total | |
For the six month period to 30 June 2019 | capital | premium | shares | reserves1 | earnings | of the parent | interests | equity |
£m | £m | £m | £m | £m | £m | £m | £m | |
As at 1 January 2019 | 149 | 992 | (52) | 230 | 7,261 | 8,580 | 72 | 8,652 |
Total comprehensive income for the period | - | - | - | 79 | 818 | 897 | (9) | 888 |
Options exercised under share option schemes | - | 6 | - | - | - | 6 | - | 6 |
Net movement in employee scheme treasury shares | - | - | (10) | (7) | (1) | (18) | - | (18) |
Dividends | - | - | - | - | (704) | (704) | - | (704) |
Movement in third party interests | - | - | - | - | - | - | 3 | 3 |
Currency translation differences | - | - | - | (2) | 2 | - | - | - |
As at 30 June 2019 | 149 | 998 | (62) | 300 | 7,376 | 8,761 | 66 | 8,827 |
1. Capital redemption and other reserves as at 30 June 2019 include share-based payments £74m, foreign exchange £122m, capital redemption £17m, hedging reserves £42m and available-for-sale reserves £45m. |
Employee | Capital | Equity | ||||||
scheme | redemption | attributable | Non- | |||||
Share | Share | treasury | and other | Retained | to owners | controlling | Total | |
For the year ended 31 December 2019 | capital | premium | shares | reserves1 | earnings | of the parent | interests | equity |
£m | £m | £m | £m | £m | £m | £m | £m | |
As at 1 January 2019 | 149 | 992 | (52) | 230 | 7,261 | 8,580 | 72 | 8,652 |
Total comprehensive income for the year | - | - | - | 2 | 1,783 | 1,785 | (24) | 1,761 |
Options exercised under share option schemes | - | 8 | - | - | - | 8 | - | 8 |
Net movement in employee scheme treasury shares | - | - | (13) | 4 | 1 | (8) | - | (8) |
Dividends | - | - | - | - | (998) | (998) | - | (998) |
Movement in third party interests | - | - | - | - | - | - | 7 | 7 |
Currency translation differences | - | - | - | 14 | (14) | - | - | - |
As at 31 December 2019 | 149 | 1,000 | (65) | 250 | 8,033 | 9,367 | 55 | 9,422 |
1. Capital redemption and other reserves as at 31 December 2019 include share-based payments £85m, foreign exchange £68m, capital redemption £17m, hedging reserves £32m and available-for-sale reserves £48m. | ||||||||
6 months | 6 months | Full year | ||
2020 | 2019 | 2019 | ||
For the six month period to 30 June 2020 | Notes | £m | £m | £m |
Cash flows from operating activities | ||||
Profit for the period | 273 | 865 | 1,810 | |
Adjustments for non cash movements in net profit for the period | ||||
Net (gains)/losses on financial investments and investment property | (6,969) | (37,069) | (45,516) | |
Investment income | (4,578) | (5,588) | (10,501) | |
Interest expense | 179 | 164 | 322 | |
Tax expense | (17) | 411 | 598 | |
Other adjustments | 18 | 62 | 117 | |
Net (increase)/decrease in operational assets | ||||
Investments held for trading or designated as fair value through profit or loss | 6,032 | 413 | (18,031) | |
Investments designated as available-for-sale | (35) | 97 | (179) | |
Other assets | (8,098) | (6,033) | (4,660) | |
Net increase/(decrease) in operational liabilities | ||||
Insurance contracts | 5,187 | 9,157 | 13,089 | |
Investment contracts | 6,789 | 22,524 | 27,514 | |
Other liabilities | 5,537 | 7,472 | 21,313 | |
Net increase/(decrease) in held for sale net liabilities | (1,181) | 223 | 1,206 | |
Cash from/(utilised in) operations | 3,137 | (7,302) | (12,918) | |
Interest paid | (127) | (140) | (263) | |
Interest received | 2,469 | 2,532 | 5,047 | |
Tax paid1 | (279) | (219) | (540) | |
Dividends received | 2,284 | 2,819 | 5,389 | |
Net cash flows from/(utilised in) operations | 7,484 | (2,310) | (3,285) | |
Cash flows from investing activities | ||||
Net acquisition of plant, equipment, intangibles and other assets | (42) | (28) | (89) | |
Net disposal/(acquisition) of operations, net of cash (transferred)/acquired | 1 | 76 | 198 | |
Net disposal/(investment) in associates and joint ventures | - | (88) | 29 | |
Net cash flows generated/(utilised) from investing activities | (41) | (40) | 138 | |
Cash flows from financing activities | ||||
Dividend distributions to ordinary equity holders during the period | 4.03 | (754) | (704) | (998) |
Options exercised under share option schemes | 4.06 | 3 | 6 | 8 |
Treasury shares purchased for employee share schemes | (22) | (10) | (20) | |
Payment of lease liabilities | (18) | (12) | (33) | |
Proceeds from borrowings | 869 | 151 | 1,309 | |
Repayment of borrowings | (237) | (593) | (958) | |
Proceeds from issuance of Restricted tier 1 convertible notes, net of associated expenses | 495 | - | - | |
Net cash flows from/(utilised in) financing activities | 336 | (1,162) | (692) | |
Net (decrease)/increase in cash and cash equivalents | 7,779 | (3,512) | (3,839) | |
Exchange gains/(losses) on cash and cash equivalents | 26 | 1 | (16) | |
Cash and cash equivalents at 1 January (before reallocation of held for sale cash) | 14,233 | 18,088 | 18,088 | |
Total cash and cash equivalents | 22,038 | 14,577 | 14,233 | |
Less: cash and cash equivalents of operations classified as held for sale | 4.02 | (338) | (353) | (310) |
Cash and cash equivalents at 30 June/31 December | 21,700 | 14,224 | 13,923 | |
1. Tax comprises UK corporation tax paid of £203m (H1 19: £126m; FY 19: £381m), withholding tax of £95m (H1 19: £105m; FY 19: £166m) and an overseas corporate tax refund of £19m (H1 19: £12m; FY 19: £7m). |
Mature Savings On 6 December 2017 the group announced the sale of its Mature Savings business to ReAssure Limited for a consideration of £650m. As part of the transaction, on 1 January 2018 the group entered into a risk transfer agreement with ReAssure Limited, whereby the group transferred all economic risks and rewards of the Mature Savings business to ReAssure Limited. The risk transfer agreement operates until the business is transferred under a court approved scheme under Part VII of the Financial Services and Markets Act 2000. The sale is expected to complete in the second half of 2020 following the completion of the Part VII transfer. As the legal transfer of the business has not yet occurred the Mature Savings business has been classified as held for sale on the Group's balance sheet as at 30 June 2020. The profit arising from the Mature Savings business in accordance with the risk transfer agreement has been recognised as "Profit after tax from discontinued operations" in the Consolidated Income Statement. Up until the Part VII this primarily reflects the unwind of expected underlying profits, which will offset the final profit on disposal. |
Dividend | Per share1 | Dividend | Per share1 | Dividend | Per share1 | |
6 months | 6 months | 6 months | 6 months | Full year | Full year | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | p | £m | p | £m | p | |
Ordinary dividends paid and charged to equity in the period: | ||||||
- Final 2018 dividend paid in June 2019 | - | - | 704 | 11.82 | 704 | 11.82 |
- Interim 2019 dividend paid in September 2019 | - | - | - | - | 294 | 4.93 |
- Final 2019 dividend paid in June 2020 | 754 | 12.64 | - | - | - | - |
Total dividends | 754 | 12.64 | 704 | 11.82 | 998 | 16.75 |
1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date. | ||||||
Subsequent to 30 June 2020, the directors declared an interim dividend of 4.93 pence per ordinary share. This dividend will be paid on 24 September 2020. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2020 and is not included as a liability in the Consolidated Balance Sheet as at 30 June 2020. |
30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
£m | £m | £m | |
Equities1 | 189,798 | 192,387 | 200,365 |
Debt securities2 | 299,168 | 275,086 | 286,916 |
Accrued interest | 1,551 | 1,617 | 1,647 |
Derivative assets3 | 25,207 | 13,198 | 14,828 |
Loans4 | 19,357 | 12,861 | 16,814 |
Financial investments | 535,081 | 495,149 | 520,570 |
Investment property | 9,334 | 8,706 | 9,107 |
Total financial investments and investment property | 544,415 | 503,855 | 529,677 |
Less: financial investments and investment property of operations classified as held for sale | (22,790) | (25,597) | (23,606) |
Financial investments and investment property | 521,625 | 478,258 | 506,071 |
1. Equity securities include investments in unit trusts of £13,615m (30 June 2019: £13,122m; 31 December 2019: £13,046m). | |||
2. A detailed analysis of debt securities to which shareholders are directly exposed is disclosed in Note 7.03. | |||
3. Derivatives are used for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. Derivative assets are shown gross of derivative liabilities of £27,550m (30 June 2019: £11,778m; 31 December 2019: £13,113m). | |||
4. Loans include £444m (30 June 2019: £447m; 31 December 2019: £437m) of loans valued at amortised cost. |
4.04 Financial investments and Investment property (continued) | ||||
(a) Fair value hierarchy (continued) | ||||
Total | Level 1 | Level 2 | Level 3 | |
For the six month period to 30 June 2020 | £m | £m | £m | £m |
Shareholder | ||||
Equity securities | 2,622 | 1,476 | - | 1,146 |
Debt securities | 4,570 | 1,433 | 2,304 | 833 |
Accrued interest | 21 | 6 | 12 | 3 |
