TIDMLGEN
RNS Number : 5968G
Legal & General Group Plc
09 August 2016
Legal & General Group Plc
Half Year Results 2016 Part 3
Capital and Investments Page 71
4.01 Group regulatory capital - Solvency II Directive
From 1 January 2016, the group has been required to measure and
monitor its capital resources on a new regulatory basis and to
comply with the requirements established by the Solvency II
Framework Directive, as adopted by the Prudential Regulation
Authority (PRA) in the UK.
In December 2015, the group received approval to calculate its
Solvency II capital requirements using a Partial Internal Model.
The vast majority of the risk to which the group is exposed is
assessed on the Internal Model basis approved by the PRA. Capital
requirements for a handful of smaller entities are assessed using
the Standard Formula basis on materiality grounds. The group's US
insurance businesses are valued on a local statutory basis,
following the PRA's approval of the group's application to use the
Deduction and Aggregation method of including these businesses in
the group solvency calculation.
The table below shows the estimated Eligible Own Funds, Solvency
Capital Requirement (SCR) and Surplus own funds of the group, based
on the Internal Model, Matching Adjustment and Transitional
Measures on Technical Provisions (TMTP), approved by the PRA in
December 2015 (together with the recalculation of TMTP approved by
the PRA in July 2016).
(a) Capital position
As at 30 June 2016, the group had a Solvency II surplus of GBP5.3bn
(FY 15: GBP5.5bn) over its Solvency Capital Requirement, corresponding
to a coverage ratio of 158% (FY 15: 169%). The pro-forma Solvency II
capital position is as follows:
30.06.16 31.12.15
GBPbn GBPbn
Core tier 1 own funds 11.6 11.3
Tier 1 subordinated liabilities 0.6 0.6
Tier 2 subordinated liabilities 2.2 2.0
Eligibility restrictions (0.1) (0.4)
====================================================================================== ========= ========
Eligible Own Funds(1) 14.3 13.5
Solvency Capital Requirement (SCR) 9.0 8.0
================================================================================
Surplus 5.3 5.5
SCR coverage ratio(2) 158% 169%
1. Eligible Own Funds do not include an accrual for the dividend of
GBP238m (FY 15: GBP592m) declared after the balance sheet date.
2. Coverage ratio is calculated on unrounded
values.
The Solvency II results are estimated and unaudited. Further explanation
of the underlying methodology and assumptions is set out in the sections
below.
(b) Methodology
Eligible Own Funds comprise the excess of the value of assets
over the liabilities, as valued on a Solvency II basis.
Subordinated debt issued by the group is considered to be part of
available capital, rather than a liability, as it is subordinate to
policyholder claims. Eligible Own Funds include deductions in
relation to fungibility and transferability restrictions, where the
surplus own funds of a specific group entity cannot be freely
transferred around the group due to local legal or regulatory
constraints.
Assets are valued at IFRS fair value with adjustments to remove
intangibles and deferred acquisition costs, and to value
reassurers' share of technical provisions on a basis consistent
with the liabilities on the Solvency II Balance Sheet.
Liabilities are valued on a best estimate market consistent
basis, with the application of a Solvency II Matching Adjustment
for valuing annuity liabilities, and include recognition of the
benefit relating to the TMTP for firms moving from the Solvency I
to the Solvency II regime. The TMTP has been calculated on a basis
approved by the PRA which seeks to encapsulate the difference
between the total Financial Resources Requirement under the
previous Solvency I regime and the new Solvency II regime.
The liabilities include the Risk Margin which represents an
allowance for the cost of capital for a purchasing insurer taking
on the portfolio of liabilities and residual risks that are deemed
to be not hedgeable under Solvency II, following the 1-in-200
stress event. This is calculated using a cost of capital of 6% as
prescribed by the European Insurance and Occupational Pensions
Authority (EIOPA).
The Solvency Capital Requirement is the amount of capital
required to cover the 1-in-200 worst projected future outcome in
the year following the valuation, allowing for realistic management
and policyholder actions and the impact of the stress on the tax
position of the group. This allows for diversification between the
different firms within the group and between the risks to which
they are exposed.
All material EEA insurance firms, including Legal & General
Assurance Society Limited, Legal & General Insurance Limited,
and Legal & General Assurance (Pensions Management) Limited
(LGIM's insurance subsidiary) are incorporated into the group's
Solvency II Internal Model assessment of required capital, assuming
diversification of the risks between and within those firms. These
firms contribute over 95% of the group's SCR.
Firms for which the capital requirements are less material, for
example Legal & General Netherlands, are valued on a Solvency
II Standard Formula basis. Firms which are not regulated but which
carry material risks to group solvency are modelled in the Internal
Model on the basis of applying an appropriate stress to their net
asset value.
Capital and Investments Page 72
4.01 Group regulatory capital - Solvency II Directive
(continued)
(b) Methodology (continued)
Legal & General America's Banner Life and its subsidiaries
are incorporated into the calculation of group solvency using a
Deduction and Aggregation basis. All risk exposure in these firms
is valued on a local statutory basis, with capital requirements set
to a multiple of local statutory Risk Based Capital (RBC) and
further restrictions on the surplus contribution to the group. The
US regulatory regime is considered to be equivalent to Solvency II
by the European Commission. The contribution to group SCR is 150%
of the local RBC Capital Adequacy Level (CAL). The contribution to
Eligible Own Funds is the SCR together with any surplus capital in
excess of 250% of RBC CAL.
All non-insurance regulated firms are included using their
current regulatory surplus. At the half year, unaudited profits
earned in the year to date have been included, allowing for any
restrictions on fungibility or transferability, without allowing
for any diversification with the rest of the group.
Allowance is made within the Solvency II Balance Sheet for the
group's defined benefit pension scheme using results on an IFRS
basis. Allowance is made within the SCR by stressing the IFRS
result position using the same Internal Model basis as for the
insurance firms.
(c) Assumptions
The calculation of the Solvency II Balance Sheet and associated
capital requirements requires a number of assumptions,
including:
(i) assumptions required to derive the present value of best
estimate liability cash flows. Non-market assumptions are broadly
the same as those used to derive the group's IFRS disclosures.
Future investment returns and discount rates are those defined by
EIOPA, which means that the risk free rates used to discount
liabilities are market swap rates, with a 14 basis point deduction
to allow for a credit risk adjustment. For annuities that are
eligible, the liability discount rate includes a Matching
Adjustment;
(ii) assumptions regarding management actions and policyholder
behaviour across the full range of scenarios. The only management
actions allowed for are those that have been approved by the Board
and are in place at the balance sheet date;
(iii) assumptions regarding the volatility of the risks to which
the group is exposed. Assumptions have been set using a combination
of historic market, demographic and operating experience data. In
areas where data is not considered robust, expert judgement has
been used; and
(iv) assumptions on the dependencies between risks, which are
calibrated using a combination of historic data and expert
judgement.
(d) Analysis of change
The table below shows the movement (net of tax) during the financial
year in the group's Solvency II surplus.
Solvency
II
surplus
Analysis of movement in the period GBPbn
Solvency II surplus as at 1 January 2016 5.5
Operating experience expected release(1) 0.5
Operating experience new business -
Market movements (0.6)
Other capital movements(2) 0.5
Dividends declared in the period (0.6)
Solvency II surplus as at 30 June 2016 5.3
1. Release of surplus generated by in-force business.
2. Other capital movements comprise model and assumption changes, including
changes to eligibility restrictions over the period.
