Legal & General Group Plc L&G FY 2014 results -2-
04 März 2015 - 8:01AM
UK Regulatory
2.01 Reconciliation of operational cash to operating profit
before tax (continued)
Opera- Changes Operating
tional Net in Operating profit/
cash New cash Exper- valuation Non-cash Inter- profit/ Tax (loss)
gene- business gene- ience assump- items national (loss) expense/ before
and
For the year ration(1) strain ration variances tions other and other after (credit) tax
ended tax
31 December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
2013
LGAS 474 (73) 401 (34) 31 (69) 10 339 105 444
- Insurance 310 (15) 295 (7) 20 (47) 10 271 84 355
- Savings 164 (58) 106 (27) 11 (22) - 68 21 89
LGR 260 33 293 9 (13) (48) - 241 69 310
LGIM 239 - 239 - - - - 239 65 304
LGC 137 - 137 - - - - 137 42 179
LGA 44 - 44 - - - 14 58 34 92
Total from
divisions 1,154 (40) 1,114 (25) 18 (117) 24 1,014 315 1,329
Group debt
costs (97) - (97) - - - - (97) (30) (127)
Group
investment
projects
and expenses (15) - (15) - - - (19) (34) (10) (44)
Total 1,042 (40) 1,002 (25) 18 (117) 5 883 275 1,158
1. Operational cash generation includes dividends remitted from LGF
of GBP2m and LGN of GBP14m within the Protection line and LGA of GBP44m.
IFRS and Cash 32
2.02 Analysis of LGAS and LGR operating profit
LGAS LGR LGAS LGR
2014 2014 2013 2013
GBPm GBPm GBPm GBPm
Net cash generation 424 343 401 293
Experience variances
Persistency - (3) 5 1
Mortality/Morbidity(1) (5) 13 - 14
Expenses (4) (3) (3) -
BPA Loading - 6 - 4
Project and development costs (12) (19) (23) (11)
Other 3 (7) (13) 1
Total experience variances (18) (13) (34) 9
Changes to valuation assumptions
Persistency(2) 42 - 7 -
Mortality/Morbidity(3) 37 61 9 (13)
Expenses 15 (5) 8 -
Other(4) (62) (8) 7 -
Total valuation assumption changes 32 48 31 (13)
Movement in non-cash
items
Deferred tax 6 (11) 5 -
Utilisation of brought forward trading
losses (9) (62) (4) (70)
Acquisition expense tax relief (42) - (51) -
Deferred Acquisition Costs (DAC)(5) (71) - (63) -
Deferred Income Liabilities (DIL)(5) 46 - 47 -
Other(6) - 41 (3) 22
Total non-cash movement items (70) (32) (69) (48)
Other (7) - 10 -
Operating profit
after tax 361 346 339 241
Tax gross up 99 82 105 69
Operating profit
before tax 460 428 444 310
1. The mortality/morbidity experience variances in LGAS in 2014 primarily
relates to adverse morbidity on one of our group protection products.
2. The persistency valuation assumption change in LGAS primarily relates
to an improvement in the experience and modelling for persistency on
some of our long term products.
3. The mortality/morbidity valuation assumption change in LGAS primarily
relates to an improvement in the modelling for certain morbidity features
on our retail protection products. The LGR mortality valuation assumption
change primarily relates to the adoption of the recent CMI projection
table (CMI2013) with an allowance for anticipated modelling changes
that have been incorporated into the CMI2014 model.
4. The other valuation assumption change in LGAS primarily relates to
a refinement in the modelling for reinsurance on certain long term policies.
5. The DAC in LGAS represents the amortisation charges offset by new
acquisition costs deferred in the year. The DIL reflects initial fees
on insured savings business which relate to the future provision of
services and are deferred and amortised over the anticipated period
in which these services are provided.
6. The other non-cash items in LGR primarily relates to the elimination
of intra-group future profits arising from the provision of investment
management services at market referenced rates.
IFRS and Cash 33
2.03 General insurance operating profit and combined operating
ratio
2014 2013
GBPm GBPm
General insurance operating profit(1) 59 69
General insurance combined operating ratio (%)(2) 87 84
1. The general insurance operating profit includes the underwriting
result and investment return.
2. The calculation of the general insurance combined operating ratio
incorporates commission and expenses as a percentage of net earned premiums.
2.04 LGIM
2014 2013
GBPm GBPm
Revenue 645 594
Expenses (309) (290)
Total LGIM operating profit 336 304
2.05 LGC
2014 2013
GBPm GBPm
Investment return 219 185
Expenses(1) (16) (6)
Total LGC operating profit 203 179
1. LGC expenses in 2014 include GBP10m of management expenses previously
borne by the Group and allocated as Group expenses.
2.06 Group investment projects and expenses
2014 2013
GBPm GBPm
Group investment projects and central
expenses (35) (44)
Restructuring costs (31) -
Total Group investment projects and expenses (66) (44)
2.07 Investment and other variances
2014 2013
GBPm GBPm
Investment variance(1) (8) 29
M&A related(2) (21) (16)
Other(3) (15) (40)
Total Investment and
other variances (44) (27)
1. Investment variance is negative, primarily due to lower equity returns
from shareholder funds. This has been partially offset by an increase
in exposure to Direct Investments in LGR, which has enhanced the risk
adjusted return, and favourable default experience.
2. M&A related includes gains, expenses and intangible amortisation
relating to acquisitions and disposals.
3. Other includes new business start-up costs, closure costs and other
non-investment related variance items. In 2013, Other included GBP17m
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