Derivative assets | 293 | 6 | 287 | - |
Loans at fair value | 569 | - | 569 | - |
Investment property | 234 | - | - | 234 |
Non profit non-unit linked | ||||
Equity securities | 190 | 186 | - | 4 |
Debt securities | 75,867 | 9,689 | 46,570 | 19,608 |
Accrued interest | 539 | 27 | 461 | 51 |
Derivative assets | 22,095 | - | 22,095 | - |
Loans at fair value | 1,309 | - | 1,309 | - |
Investment property | 4,016 | - | - | 4,016 |
With-profits | ||||
Equity securities | 2,846 | 2,664 | - | 182 |
Debt securities | 4,922 | 1,534 | 3,388 | - |
Accrued interest | 38 | 8 | 30 | - |
Derivative assets | 295 | 3 | 292 | - |
Loans at fair value | 450 | - | 450 | - |
Investment property | 455 | - | - | 455 |
Unit linked | ||||
Equity securities | 184,140 | 183,466 | 21 | 653 |
Debt securities | 213,809 | 152,925 | 60,598 | 286 |
Accrued interest | 953 | 435 | 518 | - |
Derivative assets | 2,524 | 174 | 2,350 | - |
Loans at fair value | 16,585 | - | 16,585 | - |
Investment property | 4,629 | - | - | 4,629 |
Total financial investments and investment property at fair value1,2 | 543,971 | 354,032 | 157,839 | 32,100 |
1. This table excludes loans (including accrued interest) of £444m, which are held at amortised cost. | ||||
2. This table includes financial investments of £21,497m and investment property of £1,293m relating to assets of operations classified as held for sale. | ||||
4.04 Financial investments and investment property (continued) | ||||
(a) Fair value hierarchy (continued) | ||||
Total | Level 1 | Level 2 | Level 3 | |
For the six month period to 30 June 2019 | £m | £m | £m | £m |
Shareholder | ||||
Equity securities | 2,624 | 1,629 | - | 995 |
Debt securities | 4,319 | 1,601 | 2,040 | 678 |
Accrued interest | 32 | 13 | 13 | 6 |
Derivative assets | 110 | 104 | 6 | - |
Loans at fair value | 234 | - | 234 | - |
Investment property | 203 | - | - | 203 |
Non profit non-unit linked | ||||
Equity securities | 156 | 152 | - | 4 |
Debt securities | 66,387 | 7,314 | 43,723 | 15,350 |
Accrued interest | 520 | 25 | 464 | 31 |
Derivative assets | 11,523 | - | 11,523 | - |
Loans at fair value | 726 | - | 726 | - |
Investment property | 3,131 | - | - | 3,131 |
With-profits | ||||
Equity securities | 3,191 | 2,998 | - | 193 |
Debt securities | 5,598 | 1,636 | 3,962 | - |
Accrued interest | 47 | 11 | 36 | - |
Derivative assets | 68 | 8 | 60 | - |
Loans at fair value | 396 | - | 396 | - |
Investment property | 520 | - | - | 520 |
Unit linked | ||||
Equity securities | 186,416 | 183,682 | 2,070 | 664 |
Debt securities | 198,782 | 140,904 | 57,601 | 277 |
Accrued interest | 1,018 | 493 | 525 | - |
Derivative assets | 1,497 | 200 | 1,297 | - |
Loans at fair value | 11,058 | - | 11,058 | - |
Investment property | 4,852 | - | - | 4,852 |
Total financial investments and investment property at fair value1,2 | 503,408 | 340,770 | 135,734 | 26,904 |
1. This table excludes loans (including accrued interest) of £447m, which are held at amortised cost. | ||||
2. This table includes financial investments of £24,031m and investment property of £1,566m relating to assets of operations classified as held for sale. |
4.04 Financial investments and investment property (continued) | ||||
(a) Fair value hierarchy (continued) | ||||
Total | Level 1 | Level 2 | Level 3 | |
For the year ended 31 December 2019 | £m | £m | £m | £m |
Shareholder | ||||
Equity securities | 2,670 | 1,579 | - | 1,091 |
Debt securities | 5,059 | 1,038 | 3,175 | 846 |
Accrued interest | 22 | 6 | 13 | 3 |
Derivative assets | 108 | 3 | 105 | - |
Loans at fair value | 632 | - | 632 | - |
Investment property | 254 | - | - | 254 |
Non profit non-unit linked | ||||
Equity securities | 194 | 158 | 32 | 4 |
Debt securities | 69,530 | 8,281 | 43,342 | 17,907 |
Accrued interest | 531 | 29 | 464 | 38 |
Derivative assets | 11,448 | - | 11,444 | 4 |
Loans at fair value | 630 | - | 630 | - |
Investment property | 3,798 | - | - | 3,798 |
With-profits | ||||
Equity securities | 3,103 | 2,908 | - | 195 |
Debt securities | 5,468 | 1,590 | 3,878 | - |
Accrued interest | 44 | 11 | 33 | - |
Derivative assets | 115 | 8 | 107 | - |
Loans at fair value | 397 | - | 397 | - |
Investment property | 507 | - | - | 507 |
Unit linked | ||||
Equity securities | 194,398 | 191,687 | 1,966 | 745 |
Debt securities | 206,859 | 144,072 | 62,512 | 275 |
Accrued interest | 1,050 | 499 | 551 | - |
Derivative assets | 3,157 | 202 | 2,955 | - |
Loans at fair value | 14,718 | - | 14,718 | - |
Investment property | 4,548 | - | - | 4,548 |
Total financial investments and investment property at fair value1,2 | 529,240 | 352,071 | 146,954 | 30,215 |
1. This table excludes loans (including accrued interest) of £437m, which are held at amortised cost. | ||||
2. This table includes financial investments of £22,194m and investment property of £1,412m relating to assets of operations classified as held for sale. |
4.04 Financial investments and investment property (continued) | ||||||||
(b) Level 3 assets measured at fair value (continued) | ||||||||
Other | Other | |||||||
financial | financial | |||||||
Equity | invest- | Investment | Equity | invest- | Investment | |||
securities | ments | property | Total | securities | ments | property | Total | |
2020 | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | £m | £m | |
As at 1 January | 2,035 | 19,073 | 9,107 | 30,215 | 1,757 | 13,915 | 8,608 | 24,280 |
Total gains/(losses) for the period | ||||||||
- in other comprehensive income | - | (44) | - | (44) | - | 23 | 23 | |
- realised and unrealised gains/(losses)1 | (37) | 1,038 | (256) | 745 | 38 | 907 | (19) | 926 |
Purchases / Additions | 76 | 1,603 | 577 | 2,256 | 173 | 2,608 | 359 | 3,140 |
Sales / Disposals | (72) | (868) | (94) | (1,034) | (105) | (1,054) | (250) | (1,409) |
Transfers into Level 3 | 44 | 5 | - | 49 | 2 | - | - | 2 |
Transfers out of Level 3 | (61) | (26) | - | (87) | - | (57) | - | (57) |
Other | - | - | - | - | (9) | - | 8 | (1) |
As at 30 June | 1,985 | 20,781 | 9,334 | 32,100 | 1,856 | 16,342 | 8,706 | 26,904 |
Other | ||||||||
financial | ||||||||
Equity | invest- | Investment | ||||||
securities | ments | property | Total | |||||
2019 | 2019 | 2019 | 2019 | |||||
£m | £m | £m | £m | |||||
As at 1 January | 1,757 | 13,915 | 8,608 | 24,280 | ||||
Total gains/(losses) for the period | ||||||||
- in other comprehensive income | - | 20 | - | 20 | ||||
- realised and unrealised gains / (losses)1 | 50 | 1,314 | (86) | 1,278 | ||||
Purchases / Additions | 416 | 5,680 | 1,187 | 7,283 | ||||
Sales / Disposals | (199) | (1,850) | (675) | (2,724) | ||||
Transfers into Level 3 | 21 | 5 | 73 | 99 | ||||
Transfers out of Level 3 | (10) | (11) | - | (21) | ||||
As at 31 December | 2,035 | 19,073 | 9,107 | 30,215 | ||||
1. Realised and unrealised gains and losses are recognised in investment return in the Consolidated Income Statement. |
Sensitivities | ||||
Fair value 30 June 2020 £m | Most significant unobservable input | Positive Impact £m | Negative Impact £m | |
Lifetime mortgages | 5,478 | Illiquidity premium | 493 | (493) |
Private credit loans | 11,661 | Credit spreads | 758 | (758) |
Investment property | 9,334 | Equivalent yields | 720 | (821) |
Other investments | 5,627 | Various | 412 | (455) |
Total Level 3 assets | 32,100 | 2,383 | (2,527) | |
The above table demonstrates that the effect of a change in one or more unobservable inputs to reasonable alternative assumptions would result in a change in the fair value of Level 3 assets of +7/- 8% (30 June 2019: +/-6%; 31 December 2019: +/-6%). While the table demonstrates the effect of these changes in isolation, there may in reality be a correlation between the unobservable inputs and other factors. It should also be noted that some of these sensitivities are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. | ||||
(a) Tax charge in the Consolidated Income Statement | ||||||
The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows: | ||||||
Continuing | Continuing | Continuing | ||||
operations | Total | operations | Total | operations | Total | |
6 months | 6 months | 6 months | 6 months | Full year | Full year | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | |
Profit before tax attributable to equity holders | 261 | 285 | 1,020 | 1,053 | 2,084 | 2,112 |
Tax calculated at 19.00% | 50 | 54 | 194 | 200 | 396 | 401 |
Adjusted for the effects of: | ||||||
Recurring reconciling items: | ||||||
Income not subject to tax | - | - | (1) | (1) | (4) | (4) |
(Lower)/higher rate of tax on profits taxed overseas1 | (49) | (49) | (11) | (11) | (117) | (117) |
Non-deductible expenses | 6 | 6 | 1 | 1 | 2 | 2 |
Differences between taxable and accounting investment gains | (2) | (2) | - | - | (10) | (10) |
Adjustments for non-controlling interests | 3 | 3 | - | - | 4 | 4 |
Foreign tax | 2 | 2 | - | - | 6 | 6 |
Unrecognised tax losses | 1 | 1 | 2 | 2 | 14 | 14 |
Non-recurring reconciling items: | ||||||
Income not subject to tax | - | - | (2) | (2) | (6) | (6) |
Non-deductible expenses | 2 | 2 | - | - | 6 | 6 |
Adjustments in respect of prior years2 | (14) | (14) | (2) | (2) | 9 | 9 |