Capital and Investments Page 73
4.01 Group regulatory capital - Solvency II
Directive (continued)
(e) Reconciliation of IFRS shareholders' equity to Solvency II Eligible
Own Funds
The table below gives a reconciliation of the group's IFRS shareholders'
equity to the Eligible Own Funds on a Solvency II basis.
30.06.16 31.12.15
GBPbn GBPbn
IFRS shareholders' equity 6.6 6.4
Remove DAC, goodwill and other intangible assets
and liabilities (2.1) (2.0)
Add subordinated debt treated as available capital(1) 2.5 2.5
Insurance contract valuation differences(2) 8.2 7.5
Add value of shareholder transfers 0.2 0.2
Difference in value of net deferred tax liabilities
(resulting from valuation differences) (0.7) (0.5)
Other(3) (0.3) (0.2)
Eligibility restrictions(4) (0.1) (0.4)
Eligible Own Funds 14.3 13.5
1. Treated as available capital on the Solvency II Balance Sheet as
the liabilities are subordinate to policyholder claims.
2. Differences in the measurement of liabilities between IFRS and Solvency
II, offset by the inclusion of the Risk Margin net of TMTP.
3. Reflects the valuation differences on other assets and liabilities,
predominately in respect of borrowings measured at fair value under
Solvency II.
4. Relating to the own funds of non-insurance regulated entities, subject
to local regulator rules.
The figures that appear in this note are all pre-accrual for the 2016
interim dividend of GBP238m (FY 15: 2015 final dividend of GBP592m).
(f) Sensitivity analysis
The following sensitivities are provided to give an indication of how
the group's Solvency II surplus as at 30 June 2016 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.
Only key sensitivities have been updated for the half-year process,
and only on a Solvency II basis.
Impact Impact Impact Impact
on on on on
net of net of net of net of
tax tax tax tax
Solvency Solvency Solvency Solvency
II II II II
capital coverage capital coverage
surplus ratio surplus ratio
30.06.16 30.06.16 31.12.15 31.12.15
GBPbn % GBPbn %
Credit spreads widen by 100bps assuming an
escalating addition to ratings(1,2) (0.5) (6) (0.6) (8)
A worsening in our expectation of future default
and downgrade to 115% of our assumed best estimate
level(3) (0.6) (9) (0.5) (11)
15% fall in property markets (0.3) (3) (0.3) (3)
100bps increase in risk free rates 0.7 14 0.6 19
100bps fall in risk free rates (0.9) (14) (0.4) (11)
-------------------------------------------------------- -------- -------- -------- --------
1. The spread sensitivity applies to Legal & General's corporate bond
(and similar) holdings, with no change in the firm's long term default
expectations.
2. 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 100bps.
3. Downgrade stress covers the cost of an immediate big letter downgrade
on c.20% of annuity portfolio bonds, or 3 times level expected in the
next 12 months.
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.
These results all allow (on an approximate basis) for the recalculation
of TMTP as at 30 June 2016 where the impact of the stress would cause
this to change materially.
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.
Capital and Investments Page 74
(g) Analysis of Group Solvency Capital Requirement
The table below shows a breakdown of the group's SCR by risk type. The
split is shown after the effects of diversification.
30.06.16 31.12.15
% %
Interest Rate 3 4
Equity 9 11
Property 4 5
Credit(1) 54 48
Currency 1 3
Inflation 3 2
Total Market Risk(2) 74 73
Counterparty Risk 1 1
Life Mortality - -
Life Longevity(3) 12 11
Life Lapse 1 1
Life Catastrophe 2 2
Non-life underwriting 1 1
Health underwriting - -
Expense - -
Total Insurance Risk 16 15
Operational Risk 5 5
Miscellaneous(4) 4 6
Total SCR 100 100
1. Credit risk is Legal & General's most significant exposure, arising
predominantly from the portfolio of bonds and bond-like assets backing
the group's annuity business.
2. In addition to credit risk the group also has significant exposure
to other market risks, primarily due to the investment holdings within
the shareholder funds but also the risk to fee income from assets backing
unit linked and with-profits Savings business.
3. Longevity risk is Legal & General's most significant insurance risk
exposure, arising from the annuity book on which the majority of the
longevity risk is retained.
4. Miscellaneous includes LGA on a Deduction and Aggregation basis and
the sectoral capital requirements for non-insurance regulated firms.
Capital and Investments Page 75
4.02 Group Economic Capital
Legal & General defines Economic Capital to be the amount of
capital that the Board believes the group needs to hold, over and
above its liabilities, in order to meet its strategic objectives.
This is not the same as regulatory capital which reflects
regulatory rules and constraints. The group's objectives include
being able to meet its liabilities as they fall due whilst
maintaining the confidence of our investors, rating agencies,
customers and intermediaries.
Legal & General maintains a risk-based capital model that is
used to calculate the group's Economic Capital Balance Sheet and
support the management of risk within the group. This modelling
framework, suitably adjusted for regulatory constraints, also meets
the needs of the Solvency II regime. Our Economic Capital model has
not been reviewed by the Prudential Regulatory Authority (PRA), nor
will it be.
Solvency II has elements which are considered to be inconsistent
with the group's definition of economic capital, so there are
differences between the two balance sheets. A reconciliation
between the two bases is provided in section 4.02(g).
(a) Capital position
As at 30 June 2016, the group had an economic capital surplus of GBP8.1bn
(H1 15: GBP6.4bn; FY 15: GBP7.6bn), corresponding to an economic capital
coverage ratio of 235% (H1 15: 220%; FY 15: 230%). The economic capital
position is as follows:
30.06.16 30.06.15 31.12.15
GBPbn GBPbn GBPbn
Core tier 1 own funds 11.2 9.7 10.8
Tier 1 subordinated liabilities 0.6 0.7 0.7
Tier 2 subordinated liabilities 2.2 1.7 2.3
Eligibility restrictions - (0.3) (0.3)
=============================================== ========== ========== ==========
Eligible Own Funds(1) 14.0 11.8 13.5
Economic Capital Requirement (ECR) 5.9 5.4 5.9
Surplus 8.1 6.4 7.6
ECR coverage ratio(2) 235% 220% 230%
1. Eligible Own Funds do not include an accrual for the dividend of
GBP238m (H1 15: GBP205m; FY 15: GBP592m) declared after the balance
sheet date.
2. Coverage ratio is calculated on
unrounded values.
Further explanation of the underlying methodology and assumptions is
set out in the sections below.
(b) Methodology
Eligible Own Funds are defined to be the excess of the value of
assets over the liabilities. Subordinated debt issued by the group
is considered to be part of available capital, rather than a
liability, as it is subordinate to policyholder claims.
Assets are valued at IFRS fair value with adjustments to remove
intangibles and deferred acquisition costs, and to value
reassurers' share of technical provisions on a basis consistent
with the liabilities on the Economic Capital Balance Sheet.
Liabilities are valued on a best estimate market consistent
basis, with the application of an Economic Matching Adjustment for
valuing annuity liabilities.
The Economic Capital Requirement is the amount of capital
required to cover the 1-in-200 worst projected future outcome in
the year following the valuation, allowing for realistic management
and policyholder actions and the impact of the stress on the tax
position of the group. This allows for diversification between the
different firms within the group and between the risks that they
are exposed to.
The liabilities include a Recapitalisation Cost to allow for the
cost of recapitalising the balance sheet following the 1-in-200
stress in order to maintain confidence that our future liabilities
will be met. This is calculated using a cost of capital that
reflects the long term average rates at which it is expected that
the group could raise debt and allowing for diversification between
all group entities.
All material insurance firms, including Legal & General
Assurance Society Limited, Legal & General Insurance Limited,
Legal & General Assurance (Pensions Management) Limited (LGIM's
insurance subsidiary) and Legal & General America (LGA) are
incorporated into the group's Economic Capital model assessment of
required capital, assuming diversification of the risks between the
different firms within the group and between the risks to which
they are exposed.
Firms for which the capital requirements are less material, for
example Legal & General Netherlands, are valued on the Solvency
II Standard Formula basis. Non-insurance firms are included using
their current regulatory surplus, without allowing for any
diversification with the rest of the group.
Allowance is made within the Economic Capital Balance Sheet for
the group's defined benefit pension scheme based upon the scheme's
funding basis, and allowance is made within the capital requirement
by stressing the funding position, using the same economic capital
basis as for the insurance firms.
Capital and Investments Page 76
4.02 Group Economic Capital (continued)
(c) Assumptions
The calculation of the Economic Capital Balance Sheet and
associated capital requirement requires a number of assumptions,
including:
(i) assumptions required to derive the present value of best
estimate liability cash flows. Non-market assumptions are broadly
the same as those used to derive the group's IFRS disclosures.
Future investment returns and discount rates are based on market
data where a deep and liquid market exists or using appropriate
estimation techniques where this is not the case. The risk-free
rates used to discount liabilities are market swap rates, with a 14
basis point deduction to allow for a credit risk adjustment;
(ii) assumptions regarding management actions and policyholder
behaviour across the full range of scenarios. The only management
actions allowed for are those that have been approved by the Board
and are in place at the balance sheet date;
(iii) assumptions regarding the volatility of the risks to which
the group is exposed. Assumptions have been set using a combination
of historic market, demographic and operating experience data. In
areas where data is not considered robust, expert judgement has
been used; and
(iv) assumptions on the dependencies between risks, which are
calibrated using a combination of historic data and expert
judgement.
For annuities the liability discount rate includes an Economic
Matching Adjustment, which is derived using the same approach as
the Solvency II matching adjustment, but any constraints we
consider economically artificial, such as capping the yield on
assets with a credit rating below BBB and any ineligibility of
certain assets and liabilities, have not been applied.
The other key assumption relating to the annuity business is the
assumption of longevity. As for IFRS, Legal & General models
base mortality and future improvement of mortality separately. For
our Economic Capital assessment we believe it is appropriate to
ensure that the balance sheet makes sufficient allowance to meet
the 1-in-200 stress to longevity over the run-off of the
liabilities rather than just over a 1 year timeframe as required by
Solvency II.
(d) Analysis of change
The table below shows the movement (net of tax) during the financial
year in the group's Economic Capital surplus.
Economic
Capital
surplus
Analysis of movement in the period GBPbn
Economic solvency position as at 1 January
2016 7.6
Operating experience expected
release(1) 0.5
Operating experience new
business 0.2
Market movements 0.1
Other capital movements(2) 0.3
Dividends declared
in the period (0.6)
Economic solvency position as at 30 June 2016 8.1
1. Release of surplus generated by in-force business.
2. Other capital movements comprise model and assumption changes.
Capital and Investments Page 77
4.02 Group Economic Capital (continued)
(e) Reconciliation of IFRS shareholders' equity to Economic Capital
Eligible Own Funds
The table below gives a reconciliation of the group's IFRS shareholders'
equity to the Eligible Own Funds on an Economic Capital basis.
30.06.16 30.06.15 31.12.15
GBPbn GBPbn GBPbn
IFRS shareholders' equity 6.6 6.0 6.4
Remove DAC, goodwill and other intangible assets
and liabilities (2.1) (2.0) (2.0)
Add subordinated debt treated as economic available
capital(1) 2.5 1.9 2.5
Insurance contract valuation differences(2) 7.6 6.2 7.0
Add value of shareholder transfers 0.2 0.3 0.2
Difference in value of net deferred tax liabilities
(resulting from valuation differences) (0.6) (0.5) (0.5)
Other (0.2) 0.2 0.2
Eligibility restrictions(3) - (0.3) (0.3)
Eligible Own Funds 14.0 11.8 13.5
1. Treated as available capital on the Economic Capital balance sheet
as the liabilities are subordinate to policyholder claims.
2. Differences in the measurement of liabilities between IFRS and Economic
Capital, offset by the inclusion of the recapitalisation cost.
3. Relating to the own funds of US captive reassurers and the UK with-profits
fund.
The figures that appear in this note are all pre-accrual for the 2016
interim dividend of GBP238m (H1 15: GBP205m; FY 15: GBP592m).
(f) Analysis of Group Economic Capital Requirement
The table below shows a breakdown of the group's Economic Capital Requirement
by risk type. The split is shown after the effects of diversification.
30.06.16 30.06.15 31.12.15
% % %
Interest Rate 3 6 4
Equity 11 14 13
Property 6 4 6
Credit(1) 48 44 48
Currency - 2 -
Inflation 4 (1) 3
Total Market Risk(2) 72 69 74
Counterparty Risk 2 2 1
Life Mortality - - -
Life Longevity(3) 6 9 4
Life Lapse 4 5 4
Life Catastrophe 4 3 4
Non-life underwriting 1 1 1
Health underwriting - 1 -
Expense 1 1 1
Total Insurance Risk 16 20 14
Operational Risk 7 7 7
Miscellaneous(4) 3 2 4
Total Economic Capital Requirement 100 100 100
1. Credit risk is Legal & General's most significant exposure, arising
predominantly from the portfolio of bonds backing the group's annuity
business.
2. In addition to credit risk the group also has significant exposure
to other market risks, primarily due to the investment holdings within
the shareholder funds but also the risk to fee income from assets backing
unit linked and with-profits Savings business.
3. Longevity risk is Legal & General's most significant insurance risk
exposure, arising from the annuity book on which the majority of the
longevity risk is retained.
4. Miscellaneous includes the sectoral capital requirements for non-insurance
regulated firms.
Capital and Investments Page 78
4.02 Group Economic Capital (continued)
(g) Reconciliation from Economic Capital surplus to Solvency II
surplus
The Economic Capital position does not reflect regulatory constraints.
The regulatory constraints imposed by the Solvency II regime result
in a lower surplus. The table below provides an analysis of the key
differences between the two bases. The Solvency II results are reported
net of Transitional Measures on Technical Provisions (TMTP).
30.06.16 31.12.15
GBPbn GBPbn
Economic Capital surplus 8.1 7.6
Different matching adjustment(1) (2.2) (1.4)
Risk margin vs Recapitalisation cost(2) - -
Longevity calibration(3) (0.6) (0.3)
Eligibility of group own funds(4) (0.1) (0.5)
LGA on a D&A basis(5) 0.1 0.1
Solvency II surplus(6) 5.3 5.5
1. This is the difference between the Economic Matching Adjustment and
the Solvency II Matching Adjustment.
2. The risk margin represents the amount a third party insurance company
would require to take on the obligations of a given insurance company.