Impact of the revaluation of deferred tax balances3 | 7 | 7 | 1 | 1 | (2) | (2) |
Other | 1 | 2 | - | - | (1) | (1) |
- | - | |||||
Tax attributable to equity holders | 7 | 12 | 182 | 188 | 297 | 302 |
Equity holders' effective tax rate4 | 2.7% | 4.2% | 17.8% | 17.9% | 14.3% | 14.3% |
1. The lower rate of tax on overseas profits is principally driven by the 0% rate of taxation arising in our Bermudan reinsurance company, which provides our business with regulatory capital flexibility for both our PRT business and our US term insurance business. This is partially offset by the tax rate of 21% that applies to our US operations. | ||||||
2. Adjustments in respect of prior years relate to revisions of earlier estimates. | ||||||
3. The Finance Act 2020 removed the planned reduction in the headline UK corporation tax rate from 19% to 17%. As a result, UK deferred tax assets and liabilities previously recognised at 17% have been revalued. | ||||||
4. Equity holders' effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders. | ||||||
(b) Deferred tax | |||
30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
Deferred tax (liabilities)/assets | £m | £m | £m |
Deferred acquisition expenses | 50 | 29 | 35 |
- UK | (40) | (40) | (40) |
- Overseas | 90 | 69 | 75 |
Difference between the tax and accounting value of insurance contracts | (690) | (635) | (630) |
- UK | (232) | (228) | (198) |
- Overseas | (458) | (407) | (432) |
Unrealised gains on investments | (57) | (175) | (184) |
Excess of depreciation over capital allowances | 18 | 12 | 15 |
Excess expenses | 19 | 20 | 20 |
Accounting provisions and other | (59) | (32) | (44) |
Trading losses1 | 257 | 179 | 217 |
Pension fund deficit | 34 | 35 | 28 |
Acquired intangibles | (2) | (2) | (2) |
Total net deferred tax liabilities | (430) | (569) | (545) |
Less: net deferred tax liabilities of operations classified as held for sale | 70 | 186 | 182 |
Net deferred tax liabilities | (360) | (383) | (363) |
Analysed by: | |||
- UK deferred tax assets | |||
5 | 2 | 3 | |
- UK deferred tax liabilities | (186) | (193) | (189) |
- Overseas deferred tax assets | 5 | 5 | 5 |
- Overseas deferred tax liabilities2 | (184) | (197) | (182) |
Net deferred tax liabilities | (360) | (383) | (363) |
1. Trading losses include UK trade and US operating losses of £5m (H1 19: £3m; FY 19: £4m) and £252m (H1 19: £176m; FY 19: £213m) respectively. | |||
2. Overseas deferred tax liability is wholly comprised of US balances as at 30 June 2020. | |||
Number of | |||
Authorised share capital | shares | £m | |
At 30 June 2020, 30 June 2019 and 31 December 2019: ordinary shares of 2.5p each | 9,200,000,000 | 230 | |
Share | Share | ||
Number of | capital | premium | |
Issued share capital, fully paid | shares | £m | £m |
As at 1 January 2020 | 5,965,349,607 | 149 | 1,000 |
Options exercised under share option schemes | 1,225,772 | - | 3 |
As at 30 June 2020 | 5,966,575,379 | 149 | 1,003 |
Share | Share | ||
Number of | capital | premium | |
Issued share capital, fully paid | shares | £m | £m |
As at 1 January 2019 | 5,960,768,234 | 149 | 992 |
Options exercised under share option schemes | 3,497,185 | - | 6 |
As at 30 June 2019 | 5,964,265,419 | 149 | 998 |
Options exercised under share option schemes | 1,084,188 | - | 2 |
As at 31 December 2019 | 5,965,349,607 | 149 | 1,000 |
There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights. | |||
The holders of the company's ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company. |
Carrying | Carrying | Carrying | ||||
amount | Fair value | amount | Fair value | amount | Fair value | |
30 Jun | 30 Jun | 30 Jun | 30 Jun | 31 Dec | 31 Dec | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | |
Subordinated borrowings | ||||||
10% Sterling subordinated notes 2041 (Tier 2) | 312 | 339 | 312 | 364 | 312 | 353 |
5.5% Sterling subordinated notes 2064 (Tier 2) | 589 | 688 | 589 | 684 | 589 | 726 |
5.375% Sterling subordinated notes 2045 (Tier 2) | 603 | 672 | 602 | 673 | 603 | 691 |
5.25% US Dollar subordinated notes 2047 (Tier 2) | 693 | 733 | 661 | 706 | 648 | 704 |
5.55% US Dollar subordinated notes 2052 (Tier 2) | 407 | 435 | 388 | 419 | 380 | 405 |
5.125% Sterling subordinated notes 2048 (Tier 2) | 399 | 442 | 399 | 445 | 399 | 459 |
3.75% Sterling subordinated notes 2049 (Tier 2) | 598 | 595 | - | - | 598 | 613 |
4.5% Sterling subordinated notes 2050 (Tier 2) | 499 | 521 | - | - | - | - |
Client fund holdings of group debt (Tier 2)1 | (43) | (47) | (31) | (34) | (38) | (44) |
Total subordinated borrowings | 4,057 | 4,378 | 2,920 | 3,257 | 3,491 | 3,907 |
Senior borrowings | ||||||
Sterling medium term notes 2031-2041 | 603 | 896 | 603 | 868 | 609 | 877 |
Client fund holdings of group debt1 | (9) | (13) | (9) | (13) | (9) | (13) |
Total senior borrowings | 594 | 883 | 594 | 855 | 600 | 864 |
Total core borrowings | 4,651 | 5,261 | 3,514 | 4,112 | 4,091 | 4,771 |
1. £52m (30 June 2019: £40m; 31 December 2019: £47m) of the group's subordinated and senior borrowings are held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above. | ||||||
The presented fair values of the group's core borrowings reflect quoted prices in active markets and they have been classified as level 1 in the fair value hierarchy. |
Carrying | Carrying | Carrying | ||||
amount | Fair value | amount | Fair value | amount | Fair value | |
30 Jun | 30 Jun | 30 Jun | 30 Jun | 31 Dec | 31 Dec | |
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | |
Euro Commercial Paper | 100 | 100 | 354 | 354 | 200 | 200 |
Non recourse borrowings | 1,000 | 1,000 | 657 | 657 | 842 | 842 |
Bank loans and overdrafts | 104 | 104 | 58 | 58 | - | - |
Total operational borrowings1 | 1,204 | 1,204 | 1,069 | 1,069 | 1,042 | 1,042 |
Less: liabilities of operations classified as held for sale | (30) | (30) | (29) | (29) | (29) | (29) |
Operational borrowings | 1,174 | 1,174 | 1,040 | 1,040 | 1,013 | 1,013 |
1. Unit linked borrowings with a carrying value of £21m (30 June 2019: £11m; 31 December: £7m) are excluded from the analysis above as the risk is retained by policyholders. Operational borrowings including unit linked borrowings are £1,195m (30 June 2019: £1,051m; 31 December 2019: £1,020m). |
30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |||
£m | £m | £m | |||
Derivative liabilities | 27,550 | 11,778 | 13,113 | ||
Repurchase agreements1 | 55,309 | 46,994 | 56,884 | ||
Other financial liabilities2 | 19,544 | 17,353 | 14,476 | ||
Total payables and other financial liabilities | 102,403 | 76,125 | 84,473 | ||
Less: Payables and other liabilities of operations classified as held for sale | (738) | (598) | (434) | ||
Payables and other financial liabilities | 101,665 | 75,527 | 84,039 | ||
1. The repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements. The vast majority of the repurchase agreements are unit linked. | |||||
2. Other financial liabilities includes trail commission, FX spots, lease liabilities, reinsurance payables and collateral repayable on short position reverse repurchase agreements. The value of collateral repayable on short position reverse repurchase agreements was £5,882m (30 June 2019: £6,114m; 31 December 2019: £7,673m). | |||||
Fair value hierarchy | |||||
Amortised | |||||
Total | Level 1 | Level 2 | Level 3 | cost | |
As at 30 June 2020 | £m | £m | £m | £m | £m |
Derivative liabilities | 27,550 | 232 | 27,301 | 17 | - |
Repurchase agreements | 55,309 | - | 55,309 | - | - |
Other financial liabilities | 19,544 | 6,552 | 61 | 138 | 12,793 |
Total payables and other financial liabilities | 102,403 | 6,784 | 82,671 | 155 | 12,793 |
Amortised | |||||
Total | Level 1 | Level 2 | Level 3 | cost | |
As at 30 June 2019 | £m | £m | £m | £m | £m |
Derivative liabilities | 11,778 | 276 | 11,500 | 2 | - |
Repurchase agreements | 46,994 | - | 46,994 | - | - |
Other financial liabilities | 17,353 | 5,854 | 14 | 577 | 10,908 |
Total payables and other financial liabilities | 76,125 | 6,130 | 58,508 | 579 | 10,908 |
Amortised | |||||
Total | Level 1 | Level 2 | Level 3 | cost | |
As at 31 December 2019 | £m | £m | £m | £m | £m |
Derivative liabilities | 13,113 | 283 | 12,828 | 2 | - |
Repurchase agreements | 56,884 | - | 56,884 | - | - |
Other financial liabilities | 14,476 | 7,822 | 9 | 139 | 6,506 |
Total payables and other financial liabilities | 84,473 | 8,105 | 69,721 | 141 | 6,506 |
Trail commission (included within Other financial liabilities) is modelled using expected cash flows, incorporating expected future persistency. It has therefore been classified as Level 3 liabilities. A reasonably possible alternative persistency assumption would have the effect of increasing the trail commission liability by £4m (30 June 2019 and 31 December 2019: Increase of £4m). | |||||
Significant transfers between levels There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the period ended 30 June 2020 (30 June 2019 and 31 December 2019: no significant transfers). |
Principal rates of exchange used for translation are: | |||
Period end exchange rates | 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 |