It is equal to the cost of capital on the SCR necessary to support insurance
risks that cannot be hedged over the lifetime of the business. This
is presented net of TMTP. The recapitalisation cost is an equivalent
measure under economic capital, but represents the cost of recapitalising
the balance sheet following a stress event. It also removes elements
of Solvency II specifications that are, in Legal & General's view, uneconomic.
3. Economic Capital and Solvency II balance sheets use different calibrations
for longevity risk.
4. Deductions for regulatory restrictions in respect of fungibility
and transferability restrictions. These do not apply to the Economic
Capital balance sheet.
5. To ensure consistency of risk management across the group, L&G America
remains within the Internal Model for Economic Capital purposes.
6. There are also differences in the valuation of with-profits business
and the group pension scheme that have lower order impacts on the difference
between the surpluses.
Capital and Investments Page 79
4.03 Estimated Solvency II new business contribution
(a) New business by product(1)
Contri-
bution
from new
PVNBP business(2) Margin
For the six months ended 30 June 2016 GBPm GBPm %
LGR - UK annuity business 3,743 382 10.2
UK Insurance Total 727 81 11.1
- Retail protection 565 69 12.2
- Group protection 162 12 7.4
LGA(3) 325 40 12.4
4,795 503 10.5
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. In local currency, LGA reflects PVNBP of $435m and a contribution
from new business of $54m.
(b) Assumptions
The key economic assumptions as at 30 June 2016 are as
follows:
%
Risk margin 3.5
Risk free rate
- UK 1.1
- US 1.3
Risk discount rate (net of tax)
- UK 4.6
- US 4.8
Long-term rate
of return on
non profit annuities
in LGR 3.2
The cashflows are discounted using duration-based discount
rates, which is the sum of a duration-based risk free rate and a
flat risk margin. The risk free rates have been based on a swap
curve net of the EIOPA-specified Credit Risk Adjustment. The risk
free rate shown above is a weighted average based on the projected
cash flows. Using the previous methodology the risk free rate as at
30 June 2016 (for both the UK and the US) would be 1.5% and the
risk discount rate would be 5.0%.
All other economic and non-economic assumptions and
methodologies that would have a material impact on the margin for
these contracts are unchanged from those used for the European
Embedded Value reporting at end 2015 other than the cost of
currency hedging which has been updated to reflect current market
conditions and hedging activity in light of Solvency II. In
particular:
-- The assumed future pre-tax returns on fixed interest and RPI
linked securities are set by reference to the portfolio yield on
the relevant backing assets held at market value at the end of the
reporting period. The calculated return takes account of
derivatives and other credit instruments in the investment
portfolio. The returns on fixed and index-linked securities are
calculated net of an allowance for default risk which takes account
of the credit rating and the outstanding term of the securities.
The allowance for corporate defaults within the new business
contribution is based on a level rate deduction from the expected
returns for the overall annuities portfolio of 20bps.
-- Non-economic assumptions have been set at levels commensurate
with recent operating experience, including those for mortality,
morbidity, persistency and maintenance expenses (excluding
development costs). An allowance is made for future mortality
improvement. For new business, mortality assumptions may be
modified to take certain scheme specific features into account.
These are normally reviewed annually.
Tax
The profits on the new business are calculated on an after tax
basis and are grossed up by the notional attributed tax rate. For
the UK, the after tax basis assumes the annualised current rate of
20% and subsequent planned future reductions in corporation tax to
19% from 1 April 2017 and 18% from 1 April 2020 onwards. The tax
rate used for grossing up is the long term corporate tax rate in
the territory concerned, which for the UK is 18%.
US, covered business profits are also grossed up using the long
term corporate tax rates i.e. 35%.
Capital and Investments Page 80
4.03 Estimated Solvency II new business contribution
(continued)
(c) Methodology
Basis of preparation
The group is required to comply with the requirements
established by the EU Solvency II Directive. Consequently, a
Solvency II value reporting framework, which incorporates a best
estimate of cash flows in relation to insurance assets and
liabilities, has replaced EEV reporting in the management
information used internally to measure and monitor capital
resources. Solvency II new business contribution reflects the
portion of Solvency II value added by new business written in 2016,
recognising that the statutory solvency in the UK is now on a
Solvency II basis. It has been calculated in a manner consistent
with European Embedded Value (EEV) principles.
Solvency II new business contribution has been calculated for
the group's most material insurance-related businesses, namely,
LGR, the Insurance Division and LGA.
Description of methodology
The objective of the Solvency II new business contribution is to
provide shareholders with information on the long term contribution
of new business written in 2016.
With the exception of the discount rate, cost of currency
hedging and the statutory solvency basis, new business contribution
arising from the new business premiums written during the reporting
period has been calculated on the same economic and operating
assumptions as would have been used under the EEV methodology.
The PVNBP is equivalent to total single premiums plus the
discounted value of annual premiums expected to be received over
the term of the contracts using the same economic and operating
assumptions used for the calculation of the new business
contribution for the financial period.
The new business margin is defined as new business contribution
divided by the PVNBP. The premium volumes used to calculate the
PVNBP are the same as those used to calculate new business
contribution.
LGA is consolidated into the group solvency balance sheet on a
US Statutory solvency basis. Therefore, the LGA margin is largely
unchanged from the EEV basis, where new business profitability was
also based on the US Statutory solvency basis. Intra-group
reinsurance arrangements are in place between the US and UK
businesses, and it is expected that these arrangements will be
periodically extended to cover recent new business. LGA new
business premiums and contribution reflect the groupwide expected
impact of LGA directly-written business (i.e. looks-through any
intra-group reinsurance arrangements).
Comparison to EEV new business contribution
The key difference between Solvency II and EEV new business
contribution is the statutory solvency basis used for UK business.
Due to the different reserving and capital bases under Solvency II
compared to Solvency I, the timing of profit emergence changes. The
impact on new business contribution therefore largely reflects the
cost of capital effect of this change in profit timing. The impact
on new business contribution of moving to a Solvency II basis will
differ by type of business. Products which are more capital
consumptive under Solvency II will have a lower new business value
and vice versa for less capital consumptive products.
Capital and Investments Page 81
4.03 Estimated Solvency II new business contribution
(continued)
(c) Methodology (continued)
Projection assumptions
Cash flow projections are determined using best estimate
assumptions for each component of cash flow for each line of
business. Future economic and investment return assumptions are
based on conditions at the end of the financial period.
Detailed projection assumptions including mortality, morbidity,
persistency and expenses reflect recent operating experience and
are normally reviewed annually. Allowance is made for future
improvements in annuitant mortality based on experience and
externally published data. Favourable changes in operating
experience are not anticipated until the improvement in experience
has been observed.
All costs relating to new business, even if incurred elsewhere
in the group, are allocated to the new business. The expense
assumptions used for the cash flow projections therefore include
the full cost of servicing this business.
Tax
The projections take into account all tax which is expected to
be paid, based on best estimate assumptions, applying current
legislation and practice together with known future changes.
Risk discount rate
The risk discount rate (RDR) is duration-based and is a
combination of the risk free curve and a flat risk margin, which
reflects the residual risks inherent in the group's businesses,
after taking account of margins in the statutory technical
provisions, the required capital and the specific allowance for
financial options and guarantees.
The risk free rates have been based on a swap curve net of the
EIOPA-specified Credit Risk Adjustment (30 June 2016: 14bps for UK
and 10bps for US).
The risk margin has been determined based on an assessment of
the group's weighted average cost of capital (WACC). This
assessment incorporates a beta for the group, which measures the
correlation of movements in the group's share price to movements in
a relevant index. Beta values therefore allow for the market's
assessment of the risks inherent in the business relative to other
companies in the chosen index.
The WACC is derived from the group's cost of equity and debt,
and the proportion of equity to debt in the group's capital
structure measured using market values. Each of these three
parameters is forward looking, although informed by historic
information and appropriate judgements where necessary. The cost of
equity is calculated as the risk free rate plus the equity risk
premium for the chosen index multiplied by the company's beta.
The cost of debt used in the WACC calculations takes account of
the actual locked-in rates for our senior and subordinated long
term debt. All debt interest attracts tax relief at a time adjusted
rate of 18.4%.
Whilst the WACC approach is a relatively simple and transparent
calculation to apply, subjectivity remains within a number of the
assumptions. Management believes that the chosen margin, together
with the levels of required capital, the inherent strength of the
group's regulatory reserves and the explicit deduction for the cost
of options and guarantees, is appropriate to reflect the risks
within the covered business.
(d) PVNBP to gross written premium reconciliation
30.06.16 30.06.15 31.12.15
Notes GBPbn GBPbn GBPbn
PVNBP 4.03(a) 4.8
Effect of capitalisation factor (0.9)
New business premiums from selected lines 3.9
Other(1) 0.3
3.07/
Total LGR, Insurance and LGA new business 3.08 4.2 1.6 3.3
Annualisation impact of regular premium long-term
business (0.1) (0.1) (0.2)
IFRS gross written premiums from existing long-term
insurance business 1.3 1.3 2.6
IFRS gross written premiums from Savings business 0.1 0.2 0.5
Deposit accounting for lifetime mortgage advances (0.2) - (0.2)
General insurance gross written premiums 3.09 0.2 0.2 0.3
Total gross written premiums 5.5 3.2 6.3
1. Other principally includes annuity sales in the US and lifetime mortgage
advances.
Capital and Investments Page 82
4.04 Investment portfolio
Market Market Market
value value value
30.06.16 30.06.15 31.12.15
GBPm GBPm GBPm
Worldwide total assets 846,140 717,034 747,944
Client and policyholder
assets (766,397) (649,882) (679,831)
Non-unit linked with-profits
assets (12,478) (12,216) (11,644)
Investments to which shareholders are
directly exposed 67,265 54,936 56,469
Analysed by investment class:
Other
non profit Other
LGR insurance LGC shareholder
investments investments investments(1) investments Total Total Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.15 31.12.15
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Equities 56 - 2,350 188 2,594 2,409 2,252
Bonds 4.06 47,908 2,505 1,651 666 52,730 43,917 43,916
Derivative assets(2) 5,661 - 62 - 5,723 3,730 3,663
Property 4.07 2,257 - 196 4 2,457 2,220 2,347
Cash, cash equivalents,
loans & receivables 878 556 1,313 504 3,251 2,527 4,168
Financial investments 56,760 3,061 5,572 1,362 66,755 54,803 56,346
Other assets(3) 157 - 331 22 510 133 123
Total investments 56,917 3,061 5,903 1,384 67,265 54,936 56,469
1. Equity investments include a total of GBP323m in respect of CALA
Group Limited, Peel Media Holdings Limited (MediaCityUK) and NTR Wind
Management Ltd (30 June 2015: GBP280m; 31 December 2015: GBP295m).
2. Derivative assets are shown gross of derivative liabilities of GBP5.0bn
(HY15: GBP2.0bn; FY15: GBP2.7bn). Exposures arise from the 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.
3. Other assets include reverse repurchase agreements of GBP464m (HY15:
GBPnil; FY15: GBP82m).
Capital and Investments Page 83
4.05 Direct Investments
(a) Analysed by asset class
Direct(1, Traded(3) Direct(1, Traded(3) Direct(1, Traded(3)
2) 2) 2)
Investments securities Total Investments securities Total Investments securities Total
30.06.16 30.06.16 30.06.16 30.06.15 30.06.15 30.06.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Equities 508 2,086 2,594 410 1,999 2,409 432 1,820 2,252
Bonds 4,474 48,256 52,730 3,050 40,867 43,917 3,722 40,194 43,916
Derivative
assets - 5,723 5,723 - 3,730 3,730 - 3,663 3,663
Property 2,457 - 2,457 2,220 - 2,220 2,347 - 2,347
Cash, cash
equivalents,
loans &
receivables 466 2,785 3,251 380 2,147 2,527 425 3,743 4,168
Other assets 46 464 510 133 - 133 41 82 123
7,951 59,314 67,265 6,193 48,743 54,936 6,967 49,420 56,469
1. Direct Investments constitute an agreement with another party and
represent an exposure to untraded and often less volatile assets. Direct
Investments include physical assets, bilateral loans and private equity
but exclude hedge funds.
2. A further breakdown of property is provided in note 4.07.
3. Traded securities are defined by exclusion. If an instrument
is not a Direct Investment, then it is classed as a traded security.
(b) Analysed by segment
LGR LGC LGA Insurance Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm
Equities - 508 - - 508
Bonds 3,932 197 345 - 4,474
Property 2,257 196 - 4 2,457
Cash, cash equivalents, loans & receivables 20 117 329 - 466
Other assets - 46 - - 46
6,209 1,064 674 4 7,951
LGR LGC LGA Insurance Total
At At At At At
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm
Equities - 410 - - 410
Bonds 2,737 61 252 - 3,050
Property 2,037 180 - 3 2,220
Cash, cash equivalents, loans &
receivables - 112 268 - 380
Other assets 118 15 - - 133
4,892 778 520 3 6,193
Capital and Investments Page 84
4.05 Direct Investments (continued)
(b) Analysed by segment (continued)
LGR LGC LGA Insurance Total
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm
Equities - 432 - - 432
Bonds 3,336 93 293 - 3,722
Property 2,157 186 - 4 2,347
Cash, cash equivalents, loans & receivables - 115 310 - 425
Other assets - 41 - - 41
5,493 867 603 4 6,967
(c) Movement in the period
Carrying Change Carrying
in
value market value
01.01.16 Additions Disposals value 30.06.16
GBPm GBPm GBPm GBPm GBPm
Equities 432 65 (9) 20 508
Bonds 3,722 580 (182) 354 4,474
Property 2,347 198 (60) (28) 2,457
Cash, cash equivalents, loans
& receivables 425 29 (23) 35 466
Other assets 41 3 - 2 46
6,967 875 (274) 383 7,951
Capital and Investments Page 85
4.06 Bond portfolio summary
(a) LGR analysed by sector
Sectors analysed by credit rating
BB or
AAA AA A BBB below LGR LGR
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 898 6,747 114 200 58 8,017 17
Banks:
- Tier 1 - - - - 21 21 -
- Tier 2 and other
subordinated - - 159 265 - 424 1
- Senior 100 564 1,046 85 - 1,795 4
Financial Services:
- Tier 1 - - - - - - -
- Tier 2 and other
subordinated - - 31 10 - 41 -
- Senior 78 420 210 125 - 833 2
Insurance:
- Tier 1 - - - - - - -
- Tier 2 and other
subordinated - - 136 60 26 222 -
- Senior - 15 418 184 - 617 1
Utilities 63 7 2,324 2,834 24 5,252 11
Consumer Services and
Goods
& Health Care 174 1,181 2,041 2,407 124 5,927 12
Technology and Telecoms 46 156 550 2,181 115 3,048 6
Industrials(1) - 24 1,082 967 103 2,176 5
Oil and Gas - 169 683 1,146 273 2,271 5
Property - 579 323 969 1 1,872 4
Asset backed securities 134 745 292 95 48 1,314 3
Securitisations and
debentures(2) 252 2,335 6,948 2,151 850 12,536 26
Lifetime mortgage loans(3) - - - 440 - 440 1
CDOs(4) - 722 366 14 - 1,102 2
Total GBPm 1,745 13,664 16,723 14,133 1,643 47,908 100
Total % 4 29 34 30 3 100
1. Included within Industrials is a GBP599m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(c).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period. The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the counterparty valuation.