United States dollar | 1.24 | 1.27 | 1.33 |
Euro | 1.10 | 1.12 | 1.18 |
6 months | 6 months | Full year | |
Average exchange rates | 2020 | 2019 | 2019 |
United States dollar | 1.26 | 1.29 | 1.28 |
Euro | 1.14 | 1.15 | 1.14 |
4.15 Related party transactions | |||
(i) Key management personnel transactions and compensation | |||
There were no material transactions between key management and the Legal & General group of companies during the period. All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. Contributions to the post-employment defined benefit plans were £47m (30 June 2019: £40m; 31 December 2019: £86m) for all employees. | |||
At 30 June 2020, 30 June 2019 and 31 December 2019 there were no loans outstanding to officers of the company. | |||
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows: | |||
6 months | 6 months | Full year | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Salaries | 3 | 3 | 12 |
Share-based incentive awards | 4 | 3 | 7 |
Key management personnel compensation | 7 | 6 | 19 |
5.01 LGIM total assets under management1 (AUM) | ||||||
Active | Multi | Real | Total | |||
Index | strategies | Asset | Solutions2 | assets | AUM | |
For the six month period to 30 June 2020 | £bn | £bn | £bn | £bn | £bn | £bn |
As at 1 January 2020 | 403.6 | 177.2 | 58.0 | 526.6 | 30.8 | 1,196.2 |
External inflows | 27.7 | 9.5 | 4.3 | 10.9 | 0.6 | 53.0 |
External outflows | (32.3) | (9.0) | (2.7) | (22.7) | (0.4) | (67.1) |
Overlay net flows | - | - | - | 20.1 | - | 20.1 |
ETF net flows | 0.2 | - | - | - | - | 0.2 |
External net flows3 | (4.4) | 0.5 | 1.6 | 8.3 | 0.2 | 6.2 |
Internal net flows | - | (0.2) | (0.7) | (0.1) | 0.4 | (0.6) |
Total net flows | (4.4) | 0.3 | 0.9 | 8.2 | 0.6 | 5.6 |
Cash management movements4 | - | 2.8 | - | - | - | 2.8 |
Market and other movements3 | (4.1) | 9.2 | (1.8) | 32.0 | 0.7 | 36.0 |
As at 30 June 2020 | 395.1 | 189.5 | 57.1 | 566.8 | 32.1 | 1,240.6 |
Assets attributable to: | ||||||
External | 1,134.9 | |||||
Internal | 105.7 | |||||
1. Assets under management (AUM) includes assets on our Investment Only Platform that are managed by third parties, on which fees are earned. | ||||||
2. Solutions include liability driven investments and £348.3bn (30 June 2019: £301.9bn; 31 December 2019: £335.7bn) of derivative notionals associated with the Solutions business. | ||||||
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2020 was £62.3bn (30 June 2019: £49.4bn; 31 December 2019: £67.1bn) and the movement in these assets is included in market and other movements for Solutions assets. | ||||||
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes. | ||||||
5.01 LGIM total assets under management1 (AUM) (continued) | ||||||
Active | Multi | Real | Total | |||
Index | strategies | Asset | Solutions2 | assets | AUM5 | |
For the six month period to 30 June 2019 | £bn | £bn | £bn | £bn | £bn | £bn |
At 1 January 2019 | 307.1 | 160.4 | 43.6 | 477.9 | 26.5 | 1,015.5 |
External inflows | 60.8 | 5.7 | 6.5 | 8.8 | 0.8 | 82.6 |
External outflows | (26.1) | (4.8) | (1.4) | (11.0) | (0.8) | (44.1) |
Overlay net flows | - | - | - | 22.0 | - | 22.0 |
ETF net flows | (0.2) | - | - | - | - | (0.2) |
External net flows3 | 34.5 | 0.9 | 5.1 | 19.8 | - | 60.3 |
Internal net flows | (0.1) | (2.0) | (0.3) | 3.6 | 1.2 | 2.4 |
Total net flows | 34.4 | (1.1) | 4.8 | 23.4 | 1.2 | 62.7 |
Cash management movements4 | - | 0.5 | - | - | - | 0.5 |
Market and other movements3 | 43.9 | 12.4 | 6.0 | (7.7) | 1.2 | 55.8 |
At 30 June 2019 | 385.4 | 172.2 | 54.4 | 493.6 | 28.9 | 1,134.5 |
Assets attributable to: | ||||||
External | 1,032.7 | |||||
Internal | 101.8 | |||||
1. Assets under management (AUM) includes assets on our Investment Only Platform that are managed by third parties, on which fees are earned. | ||||||
2. Solutions include liability driven investments and £301.9bn of derivative notionals associated with the Solutions business. | ||||||
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2019 was £49.4bn and the movement in these assets is included in market and other movements for Solutions assets. | ||||||
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes. | ||||||
5. AUM have been reanalysed from those previously reported in order to present Multi Asset separately. This has resulted in the removal of the Global Fixed income and Active equities categories, the inclusion of Multi Asset and Active Strategies, and a reallocation of AUM across the revised categorisation. Total AUM, and the split between external and internal, remains unchanged. |
5.01 LGIM total assets under management1 (AUM) (continued) | ||||||
Active | Multi | Real | Total | |||
Index | strategies | asset | Solutions2 | assets | AUM | |
For the year ended 31 December 2019 | £bn | £bn | £bn | £bn | £bn | £bn |
As at 1 January 2019 | 307.1 | 160.4 | 43.6 | 477.9 | 26.5 | 1,015.5 |
External inflows | 96.2 | 14.0 | 11.2 | 25.5 | 1.8 | 148.7 |
External outflows | (58.9) | (11.2) | (3.5) | (26.2) | (1.7) | (101.5) |
Overlay net flows | - | - | - | 38.8 | - | 38.8 |
ETF net flows | 0.4 | - | - | - | - | 0.4 |
External net flows3 | 37.7 | 2.8 | 7.7 | 38.1 | 0.1 | 86.4 |
Internal net flows | (0.3) | (0.4) | (0.9) | 1.9 | 2.5 | 2.8 |
Total net flows | 37.4 | 2.4 | 6.8 | 40.0 | 2.6 | 89.2 |
Cash management movements4 | - | (0.6) | - | - | - | (0.6) |
Market and other movements3 | 59.1 | 15.0 | 7.6 | 8.7 | 1.7 | 92.1 |
As at 31 December 2019 | 403.6 | 177.2 | 58.0 | 526.6 | 30.8 | 1,196.2 |
Assets attributable to: | ||||||
External | 1,092.2 | |||||
Internal | 104.0 | |||||
1. Assets under management (AUM) includes assets on our Investment Only Platform, that are managed by third parties, on which fees are earned. | ||||||
2. Solutions include liability driven investments and £335.7bn of derivative notionals associated with the Solutions business. | ||||||
3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2019 was £67.1bn and the movement in these assets is included in market and other movements for Solutions assets. | ||||||
4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes. | ||||||
5.02 LGIM total external assets under management and net flows | ||||||
Assets under management | Net flows2 | |||||
30 Jun | 30 Jun | 31 Dec | 30 Jun | 30 Jun | 31 Dec | |
2020 | 2019 | 2019 | 2020 | 2019 | 2019 | |
£bn | £bn | £bn | £bn | £bn | £bn | |
International1 | 289.5 | 248.6 | 276.7 | (3.2) | 44.6 | 14.6 |
UK Institutional | ||||||
- Defined contribution | 96.7 | 86.4 | 94.3 | 5.5 | 3.6 | 3.7 |
- Defined benefit | 706.7 | 659.7 | 679.3 | 2.5 | 10.7 | 4.8 |
UK Retail | ||||||
- Retail intermediary | 33.3 | 30.0 | 33.1 | 1.2 | 1.7 | 2.5 |
- Personal investing3 | 5.2 | 5.6 | 5.7 | - | (0.1) | (0.1) |
ETF | 3.5 | 2.4 | 3.1 | 0.2 | (0.2) | 0.6 |
Total external | 1,134.9 | 1,032.7 | 1,092.2 | 6.2 | 60.3 | 26.1 |
1. International asset are shown on the basis of client domicile. Total International AUM including assets managed internationally on behalf of UK clients amounted to £385bn as at 30 June 2020 (30 June 2019: £343bn; 31 December 2019: £370bn). | ||||||
2. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. | ||||||
3. Personal investing includes £1.4bn as at 30 June 2020 (30 June 2019: £1.9bn; 31 December 2019: £1.6bn) of AUM relating to legacy Banks and Building Society customers which is driving net outflows. | ||||||
5.03 Reconciliation of assets under management to Consolidated Balance Sheet financial investments, investment property and cash and cash equivalents | |||
30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
£bn | £bn | £bn | |
Assets under management | 1,241 | 1,135 | 1,196 |
Derivative notionals1 | (348) | (302) | (336) |
Third party assets2 | (399) | (362) | (379) |
Other3 | 72 | 47 | 63 |
Total financial investments, investment property and cash and cash equivalents | 566 | 518 | 544 |
Less: assets of operations classified as held for sale | (23) | (26) | (24) |
Financial investments, investment property and cash and cash equivalents | 543 | 492 | 520 |
1. Derivative notionals are included in the assets under management measure but are not for IFRS reporting and are thus removed. | |||
2. Third party assets are those that LGIM manage on behalf of others which are not included on the group's Consolidated Balance Sheet. | |||
3. Other includes assets that are managed by third parties on behalf of the group, other assets and liabilities related to financial investments, derivative assets and pooled funds. |
5.04 Assets under administration | ||||||
Workplace1 | Annuities2 | Workplace | Annuities | Workplace | Annuities | |
30 Jun 2020 | 30 Jun 2020 | 30 Jun 2019 | 30 Jun 2019 | 31 Dec 2019 | 31 Dec 2019 | |
£bn | £bn | £bn | £bn | £bn | £bn | |
As at 1 January | 40.3 | 75.9 | 30.0 | 63.0 | 30.0 | 63.0 |
Gross inflows | 3.3 | 3.8 | 3.5 | 7.2 | 7.3 | 12.4 |
Gross outflows | (0.9) | - | (0.9) | - | (2.0) | - |
Payments to pensioners | - | (2.1) | - | (2.0) | - | (4.1) |
Net flows | 2.4 | 1.7 | 2.6 | 5.2 | 5.3 | 8.3 |
Market and other movements | (1.2) | 3.1 | 3.5 | 3.9 | 5.0 | 4.6 |