Capital and Investments Page 86
4.06 Bond portfolio summary (continued)
(a) LGR analysed by sector (continued)
Sectors analysed by credit rating
(continued)
BB or
AAA AA A BBB below Other LGR LGR
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 921 5,458 126 208 8 1 6,722 17
Banks:
- Tier 1 - - 55 6 33 - 94 -
- Tier 2 and other
subordinated 41 2 231 149 11 - 434 1
- Senior 73 383 891 137 3 - 1,487 4
Financial Services:
- Tier 1 - 4 - - - - 4 -
- Tier 2 and other
subordinated 4 1 43 8 - - 56 -
- Senior 52 386 89 121 1 - 649 2
Insurance:
- Tier 1 - 4 10 71 - - 85 -
- Tier 2 and other
subordinated 4 6 147 138 - - 295 1
- Senior - 49 346 138 - - 533 1
Utilities 3 5 2,154 2,329 24 - 4,515 11
Consumer Services and
Goods
& Health Care 161 735 1,434 1,518 140 1 3,989 11
Technology and Telecoms 24 98 436 1,669 158 1 2,386 6
Industrials(1) 3 20 866 857 36 1 1,783 5
Oil and Gas 19 345 473 1,011 278 - 2,126 5
Property 2 364 231 814 - 2 1,413 4
Asset backed securities 296 671 197 73 33 - 1,270 3
Securitisations and
debentures(2) 272 2,186 5,437 2,149 292 - 10,336 26
Lifetime mortgage loans(3) - - - 38 - - 38 -
CDOs(4) - 537 464 54 47 - 1,102 3
Total GBPm 1,875 11,254 13,630 11,488 1,064 6 39,317 100
Total % 5 29 34 29 3 - 100
1. Included within Industrials is a GBP507m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(c).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period. The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the counterparty valuation.
Capital and Investments Page 87
4.06 Bond portfolio summary (continued)
(a) LGR analysed by sector (continued)
Sectors analysed by credit rating (continued)
BB or
AAA AA A BBB below LGR LGR
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 956 4,774 64 154 30 5,978 14
Banks:
- Tier 1 17 35 - - 26 78 -
- Tier 2 and other
subordinated - - 92 138 2 232 1
- Senior 49 421 859 77 1 1,407 4
Financial Services:
- Tier 1 - - - - - - -
- Tier 2 and other
subordinated - 3 33 8 4 48 -
- Senior 63 396 106 140 - 705 2
Insurance:
- Tier 1 - - - 6 - 6 -
- Tier 2 and other
subordinated - - 144 64 - 208 1
- Senior - 14 316 118 - 448 1
Utilities 43 8 1,847 2,593 27 4,518 11
Consumer Services and
Goods
& Health Care 136 969 1,572 1,830 130 4,637 12
Technology and Telecoms 48 138 409 1,940 129 2,664 7
Industrials(1) - 21 934 899 30 1,884 5
Oil and Gas 24 321 482 901 247 1,975 5
Property - 516 269 868 - 1,653 4
Asset backed securities 123 657 167 74 38 1,059 3
Securitisations and
debentures(2) 258 2,152 5,489 2,349 331 10,579 26
Lifetime mortgage loans(3) - - - 207 - 207 1
CDOs(4) - 552 469 14 47 1,082 3
Total GBPm 1,717 10,977 13,252 12,380 1,042 39,368 100
Total % 4 28 34 31 3 100
1. Included within Industrials is a GBP455m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(c).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period . The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the counterparty valuation.
Capital and Investments Page 88
4.06 Bond portfolio summary (continued)
(a) LGR analysed by sector
(continued)
Sectors analysed by domicile
EU Rest of
UK US excluding the World LGR
UK
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 6,133 571 635 678 8,017
Banks 638 780 635 187 2,240
Financial Services 270 229 277 98 874
Insurance 312 481 46 - 839
Utilities 2,673 390 2,125 64 5,252
Consumer Services and Goods
& Health Care 1,214 4,054 464 195 5,927
Technology and Telecoms 508 1,267 879 394 3,048
Industrials 119 1,129 323 605 2,176
Oil and Gas 181 1,106 345 639 2,271
Property 1,410 385 12 65 1,872
Asset backed securities, securitisations and
debentures(1) 11,539 1,086 462 1,203 14,290
CDOs - - 1,031 71 1,102
Total 24,997 11,478 7,234 4,199 47,908
1. Includes lifetime
mortgage loans.
EU Rest of
UK US excluding the World LGR
UK
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 4,963 519 638 602 6,722
Banks 662 795 453 105 2,015
Financial Services 186 330 140 53 709
Insurance 463 341 91 18 913
Utilities 2,347 252 1,857 59 4,515
Consumer Services and
Goods & Health Care 792 2,786 336 75 3,989
Technology and Telecoms 389 973 841 183 2,386
Industrials 199 735 266 583 1,783
Oil and Gas 193 1,088 354 491 2,126
Property 1,054 316 17 26 1,413
Asset backed securities, securitisations and
debentures(1) 9,013 1,075 378 1,178 11,644
CDOs - - 1,026 76 1,102
Total 20,261 9,210 6,397 3,449 39,317
1. Includes lifetime
mortgage loans.
Capital and Investments Page 89
4.06 Bond portfolio summary (continued)
(a) LGR analysed by sector (continued)
Sectors analysed by domicile (continued)
EU Rest of
UK US excluding the World LGR
UK
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 4,305 455 647 571 5,978
Banks 568 582 441 126 1,717
Financial Services 217 373 159 4 753
Insurance 337 284 41 - 662
Utilities 2,355 313 1,796 54 4,518
Consumer Services and Goods & Health Care 870 3,212 391 164 4,637
Technology and Telecoms 462 1,217 787 198 2,664
Industrials 220 854 272 538 1,884
Oil and Gas 197 995 326 457 1,975
Property 1,286 324 12 31 1,653
Asset backed securities, securitisations and
debentures(1) 9,570 884 355 1,036 11,845
CDOs - - 1,047 35 1,082
Total 20,387 9,493 6,274 3,214 39,368
1. Includes lifetime
mortgage loans.