As at 30 June/31 December | 41.5 | 80.7 | 36.1 | 72.1 | 40.3 | 75.9 |
1. Workplace assets under administration as at 30 June 2020 includes £41.5bn (30 June 2019: £36.0bn; 31 December 2019: £40.2bn) of assets under management included in Note 5.01. | ||||||
2. Annuities assets under administration as at 30 June 2020 includes £73.8bn (30 June 2019: £67.9bn; 31 December 2019: £70.1bn) of assets under management included in Note 5.01. |
5.05 LGR new business | ||||
6 months | 6 months | 6 months | Full year | |
30 Jun | 30 Jun | 31 Dec | 31 Dec | |
2020 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | |
Pension risk transfer | ||||
- UK | 3,176 | 6,316 | 4,009 | 10,325 |
- US | 248 | 223 | 670 | 893 |
- Bermuda | - | 138 | 36 | 174 |
Individual annuities | 421 | 497 | 473 | 970 |
Lifetime mortgage advances | 362 | 489 | 476 | 965 |
Total LGR new business | 4,207 | 7,663 | 5,664 | 13,327 |
5.06 LGI new business | ||||
6 months | 6 months | 6 months | Full year | |
30 Jun | 30 Jun | 31 Dec | 31 Dec | |
2020 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | |
UK Retail protection | 83 | 91 | 83 | 174 |
UK Group protection | 65 | 44 | 32 | 76 |
US protection1 | 44 | 43 | 46 | 89 |
Total LGI new business | 192 | 178 | 161 | 339 |
1. In local currency, US protection reflects new business of $56m for 2020 (H1 19: $55m; H2 19: $58m). |
5.07 Gross written premiums on insurance business | ||||
6 months | 6 months | 6 months | Full year | |
30 Jun | 30 Jun | 31 Dec | 31 Dec | |
2020 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | |
UK Retail protection | 680 | 658 | 669 | 1,327 |
UK Group protection | 245 | 233 | 112 | 345 |
US Protection1 | 550 | 518 | 539 | 1,057 |
Longevity insurance | 159 | 190 | 186 | 376 |
Total gross written premiums on insurance business2 | 1,634 | 1,599 | 1,506 | 3,105 |
1. In local currency, US protection reflects gross written premiums of $693m for 2020 (H1 19: $670m; H2 19: $679m). | ||||
2. Total gross written premiums includes £58m (YE 19: £66m) of general insurance premiums relating to a residual reinsurance treaty. |
(a) Capital position | ||
As at 30 June 2020, and on the above basis, the group had a surplus of £7.3bn (31 December 2019: £7.3bn) over its Solvency Capital Requirement, corresponding to a Solvency II capital coverage ratio on a "shareholder view" basis of 173% (31 December 2019: 184%). The shareholder view of the Solvency II capital position is as follows: | ||
30 Jun 2020 | 31 Dec 2019 | |
£bn | £bn | |
Unrestricted Tier 1 Own Funds | 12.3 | 12.4 |
Restricted Tier 1 Own Funds1 | 0.5 | - |
Tier 2 Subordinated liabilities2 | 4.7 | 3.9 |
Eligibility restrictions | (0.2) | (0.2) |
Solvency II Own Funds3,4 | 17.3 | 16.1 |
Solvency Capital Requirement | (10.0) | (8.8) |
Solvency II surplus | 7.3 | 7.3 |
- | ||
SCR Coverage ratio5 | 173% | 184% |
1. Restricted Tier 1 Own Funds represent perpetual restricted tier 1 contingent convertible notes issued during the period. See note 4.07 for details. | ||
2. Tier 2 subordinated liabilities include new debt issue of £0.5bn during the period. | ||
3. Solvency II Own Funds do not include an accrual for the interim dividend of £294m (31 December 2019: £754m) declared after the balance sheet date. | ||
4. Solvency II Own Funds allow for a risk margin of £6.7bn (31 December 2019: £5.9bn) and TMTP of £6.3bn (31 December 2019: £5.7bn). | ||
5. SCR Coverage ratio is based on unrounded inputs. |
(c) Analysis of change | ||
The table below shows the movement (net of tax) during the six month period ended 30 June 2020 in the group's Solvency II surplus. | ||
6 months | Full year | |
30 Jun 2020 | 31 Dec 2019 | |
£bn | £bn | |
Surplus arising from back-book (including release of SCR) | 0.7 | 1.5 |
Release of risk margin1 | 0.3 | 0.4 |
Amortisation of TMTP2 | (0.2) | (0.3) |
Total operational surplus generation3 | 0.8 | 1.6 |
Operational surplus generation - continuing operations | 0.8 | 1.5 |
Operational surplus generation - discontinued operations | - | 0.1 |
Total operational surplus generation3 | 0.8 | 1.6 |
New business strain - continuing operations | (0.1) | (0.5) |
New business strain - discontinued operations | - | (0.1) |
New business strain | (0.1) | (0.6) |
Net surplus generation | 0.7 | 1.0 |
Operating variances4 | 0.1 | 0.3 |
Mergers, acquisitions and disposals5 | (0.1) | 0.1 |
Market movements6 | (0.9) | (0.2) |
Restricted Tier 1 convertible notes7 | 0.5 | - |
Subordinated liabilities8 | 0.5 | 0.2 |
Dividends paid9 | (0.8) | (1.0) |
Total surplus movement (after dividends paid in the period) | - | 0.4 |
1. Based on the risk margin in force at 31 December 2019 and does not include the release of any risk margin added by new business written in 2020. | ||
2. TMTP amortisation based on a linear run down of the 31 December 2019 TMTP of £4.9bn (net of tax, £5.7bn before tax) (2019: £4.4bn net of tax, £5.2bn before tax), based on management's estimate of the TMTP on 31 December 2019 market conditions. | ||
3. Release of surplus generated by in-force business and includes management actions which at the start of the year could have been reasonably expected to take place. For 2020 these are primarily related to the optimisation of structures used to make assets Matching Adjustment eligible and the planned reinsurance of backbook liabilities. | ||
4. Operating variances include the impact of experience variances, changes to valuation and capital calibration assumptions, other management actions including changes in asset mix, hedging strategies, and Matching Adjustment optimisation. | ||
5. Mergers, acquisitions and disposals include the impacts of the sale of the Mature Savings business, expected to complete in H2 20. | ||
6. Market movements represent the impact of changes in investment market conditions over the period and changes to future economic assumptions. Market movements in 2020 include an increase in the risk margin of £1.0bn (net of tax) and an increase to TMTP of £1.0bn (net of tax). | ||
7. Restricted Tier 1 convertible notes represent an issuance of £0.5bn in the period (2019: nil). | ||
8. Subordinated liabilities includes an issuance of £0.5bn in the period (2019: redemption of £0.4bn and an issuance of £0.6bn). | ||
9. Dividends paid are the amounts from the 2019 final dividend paid in H1 20 (2019: 2018 final and 2019 interim dividend declarations). | ||
(d) Reconciliation of IFRS Net Release from Operations to Solvency II Net Surplus Generation | ||
(i) The table below provides a reconciliation of the group's IFRS Release from Operations to Solvency II Operational Surplus Generation. | ||
6 months | Full year | |
2020 | 2019 | |
£bn | £bn | |
IFRS Release from Operations | 0.7 | 1.3 |
Expected release of IFRS prudential margins | (0.2) | (0.5) |
Releases of IFRS specific reserves1 | (0.1) | (0.1) |
Solvency II investment margin2,3 | 0.1 | 0.2 |
Release of Solvency II Capital Requirement and Risk Margin less TMTP amortisation | 0.3 | 0.7 |
Solvency II Operational Surplus Generation4 | 0.8 | 1.6 |
1. Release of prudence from IFRS specific reserves which are not included in Solvency II (e.g. long term longevity and expense margins). | ||
2. Release of prudence related to differences between the EIOPA-defined fundamental spread and Legal & General's best estimate default assumption. | ||
3. Expected market returns earned on LGR's free assets in excess of risk free rates over H1 20. | ||
4. Solvency II Operational Surplus Generation includes management actions which at the start of 2020 were expected to take place within the group plan. | ||
(ii) The table below provides a reconciliation of the group's IFRS New Business Surplus to Solvency II New Business Strain. | ||
6 months | Full year | |
2020 | 2019 | |
£bn | £bn | |
IFRS New business surplus | 0.1 | 0.3 |
Removal of requirement to set up prudential margins above best estimate on New Business | 0.2 | 0.2 |
Set up of SCR on new business | (0.3) | (0.9) |
Set up of risk margin on new business | (0.1) | (0.2) |
Solvency II New business strain1 | (0.1) | (0.6) |
1. UK PRT new business volumes during H1 20 were £3.2bn, compared to £10.3bn over 2019. |
(e) Reconciliation of IFRS equity to Solvency II Own Funds | ||||
A reconciliation of the group's IFRS equity to Solvency II Own Funds is given below: | ||||
30 Jun 2020 | 31 Dec 2019 | |||
£bn | £bn | |||
IFRS equity1 | 9.4 | 9.4 | ||
Remove DAC, goodwill and other intangible assets and associated liabilities | (0.5) | (0.5) | ||
Add IFRS carrying value of subordinated borrowings2 | 4.1 | 3.5 | ||
Insurance contract valuation differences3 | 6.0 | 5.2 | ||
Difference in value of net deferred tax liabilities | (0.7) | (0.5) | ||
SCR for with-profits fund and final salary pension schemes | (0.8) | (0.8) | ||
Eligibility restrictions4 | (0.2) | (0.2) | ||
Solvency II Own Funds5 | 17.3 | 16.1 | ||
1. IFRS equity represents IFRS equity attributable to owners of the parent and restricted tier 1 convertible notes as per the Consolidated Balance Sheet. | ||||
2. Treated as available capital on the Solvency II balance sheet as the liabilities are subordinate to policyholder claims. | ||||
3. Differences in the measurement of technical provisions between IFRS and Solvency II. | ||||
4. Relating to the Own Funds of non-insurance regulated entities that are subject to local regulatory rules. | ||||
5. Solvency II Own Funds do not include an accrual for the interim dividend of £294m (31 December 2019: £754m) declared after the balance sheet date. |
6.01 Group regulatory capital - Solvency II (continued) | ||||
(f) Sensitivity analysis The following sensitivities are provided to give an indication of how the group's Solvency II surplus as at 30 June 2020 would have changed in a variety of adverse events. These are all independent stresses to a single risk. In practice, the balance sheet is impacted by combinations of stresses and the combined impact can be larger than adding together the impacts of the same stresses in isolation. It is expected that, particularly for market risks, adverse stresses will happen together. | ||||
Impact on | Impact on | Impact on | Impact on | |
net of tax | net of tax | net of tax | net of tax | |
Solvency II | Solvency II | Solvency II | Solvency II | |
capital | coverage | capital | coverage | |
surplus1 | ratio1 | surplus1 | ratio1 | |
2020 | 2020 | 2019 | 2019 | |
£bn | % | £bn | % | |
Credit spreads widen by 100bps assuming an escalating addition to ratings2,3 | 0.3 | 7 | 0.3 | 8 |
Credit spreads narrow by 100bps assuming an escalating addition to ratings2,3 | (0.3) | (8) | (0.4) | (9) |
Credit spreads widen by 100bps assuming a level addition to ratings2 | 0.4 | 10 | 0.5 | 11 |
Credit spreads of sub investment grade assets widen by 100bps assuming a level addition to ratings2,4 | (0.3) | (5) | (0.3) | (6) |
Credit migration5 | (1.5) | (15) | (0.8) | (9) |
25% fall in equity markets6 | (0.5) | (4) | (0.5) | (5) |
15% fall in property markets7 | (0.7) | (6) | (0.7) | (6) |
100bps increase in risk free rates8 | 0.7 | 15 | 1.0 | 22 |
50bps decrease in risk free rates8,9 | (0.4) | (8) | (0.6) | (11) |
1. Both the 2020 and 2019 sensitivities exclude the impact from the Mature Savings business (including the With-Profits fund) as the risks have been transferred to ReAssure Limited from 1 January 2018. | ||||
2. The spread sensitivity applies to the group's corporate bond (and similar) holdings, with no change in long term default expectations. Restructured lifetime mortgages are excluded as the underlying exposure is to property. | ||||
3. The stress for AA bonds is twice that for AAA bonds, for A bonds it is three times, for BBB four times and so on, such that the weighted average spread stress for the portfolio is 100 basis points. To give a 100bps increase on the total portfolio the spread stress increases in steps of 32bps, i.e. 32bps for AAA, 64bps for AA etc. | ||||
4. No stress for bonds rated BBB and above. For bonds rated BB and below the stress is 100bps. The spread widening on the total portfolio is 1bp as the group holds only 2% in bonds rated BB and below. The impact is primarily an increase in SCR arising from the modelled cost of trading downgraded bonds back to a higher rating in the stress scenarios in the SCR calculation. We estimate the widening between BBB and BB bonds over H1 20 to be c.115bps. | ||||
5. Credit migration stress covers the cost of an immediate big letter downgrade on 20% of all assets where the capital treatment depends on a credit rating (including corporate bonds, sale and leaseback rental strips, lifetime mortgage senior notes are excluded). Downgraded assets are assumed to be traded to their original credit rating, so the impact is primarily a reduction in Own Funds from the loss of value on downgrade. The impact of the sensitivity will depend upon the market levels of spreads at the balance sheet date. | ||||
6. This relates primarily to equity exposure in LGC but will also include equity-based mutual funds and other investments that receive an equity stress (for example, certain investments in subsidiaries). Some assets have factors that increase or decrease the stress relative to general equity levels via a beta factor. | ||||
7. Assets stressed include residual values from sale and leaseback, the full amount of lifetime mortgages and direct investments treated as property. | ||||
8. Assuming a recalculation of the Transitional Measure on Technical Provisions that partially offsets the impact on Risk Margin. | ||||
9. In the interest rate down stress negative rates are allowed, i.e. there is no floor at zero rates. | ||||
The above sensitivity analysis does not reflect all management actions which could be taken to reduce the impacts. In practice, the group actively manages its asset and liability positions to respond to market movements. Other than in the interest rate stresses, we have not allowed for the recalculation of TMTP. The impacts of these stresses are not linear therefore these results should not be used to interpolate or extrapolate the impact of a smaller or larger stress. The results of these tests are indicative of the market conditions prevailing at the balance sheet date. The results would be different if performed at an alternative reporting date. |
6.02 Estimated Solvency II new business contribution | ||||||
(a) New business by product1 | ||||||
Management estimates of the present value of new business premium (PVNBP) and the margin for selected lines of business are provided below: | ||||||
Contribution | Contribution | |||||
from new | from new | |||||
PVNBP | business2 | Margin3 | PVNBP | business2 | Margin3 | |
6 months | 6 months | 6 months | Full year | Full year | Full year | |
2020 | 2020 | 2020 | 2019 | 2019 | 2019 | |
£m | £m | % | £m | £m | % | |
LGR - UK annuity business | 3,597 | 382 | 10.6 | 11,295 | 890 | 7.9 |
UK Protection Total | 919 | 86 | 9.4 | 1,604 | 122 | 7.6 |
- Retail Protection | 636 | 61 | 9.6 | 1,284 | 98 | 7.6 |
- Group Protection | 283 | 25 | 8.8 | 320 | 24 | 7.5 |
US Protection4 | 452 | 52 | 11.5 | 850 | 94 | 11.1 |
1. Selected lines of business only. | ||||||
2. The contribution from new business is defined as the present value at the point of sale of expected future Solvency II surplus emerging from new business written in the period using the risk discount rate applicable at the end of the reporting period. | ||||||
3. Margin is based on unrounded inputs. | ||||||
4. In local currency, US Protection reflects PVNBP of $570m (31 December 2019: $1,085m) and a contribution from new business of $66m (31 December 2019: $120m). | ||||||
The increase in LGR margin was driven by the longer average duration for the schemes written in the first six months of the year, compared to the schemes written in prior year. For UK Protection new business the increase in profitability was driven by a shift in the product mix combined with continued price optimisation. The margin was further increased by the fall in interest rates during H1 20, which led to lower discount rates and in turn higher profitability. The US Protection margin improved compared to the prior year. The increase is driven by changes to local statutory regulatory reserving standards in 2020, which reduce excess reserve levels and subsequently reduce financing costs. |
(c) Assumptions | 30 Jun 2020 | 31 Dec 2019 |
% | % | |
Margin for Risk | 4.6 | 3.5 |
Risk free rate | ||
- UK | 0.4 | 1.1 |
- US | 0.7 | 1.9 |
Risk discount rate (net of tax) | ||
- UK | 5.0 | 4.6 |
- US | 5.3 | 5.4 |
Long-term rate of return on non profit annuities in LGR | 2.4 | 2.8 |
6.02 Estimated Solvency II new business contribution (continued) | |||
(d) Reconciliation of PVNBP to gross written premium | |||
A reconciliation of PVNBP and gross written premium is given below: | |||
6 months | Full year | ||
2020 | 2019 | ||
Notes | £bn | £bn | |
PVNBP | 6.02 (a) | 5.0 | 13.7 |
Effect of capitalisation factor | (1.2) | (1.9) | |
New business premiums from selected lines | 3.8 | 11.8 | |
Other1 | 0.6 | 1.9 | |
Total LGR and LGI new business | 5.05,5.06 | 4.4 | 13.7 |
Annualisation impact of regular premium long-term business | (0.1) | (0.2) | |
IFRS gross written premiums from existing long-term insurance business | 1.6 | 2.9 | |
Deposit accounting for investment products | (0.4) | (1.2) | |
Total gross written premiums2 | 3.01 | 5.5 | 15.2 |
1. Other principally includes annuity sales in the US and lifetime mortgage advances. | |||
2. Total gross written premiums exclude gross written premiums from discontinued operations. |
7.01 Investment portfolio | ||||||||
Market | Market | Market | ||||||
value | value | value | ||||||
30 Jun | 30 Jun | 31 Dec | ||||||
2020 | 2019 | 2019 | ||||||
£m | £m | £m | ||||||
Worldwide total assets under management1 | 1,247,942 | 1,141,593 | 1,202,425 | |||||
Client and policyholder assets | (1,119,803) | (1,036,229) | (1,092,626) | |||||
Non-unit linked with-profits assets | (9,854) | (10,372) | (10,190) | |||||
Investments to which shareholders are directly exposed | 118,285 | 94,992 | 99,609 | |||||
1. Worldwide total assets under management include LGIM AUM and other group assets not managed by LGIM. | ||||||||