Capital and Investments Page 90
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector
Sectors analysed by credit rating
BB or
AAA AA A BBB below Other Total Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 1,549 7,355 196 424 113 1 9,638 18
Banks:
- Tier 1 - - - 1 21 - 22 -
- Tier 2 and other
subordinated - - 172 279 - 1 452 1
- Senior 207 865 1,335 102 1 1 2,511 5
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other
subordinated - - 32 11 - 3 46 -
- Senior 85 504 259 161 2 2 1,013 2
Insurance:
- Tier 1 - - 1 - - - 1 -
- Tier 2 and other
subordinated - 3 140 70 26 1 240 -
- Senior - 17 426 190 - - 633 1
Utilities 64 16 2,385 2,931 36 40 5,472 10
Consumer Services and
Goods
& Health Care 210 1,218 2,195 2,630 207 11 6,471 13
Technology and Telecoms 58 185 614 2,302 142 3 3,304 6
Industrials(1) - 34 1,194 1,125 158 5 2,516 5
Oil and Gas - 197 740 1,241 323 2 2,503 5
Property - 579 344 1,029 10 163 2,125 4
Asset backed securities 335 768 293 95 48 - 1,539 3
Securitisations and
debentures(2) 309 2,337 7,011 2,180 865 - 12,702 24
Lifetime mortgage loans(3) - - - 440 - - 440 1
CDOs(4) - 722 366 14 - - 1,102 2
Total GBPm 2,817 14,800 17,703 15,225 1,952 233 52,730 100
Total % 5 28 34 29 4 - 100
1. Included within Industrials is a GBP605m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(d).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period. The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the market valuation.
Capital and Investments Page 91
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector (continued)
Sectors analysed by credit rating (continued)
BB or
AAA AA A BBB below Other Total Total
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 1,485 5,928 181 399 42 8 8,043 18
Banks:
- Tier 1 - - 55 9 33 - 97 -
- Tier 2 and other
subordinated 133 4 248 183 14 1 583 1
- Senior 271 511 1,031 168 8 1 1,990 5
Financial Services:
- Tier 1 - 4 - - - - 4 -
- Tier 2 and other
subordinated 10 5 51 14 1 - 81 -
- Senior 70 418 176 186 9 1 860 2
Insurance:
- Tier 1 - 4 10 72 - - 86 -
- Tier 2 and other
subordinated 9 15 149 150 2 1 326 1
- Senior 1 89 359 146 - - 595 1
Utilities 7 18 2,235 2,423 33 2 4,718 11
Consumer Services and
Goods
& Health Care 211 817 1,636 1,714 209 5 4,592 10
Technology and Telecoms 44 137 512 1,755 189 3 2,640 6
Industrials(1) 9 28 1,011 1,023 77 4 2,152 5
Oil and Gas 28 381 512 1,097 312 2 2,332 5
Property 4 367 243 866 11 64 1,555 4
Asset backed securities 670 706 201 75 34 - 1,686 4
Securitisations and
debentures(2) 274 2,199 5,505 2,154 305 - 10,437 24
Lifetime mortgage loans(3) - - - 38 - - 38 -
CDOs(4) - 537 464 54 47 - 1,102 3
Total GBPm 3,226 12,168 14,579 12,526 1,326 92 43,917 100
Total % 7 28 33 29 3 - 100
1. Included within Industrials is a GBP520m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(d).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period. The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the market valuation.
Capital and Investments Page 92
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector (continued)
Sectors analysed by credit rating (continued)
BB or
AAA AA A BBB below Other Total Total
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 1,981 5,022 112 367 62 5 7,549 17
Banks:
- Tier 1 68 139 5 10 26 - 248 1
- Tier 2 and other
subordinated 22 - 100 146 3 1 272 1
- Senior 105 721 992 98 3 1 1,920 4
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other
subordinated - 3 38 16 - 1 58 -
- Senior 65 415 172 198 7 - 857 2
Insurance:
- Tier 1 - - - 6 - - 6 -
- Tier 2 and other
subordinated - 3 146 68 1 1 219 -
- Senior 1 18 326 126 - - 471 1
Utilities 42 17 1,900 2,677 42 13 4,691 11
Consumer Services and
Goods
& Health Care 170 1,004 1,707 1,993 210 4 5,088 12
Technology and Telecoms 61 169 472 2,027 151 1 2,881 7
Industrials(1) - 38 1,039 1,075 67 2 2,221 5
Oil and Gas 27 342 517 958 280 1 2,125 5
Property - 516 287 912 9 81 1,805 4
Asset backed securities 511 672 164 74 42 - 1,463 3
Securitisations and
debentures(2) 281 2,157 5,602 2,370 343 - 10,753 25
Lifetime mortgage loans(3) - - - 207 - - 207 -
CDOs(4) - 552 469 14 47 - 1,082 2
Total GBPm 3,334 11,788 14,048 13,342 1,293 111 43,916 100
Total % 8 27 32 30 3 - 100
1. Included within Industrials is a GBP455m exposure to Basic Resources.
2. Securitisations and debentures have been reanalysed in note 4.06(d).
3. Lifetime mortgage loans have increased in value since inception predominantly
due to the accrual of interest on the loans.
4. The underlying reference portfolio has had no reference entity defaults
during the period. The CDOs are termed as super senior since default
losses on the reference portfolio have to exceed 27.5%, on average across
the reference portfolio, before the CDOs incur any default losses. Assuming
an average recovery rate of 30%, then over 39% of the reference names
would have to default before the CDOs incur any default losses. The
CDOs are valued using an external valuation which is based on observable
market inputs. This is then validated against the market valuation.
Capital and Investments Page 93
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector
(continued)
Sectors analysed by domicile
EU
excluding Rest of
UK US UK the World Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 6,503 881 1,398 856 9,638
Banks 676 941 935 433 2,985
Financial Services 279 287 293 200 1,059
Insurance 322 497 55 - 874
Utilities 2,723 474 2,206 69 5,472
Consumer Services and Goods
& Health Care 1,261 4,446 535 229 6,471
Technology and Telecoms 521 1,419 942 422 3,304
Industrials 153 1,354 374 635 2,516
Oil and Gas 205 1,202 404 692 2,503
Property 1,575 459 22 69 2,125
Asset backed securities, securitisations and
debentures(1) 11,586 1,394 478 1,223 14,681
CDOs - - 1,031 71 1,102
Total 25,804 13,354 8,673 4,899 52,730
1. Includes lifetime
mortgage loans.
EU
excluding Rest of
UK US UK the World Total
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 5,309 735 1,271 728 8,043
Banks 757 925 687 301 2,670
Financial Services 200 443 212 90 945
Insurance 486 399 102 20 1,007
Utilities 2,365 344 1,933 76 4,718
Consumer Services and Goods
& Health Care 861 3,221 392 118 4,592
Technology and Telecoms 405 1,147 884 204 2,640
Industrials 247 952 331 622 2,152
Oil and Gas 208 1,186 399 539 2,332
Property 1,129 369 22 35 1,555
Asset backed securities, securitisations and
debentures(1) 9,081 1,515 388 1,177 12,161
CDOs - - 1,026 76 1,102
Total 21,048 11,236 7,647 3,986 43,917
1. Includes lifetime
mortgage loans.