Analysed by investment class: | ||||||||
Other | ||||||||
non profit | Other | |||||||
LGR | insurance | LGC | shareholder | |||||
investments | investments | investments | investments | Total | Total | Total | ||
30 Jun | 30 Jun | 30 Jun | 30 Jun | 30 Jun | 30 Jun | 31 Dec | ||
2020 | 2020 | 2020 | 2020 | 2020 | 2019 | 2019 | ||
Notes | £m | £m | £m | £m | £m | £m | £m | |
Equities2 | 206 | 22 | 2,772 | 86 | 3,086 | 3,142 | 3,131 | |
Bonds | 7.03 | 76,406 | 2,103 | 2,161 | 327 | 80,997 | 71,258 | 75,142 |
Derivative assets3 | 22,095 | - | 293 | - | 22,388 | 11,633 | 11,556 | |
Property | 7.04 | 4,016 | - | 157 | - | 4,173 | 3,275 | 3,957 |
Cash, cash equivalents and loans4 | 2,858 | 577 | 2,064 | 538 | 6,037 | 4,317 | 4,275 | |
Financial investments | 105,581 | 2,702 | 7,447 | 951 | 116,681 | 93,625 | 98,061 | |
Other assets5 | 89 | - | 1,515 | - | 1,604 | 1,367 | 1,548 | |
Total investments | 105,670 | 2,702 | 8,962 | 951 | 118,285 | 94,992 | 99,609 | |
2. Equity investments include a total of £328m (30 June 2019: £362m; 31 December 2019: £324m) in respect of associates and joint ventures. | ||||||||
3. Derivative assets are shown gross of derivative liabilities of £24.9bn (30 June 2019: £6.9bn; 31 December 2019: £11.5bn). Exposures arise from use of derivatives for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for asset and liability management. | ||||||||
4. Loans include reverse repurchase agreements of £1,868m (30 June 2019: £960m; 31 December 2019: £1,262m). | ||||||||
5. Other assets include finance leases of £89m (2019: £90m) and the consolidated net asset value of the group's investments in CALA Homes and other housing businesses. | ||||||||
7.02 Direct investments | |||||||||
(a) Analysed by asset class | |||||||||
Direct1 | Traded2 | Direct1 | Traded2 | Direct1 | Traded2 | ||||
Investments | securities | Total | Investments | securities | Total | Investments | securities | Total | |
30 Jun | 30 Jun | 30 Jun | 30 Jun | 30 Jun | 30 Jun | 31 Dec | 31 Dec | 31 Dec | |
2020 | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
Equities | 1,355 | 1,731 | 3,086 | 1,300 | 1,842 | 3,142 | 1,282 | 1,849 | 3,131 |
Bonds3 | 20,272 | 60,725 | 80,997 | 15,824 | 55,434 | 71,258 | 18,553 | 56,589 | 75,142 |
Derivative assets | - | 22,388 | 22,388 | - | 11,633 | 11,633 | - | 11,556 | 11,556 |
Property4 | 4,173 | - | 4,173 | 3,275 | - | 3,275 | 3,957 | - | 3,957 |
Loans and other receivables | 467 | 5,570 | 6,037 | 410 | 3,907 | 4,317 | 408 | 3,867 | 4,275 |
Financial investments | 26,267 | 90,414 | 116,681 | 20,809 | 72,816 | 93,625 | 24,200 | 73,861 | 98,061 |
Other assets | 1,604 | - | 1,604 | 1,367 | - | 1,367 | 1,548 | - | 1,548 |
Total investments | 27,871 | 90,414 | 118,285 | 22,176 | 72,816 | 94,992 | 25,748 | 73,861 | 99,609 |
1. Direct investments, which generally constitute an agreement with another party, represent an exposure to untraded and often less volatile asset classes. Direct Investments also include physical assets, bilateral loans and private equity, but exclude hedge funds. | |||||||||
2. Traded securities are defined by exclusion. If an instrument is not a Direct Investment, then it is classed as a traded security. | |||||||||
3. Bonds include lifetime mortgages of £5,478m (30 June 2019: £3,990m; 31 December 2019: £4,733m). | |||||||||
4. A further breakdown of property is provided in Note 7.04. |
7.02 Direct investments (continued) | ||||
(b) Analysed by segment | ||||
LGR | LGC1 | LGI | Total | |
30 Jun | 30 Jun | 30 Jun | 30 Jun | |
2020 | 2020 | 2020 | 2020 | |
£m | £m | £m | £m | |
- | ||||
Equities | 16 | 1,261 | 78 | 1,355 |
Bonds2 | 19,444 | 3 | 825 | 20,272 |
Property | 4,016 | 157 | - | 4,173 |
Loans and other receivables | - | 145 | 322 | 467 |
Financial investments | 23,476 | 1,566 | 1,225 | 26,267 |
Other assets | 89 | 1,515 | - | 1,604 |
Total direct investments | 23,565 | 3,081 | 1,225 | 27,871 |
1. LGC includes £48m of equities that belong to other shareholder funds. | ||||
2. Bonds include lifetime mortgages of £5,478m. | ||||
LGR | LGC1 | LGI | Total | |
30 Jun 2019 | 30 Jun 2019 | 30 Jun 2019 | 30 Jun 2019 | |
£m | £m | £m | £m | |
Equities | 6 | 1,233 | 61 | 1,300 |
Bonds2 | 15,148 | 3 | 673 | 15,824 |
Property | 3,131 | 144 | - | 3,275 |
Loans and other receivables | - | 64 | 346 | 410 |
Financial investments | 18,285 | 1,444 | 1,080 | 20,809 |
Other assets | 90 | 1,277 | - | 1,367 |
Total direct investments | 18,375 | 2,721 | 1,080 | 22,176 |
1. LGC includes £58m of equities and £23m of property that belong to other shareholder funds. | ||||
2. Bonds include lifetime mortgages of £3,990m. | ||||
LGR | LGC1 | LGI | Total | |
31 Dec | 31 Dec | 31 Dec | 31 Dec | |
2019 | 2019 | 2019 | 2019 | |
£m | £m | £m | £m | |
Equities | 9 | 1,211 | 62 | 1,282 |
Bonds2 | 17,711 | 4 | 838 | 18,553 |
Property | 3,798 | 159 | - | 3,957 |
Loans and other receivables | - | 93 | 315 | 408 |
Financial investments | 21,518 | 1,467 | 1,215 | 24,200 |
Other assets | 90 | 1,458 | - | 1,548 |
Total direct investments | 21,608 | 2,925 | 1,215 | 25,748 |
1. LGC included £48m of equities that belong to other shareholder funds. | ||||
2. Bonds include lifetime mortgages of £4,733m. | ||||
7.03 Bond portfolio summary | ||||||||
(a) Sectors analysed by credit rating | ||||||||
BB or | ||||||||
AAA | AA | A | BBB | below | Other | Total2 | Total2 | |
As at 30 June 2020 | £m | £m | £m | £m | £m | £m | £m | % |
Sovereigns, Supras and Sub-Sovereigns | 2,521 | 11,299 | 738 | 449 | 26 | - | 15,033 | 19 |
Banks: | ||||||||
- Tier 1 | - | - | - | 1 | - | 1 | 2 | - |
- Tier 2 and other subordinated | - | - | 69 | 42 | 5 | - | 116 | - |
- Senior | - | 1,335 | 2,192 | 545 | 1 | - | 4,073 | 5 |
- Covered | 187 | - | 4 | - | - | - | 191 | - |
Financial Services: | ||||||||
- Tier 2 and other subordinated | - | 120 | 70 | 11 | - | 4 | 205 | - |
- Senior | 2 | 447 | 176 | 267 | 9 | - | 901 | 1 |
Insurance: | ||||||||
- Tier 2 and other subordinated | 56 | 139 | 8 | 63 | - | - | 266 | - |
- Senior | - | 257 | 538 | 311 | - | - | 1,106 | 1 |
Consumer Services and Goods: | ||||||||
- Cyclical | - | 354 | 1,089 | 1,961 | 333 | 2 | 3,739 | 5 |
- Non-cyclical | 305 | 883 | 2,803 | 4,006 | 316 | 1 | 8,314 | 10 |
- Health Care | - | 376 | 856 | 636 | 7 | - | 1,875 | 2 |
Infrastructure: | ||||||||
- Social | 216 | 771 | 4,331 | 877 | 89 | - | 6,284 | 8 |
- Economic | 332 | 58 | 920 | 3,626 | 337 | - | 5,273 | 7 |
Technology and Telecoms | 206 | 204 | 1,612 | 2,844 | 41 | - | 4,907 | 6 |
Industrials | - | 12 | 847 | 681 | 27 | - | 1,567 | 2 |
Utilities | - | 221 | 5,540 | 5,733 | 6 | - | 11,500 | 15 |
Energy | - | - | 424 | 859 | 12 | - | 1,295 | 2 |
Commodities | - | - | 286 | 748 | 17 | - | 1,051 | 1 |
Oil and Gas | - | 649 | 1,037 | 539 | 274 | - | 2,499 | 3 |
Real estate | - | 7 | 1,685 | 1,608 | 101 | - | 3,401 | 4 |
Structured finance ABS / RMBS / CMBS / Other | 372 | 662 | 220 | 391 | 192 | 1 | 1,838 | 2 |
Lifetime mortgage loans1 | 3,427 | 1,384 | 304 | 350 | - | 13 | 5,478 | 7 |
CDOs | - | 57 | 11 | 15 | - | - | 83 | - |
Total £m | 7,624 | 19,235 | 25,760 | 26,563 | 1,793 | 22 | 80,997 | 100 |
Total % | 9 | 24 | 32 | 33 | 2 | - | 100 | |
1. The credit ratings attributed to lifetime mortgages are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for £76,406m, representing 94% of the total group portfolio. |
7.03 Bond portfolio summary (continued) | ||||||||
(a) Sectors analysed by credit rating (continued) | ||||||||
BB or | ||||||||
AAA | AA | A | BBB | below | Other | Total2 | Total2 | |
As at 30 June 2019 | £m | £m | £m | £m | £m | £m | £m | % |
Sovereigns, Supras and Sub-Sovereigns | 1,585 | 9,472 | 297 | 456 | 59 | - | 11,869 | 17 |
Banks: | ||||||||
- Tier 1 | - | - | - | 2 | - | - | 2 | - |
- Tier 2 and other subordinated | - | 47 | 84 | 27 | 2 | - | 160 | - |
- Senior | 23 | 1,693 | 2,830 | 81 | - | - | 4,627 | 6 |
- Covered | 132 | - | - | - | - | - | 132 | - |
Financial Services: | ||||||||
- Tier 2 and other subordinated | - | 93 | 91 | 10 | - | 4 | 198 | - |
- Senior | 2 | 469 | 73 | 303 | 8 | - | 855 | 1 |
Insurance: | ||||||||
- Tier 2 and other subordinated | 28 | 125 | 3 | 53 | - | - | 209 | - |
- Senior | - | 233 | 551 | 205 | - | - | 989 | 1 |
Consumer Services and Goods: | ||||||||
- Cyclical | - | 632 | 951 | 1,903 | 142 | 2 | 3,630 | 5 |
- Non-cyclical | 240 | 1,100 | 2,060 | 3,698 | 209 | 1 | 7,308 | 10 |
- Health Care | - | 138 | 465 | 472 | 7 | - | 1,082 | 2 |
Infrastructure: | ||||||||
- Social | 110 | 790 | 3,719 | 847 | 40 | - | 5,506 | 8 |
- Economic | 336 | 27 | 1,683 | 2,781 | 55 | - | 4,882 | 7 |
Technology and Telecoms | 116 | 168 | 1,133 | 2,819 | 52 | - | 4,288 | 6 |
Industrials | - | 12 | 750 | 679 | 26 | - | 1,467 | 2 |
Utilities | - | 181 | 5,863 | 4,513 | 4 | 35 | 10,596 | 15 |
Energy | - | - | 300 | 874 | 14 | - | 1,188 | 2 |
Commodities | - | - | 261 | 584 | 15 | - | 860 | 1 |
Oil and Gas | - | 419 | 917 | 698 | 113 | 1 | 2,148 | 3 |
Real estate | - | 6 | 1,692 | 1,542 | 131 | - | 3,371 | 5 |
Structured finance ABS / RMBS / CMBS / Other | 446 | 766 | 251 | 336 | 21 | 1 | 1,821 | 3 |
Lifetime mortgage loans1 | 2,403 | 886 | 326 | 276 | - | 99 | 3,990 | 6 |
CDOs | - | - | 66 | 14 | - | - | 80 | - |
Total £m | 5,421 | 17,257 | 24,366 | 23,173 | 898 | 143 | 71,258 | 100 |
Total % | 8 | 24 | 34 | 33 | 1 | - | 100 | |
1. The credit ratings attributed to lifetime mortgages are allocated in accordance with the internal Matching Adjustment structuring. | ||||||||
2. The group's bond portfolio is dominated by LGR investments. These account for £66,907m, representing 94% of the total group portfolio. |
7.03 Bond portfolio summary (continued) | ||||||||
(a) Sectors analysed by credit rating (continued) | ||||||||
BB or | ||||||||
AAA | AA | A | BBB | below | Other | Total2 | Total2 | |
As at 31 December 2019 | £m | £m | £m | £m | £m | £m | £m | % |
Sovereigns, Supras and Sub-Sovereigns | 2,188 | 9,543 | 535 | 390 | 27 | - | 12,683 | 17 |
Banks: | ||||||||
- Tier 1 | - | - | - | 1 | - | 1 | 2 | - |
- Tier 2 and other subordinated | - | - | 73 | 24 | 3 | - | 100 | - |
- Senior | 6 | 1,893 | 2,794 | 758 | 1 | - | 5,452 | 7 |
- Covered | 165 | - | 2 | - | - | - | 167 | - |
Financial Services: | ||||||||
- Tier 2 and other subordinated | - | 196 | 91 | 10 | - | 4 | 301 | - |
- Senior | 4 | 381 | 231 | 322 | 9 | - | 947 | 1 |
Insurance: | ||||||||
- Tier 2 and other subordinated | 49 | 131 | 6 | 56 | - | - | 242 | - |
- Senior | - | 232 | 549 | 207 | - | - | 988 | 1 |
Consumer Services and Goods: | ||||||||
- Cyclical | - | 425 | 963 | 1,985 | 134 | 2 | 3,509 | 5 |
- Non-cyclical | 260 | 868 | 2,185 | 3,827 | 217 | 1 | 7,358 | 10 |
- Health care | - | 309 | 728 | 425 | 7 | - | 1,469 | 2 |
Infrastructure: | ||||||||
- Social | 121 | 772 | 4,044 | 781 | 80 | - | 5,798 | 8 |
- Economic | 338 | 27 | 1,436 | 3,148 | 102 | - | 5,051 | 7 |
Technology and Telecoms | 202 | 173 | 1,196 | 2,805 | 42 | - | 4,418 | 6 |
Industrials | - | 11 | 817 | 588 | 27 | - | 1,443 | 2 |
Utilities | - | 190 | 5,885 | 4,669 | 2 | 32 | 10,778 | 15 |
Energy | - | - | 340 | 814 | 12 | - | 1,166 | 2 |
Commodities | - | - | 244 | 654 | 14 | - | 912 | 1 |
Oil and Gas | - | 593 | 799 | 702 | 108 | 1 | 2,203 | 3 |
Real estate | 3 | 8 | 1,787 | 1,629 | 125 | - | 3,552 | 5 |
Structured finance ABS / RMBS / CMBS / Other | 406 | 735 | 247 | 367 | 32 | 1 | 1,788 | 2 |
Lifetime mortgage loans1 | 2,798 | 1,253 | 362 | 309 | - | 11 | 4,733 | 6 |
CDOs | - | - | 68 | 14 | - | - | 82 | - |
Total £m | 6,540 | 17,740 | 25,382 | 24,485 | 942 | 53 | 75,142 | 100 |
Total % | 9 | 23 | 34 | 33 | 1 | - | 100 | |
1. The credit ratings attributed to lifetime mortgages are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for £70,061m, representing 93% of the total group portfolio. |
7.03 Bond portfolio summary (continued) | |||||
(b) Sectors analysed by domicile | |||||
EU | |||||
excluding | Rest of | ||||
UK | US | UK | the World | Total | |
As at 30 June 2020 | £m | £m | £m | £m | £m |
Sovereigns, Supras and Sub-Sovereigns | 11,035 | 2,603 | 859 | 536 | 15,033 |
Banks | 998 | 1,696 | 1,181 | 507 | 4,382 |
Financial Services | 415 | 189 | 490 | 12 | 1,106 |
Insurance | 111 | 934 | 203 | 124 | 1,372 |
Consumer Services and Goods: | |||||
- Cyclical | 539 | 2,666 | 367 | 167 | 3,739 |
- Non-cyclical | 1,715 | 6,037 | 424 | 138 | 8,314 |
- Health care | 204 | 1,603 | 68 | - | 1,875 |
Infrastructure: | |||||
- Social | 5,670 | 452 | 111 | 51 | 6,284 |
- Economic | 3,945 | 830 | 190 | 308 | 5,273 |
Technology and Telecoms | 593 | 2,677 | 755 | 882 | 4,907 |
Industrials | 78 | 1,075 | 348 | 66 | 1,567 |
Utilities | 6,597 | 2,332 | 2,055 | 516 | 11,500 |
Energy | 228 | 813 | 112 | 142 | 1,295 |
Commodities | 4 | 346 | 167 | 534 | 1,051 |
Oil and Gas | 253 | 644 | 796 | 806 | 2,499 |
Real estate | 2,196 | 381 | 618 | 206 | 3,401 |
Structured Finance ABS / RMBS / CMBS / Other | 941 | 870 | 12 | 15 | 1,838 |
Lifetime mortgages | 5,478 | - | - | - | 5,478 |
CDOs | - | - | - | 83 | 83 |
Total | 41,000 | 26,148 | 8,756 | 5,093 | 80,997 |
7.03 Bond portfolio summary (continued) | |||||
(b) Sectors analysed by domicile (continued) | |||||
EU | |||||
excluding | Rest of | ||||
UK | US | UK | the World | Total | |
As at 30 June 2019 | £m | £m | £m | £m | £m |
Sovereigns, Supras and Sub-Sovereigns | 9,279 | 1,500 | 704 | 386 | 11,869 |
Banks | 1,468 | 1,209 | 1,450 | 794 | 4,921 |
Financial Services | 354 | 91 | 597 | 11 | 1,053 |
Insurance | 137 | 769 | 206 | 86 | 1,198 |
Consumer Services and Goods: | |||||
- Cyclical | 624 | 2,232 | 615 | 159 | 3,630 |
- Non-cyclical | 1,619 | 5,158 | 491 | 40 | 7,308 |
- Health care | 18 | 1,018 | 46 | - | 1,082 |
Infrastructure: | |||||
- Social | 5,106 | 358 | - | 42 | 5,506 |
- Economic | 3,905 | 563 | 95 | 319 | 4,882 |
Technology and Telecoms | 717 | 2,217 | 653 | 701 | 4,288 |
Industrials | 96 | 932 | 372 | 67 | 1,467 |
Utilities | 5,928 | 1,869 | 2,300 | 499 | 10,596 |
Energy | 266 | 780 | 4 | 138 | 1,188 |
Commodities | 14 | 335 | 66 | 445 | 860 |
Oil and Gas | 294 | 659 | 438 | 757 | 2,148 |
Real estate | 2,080 | 401 | 525 | 365 | 3,371 |
Structured Finance ABS / RMBS / CMBS / Other | 1,019 | 754 | 22 | 26 | 1,821 |
Lifetime mortgages | 3,990 | - | - | - | 3,990 |
CDOs | - | - | - | 80 | 80 |
Total | 36,914 | 20,845 | 8,584 | 4,915 | 71,258 |
7.03 Bond portfolio summary (continued) | |||||
(b) Sectors analysed by domicile (continued) | |||||
EU | |||||
excluding | Rest of | ||||
UK | US | UK | the World | Total | |
As at 31 December 2019 | £m | £m | £m | £m | £m |
Sovereigns, Supras and Sub-Sovereigns | 9,764 | 1,995 | 645 | 279 | 12,683 |
Banks | 2,002 | 1,328 | 1,669 | 722 | 5,721 |
Financial Services | 501 | 95 | 639 | 13 | 1,248 |
Insurance | 103 | 858 | 186 | 83 | 1,230 |
Consumer Services and Goods | |||||
- Cyclical | 637 | 2,325 | 341 | 206 | 3,509 |
- Non-cyclical | 1,716 | 5,123 | 479 | 40 | 7,358 |
- Health care | 182 | 1,233 | 54 | - | 1,469 |
Infrastructure | |||||
- Social | 5,357 | 290 | 106 | 45 | 5,798 |
- Economic | 3,823 | 705 | 174 | 349 | 5,051 |
Technology and Telecoms | 685 | 2,321 | 673 | 739 | 4,418 |
Industrials | 76 | 1,036 | 273 | 58 | 1,443 |
Utilities | 6,259 | 1,927 | 2,108 | 484 | 10,778 |
Energy | 265 | 768 | 11 | 122 | 1,166 |
Commodities | 5 | 305 | 137 | 465 | 912 |
Oil and Gas | 288 | 665 | 583 | 667 | 2,203 |
Real estate | 2,290 | 377 | 489 | 396 | 3,552 |
Structured finance ABS / RMBS / CMBS / Other | 979 | 766 | 21 | 22 | 1,788 |
Lifetime mortgage loans | 4,733 | - | - | - | 4,733 |
CDOs | - | - | - | 82 | 82 |
Total | 39,665 | 22,117 | 8,588 | 4,772 | 75,142 |
7.03 Bond portfolio summary (continued) | |||
(c) Bond portfolio analysed by credit rating | |||
Externally | Internally | ||
rated | rated1 | Total | |
As at 30 June 2020 | £m | £m | £m |
AAA | 3,808 | 3,816 | 7,624 |
AA | 15,720 | 3,515 | 19,235 |
A | 19,457 | 6,303 | 25,760 |
BBB | 20,835 | 5,728 | 26,563 |
BB or below | 1,114 | 679 | 1,793 |
Other | 8 | 14 | 22 |
Total | 60,942 | 20,055 | 80,997 |
Externally | Internally | ||
rated | rated1 | Total | |
As at 30 June 2019 | £m | £m | £m |
AAA | 2,647 | 2,774 | 5,421 |
AA | 14,631 | 2,626 | 17,257 |
A | 19,173 | 5,193 | 24,366 |
BBB | 18,199 | 4,974 | 23,173 |
BB or below | 658 | 240 | 898 |
Other | 10 | 133 | 143 |
Total | 55,318 | 15,940 | 71,258 |
Externally | Internally | ||
rated | rated1 | Total | |
As at 31 December 2019 | £m | £m | £m |
AAA | 3,364 | 3,176 | 6,540 |
AA | 14,568 | 3,172 | 17,740 |
A | 19,320 | 6,062 | 25,382 |
BBB | 18,990 | 5,495 | 24,485 |
BB or below | 655 | 287 | 942 |
Other | 12 | 41 | 53 |
Total | 56,909 | 18,233 | 75,142 |
1. Where external ratings are not available an internal rating has been used where practicable to do so. | |||
7.04 Property analysis | ||||
Property exposure within Direct investments by status | ||||
LGR1 | LGC2 | Total | ||
As at 30 June 2020 | £m | £m | £m | % |
Fully let | 3,663 | - | 3,663 | 88 |
Development | 353 | 25 | 378 | 9 |
Land | - | 132 | 132 | 3 |
4,016 | 157 | 4,173 | 100 | |
LGR1 | LGC2 | Total | ||
As at 30 June 2019 | £m | £m | £m | % |
Fully let | 2,715 | - | 2,715 | 83 |
Development3 | 416 | 23 | 439 | 13 |
Land | - | 121 | 121 | 4 |
3,131 | 144 | 3,275 | 100 | |
LGR1 | LGC2 | Total | ||
As at 31 December 2019 | £m | £m | £m | % |
Fully let | 3,414 | - | 3,414 | 87 |
Development | 384 | 23 | 407 | 10 |
Land | - | 136 | 136 | 3 |
3,798 | 159 | 3,957 | 100 | |
1. The fully let LGR property includes £3.5bn (30 June 2019: £3.0bn; 31 December 2019: £3.2bn) let to investment grade tenants. | ||||
2. The above analysis does not include assets related to the group's investments in CALA Homes and other housing businesses, which are accounted for as inventory within Receivables and other assets on the group's Consolidated Balance Sheet and measured at the lower of cost and net realisable value. At 30 June 2020 the group held a total of £2,261m (30 June 2019: £1,910m; 31 December 2019: £2,120m) of such assets. | ||||
3. The 30 June 2019 balance for LGR has been represented, by reallocating £416m from Fully let to Development, to more appropriately reflect the status of that property exposure. |