Capital and Investments Page 94
4.06 Bond portfolio summary (continued)
(b) Total group analysed by sector
(continued)
Sectors analysed by domicile (continued)
EU
excluding Rest of
UK US UK the World Total
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 4,665 775 1,374 735 7,549
Banks 674 703 655 408 2,440
Financial Services 227 460 208 20 915
Insurance 343 305 47 1 696
Utilities 2,376 387 1,859 69 4,691
Consumer Services and
Goods & Health Care 904 3,565 428 191 5,088
Technology and Telecoms 468 1,377 822 214 2,881
Industrials 257 1,064 330 570 2,221
Oil and Gas 206 1,060 357 502 2,125
Property 1,375 374 19 37 1,805
Asset backed securities, securitisations and
debentures(1) 9,578 1,440 364 1,041 12,423
CDOs - - 1,047 35 1,082
Total 21,073 11,510 7,510 3,823 43,916
1. Includes lifetime
mortgage loans.
Capital and Investments Page 95
4.06 Bond portfolio summary (continued)
(c) Analysis of LGR securitisations and debentures
BB or
AAA AA A BBB below LGR LGR LGR
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns - 743 5 - - 748 702 682
Financial Services - 636 1,392 249 150 2,427 2,145 2,166
Insurance - 43 106 - - 149 110 130
Utilities - 103 1,797 129 - 2,029 1,722 1,765
Consumer Services and
Goods
& Health Care - - 286 69 21 376 408 355
Technology and Telecoms - - - - - - 1 1
Industrials - 43 455 300 5 803 700 711
Oil and Gas - - 14 32 19 65 64 65
Property - 204 586 1 - 791 411 402
Infrastructure / PFI
/ Social housing - 186 664 715 64 1,629 1,259 1,232
Covered Bonds(1) 251 2 - 16 - 269 285 273
Whole Business Securitised - 67 390 345 105 907 847 624
Commercial Property
Backed Bonds - 188 505 14 464 1,171 679 1,092
Secured Bonds(2) 1 120 748 281 22 1,172 1,003 949
Other - - - - - - - 132
Total 252 2,335 6,948 2,151 850 12,536 10,336 10,579
1. Covered bonds are typically issued by banks and are secured on pools
of residential mortgages.
2. Secured bonds are typically issued by Special Purpose Vehicles and
are secured on various assets and/or cashflows within the issuer's business.
(d) Analysis of total group securitisations and
debentures
BB or
AAA AA A BBB below Total Total Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns - 743 5 - - 748 702 682
Financial Services - 636 1,392 249 150 2,427 2,145 2,166
Insurance - 43 106 - - 149 114 132
Utilities - 103 1,799 130 - 2,032 1,727 1,768
Consumer Services and
Goods
& Health Care - - 332 86 24 442 410 416
Technology and Telecoms - - - - - - 1 1
Industrials - 43 456 300 6 805 701 711
Oil and Gas - - 14 32 19 65 64 65
Property - 204 586 1 - 791 411 403
Infrastructure / PFI
/ Social housing - 186 667 715 64 1,632 1,259 1,234
Covered Bonds(1) 307 2 - 16 - 325 286 279
Whole Business Securitised - 67 390 347 105 909 847 626
Commercial Property
Backed Bonds - 189 505 14 464 1,172 679 1,092
Secured Bonds(2) 1 121 749 289 33 1,193 1,034 959
Other 1 - 10 1 - 12 57 219
Total 309 2,337 7,011 2,180 865 12,702 10,437 10,753
1. Covered bonds are typically issued by banks and are secured on pools
of residential mortgages.
2. Secured bonds are typically issued by Special Purpose Vehicles and
are secured on various assets and/or cashflows within the issuer's business.
Capital and Investments Page 96
4.06 Bond portfolio summary (continued)
(e) LGR and total group analysed by credit
rating
Externally Internally Externally Internally
rated rated(1) LGR rated rated(1) Total
30.06.16 30.06.16 30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm GBPm GBPm
AAA 1,737 8 1,745 2,809 8 2,817
AA 11,964 1,700 13,664 13,096 1,704 14,800
A 14,422 2,301 16,723 15,325 2,378 17,703
BBB 12,496 1,637 14,133 13,372 1,853 15,225
BB or below 1,102 541 1,643 1,348 604 1,952
Other - - - 233 - 233
41,721 6,187 47,908 46,183 6,547 52,730
1. Where external ratings are not available an internal rating has been
used where it is practicable to do so.
Externally Internally Externally Internally
rated rated(1) LGR rated rated(1) Total
30.06.15 30.06.15 30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm GBPm GBPm
AAA 1,870 5 1,875 3,149 77 3,226
AA 9,763 1,491 11,254 10,605 1,563 12,168
A 11,996 1,634 13,630 12,915 1,664 14,579
BBB 10,268 1,220 11,488 11,133 1,393 12,526
BB or below 1,008 56 1,064 1,233 93 1,326
Other - 6 6 - 92 92
34,905 4,412 39,317 39,035 4,882 43,917
1. Where external ratings are not available an internal rating has been
used where it is practicable to do so.
Externally Internally Externally Internally
rated rated(1) LGR rated rated(1) Total
31.12.15 31.12.15 31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm GBPm GBPm
AAA 1,711 6 1,717 3,326 8 3,334
AA 9,426 1,551 10,977 10,234 1,554 11,788
A 11,349 1,903 13,252 12,084 1,964 14,048
BBB 10,721 1,659 12,380 11,497 1,845 13,342
BB or below 1,022 20 1,042 1,221 72 1,293
Other - - - - 111 111
34,229 5,139 39,368 38,362 5,554 43,916
1. Where external ratings are not available an internal rating has been
used where it is practicable to do so.
Capital and Investments Page 97
4.07 Property analysis
Group property Direct Investments by status
LGR(1) LGC Insurance Total
At At At At
30.06.16 30.06.16 30.06.16 30.06.16
GBPm GBPm GBPm GBPm %
Fully let 2,257 58 4 2,319 94
Part let - - - - -
Development - 95 - 95 4
Land - 43 - 43 2
2,257 196 4 2,457 100
1. The fully let LGR property includes GBP1.9bn let to investment grade
tenants.
LGR(1) LGC Insurance Total
At At At At
30.06.15 30.06.15 30.06.15 30.06.15
GBPm GBPm GBPm GBPm %
Fully let 2,037 30 3 2,070 93
Part let - - - - -
Development - 108 - 108 5
Land - 42 - 42 2
2,037 180 3 2,220 100
1. The fully let LGR property includes GBP1.7bn let to investment grade
tenants.
LGR(1) LGC Insurance Total
At At At At
31.12.15 31.12.15 31.12.15 31.12.15
GBPm GBPm GBPm GBPm %
Fully let 2,157 25 4 2,186 93
Part let - - - - -
Development - 118 - 118 5
Land - 43 - 43 2
2,157 186 4 2,347 100
1. The fully let LGR property includes GBP1.9bn let to investment grade
tenants.
Capital and Investments Page 98
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Glossary Page 99
Adjusted earnings per share*
Calculated by dividing profit after tax from continuing
operations, attributable to equity holders of the company,
excluding recognised gains and losses associated with held for sale
and completed business disposals, by the weighted average number of
ordinary shares in issue during the period, excluding employee
scheme treasury shares.
Adjusted return on equity*
ROE measures the return earned by shareholders on shareholder
capital retained within the business. Adjusted ROE is calculated as
IFRS pro t after tax divided by average IFRS shareholders' funds
excluding recognised gains and losses associated with held for sale
and completed business disposals.
Adjusted operating profit*
Operating pro t measures the pre-tax result excluding the impact
of investment volatility, economic assumption changes and
exceptional items. Adjusted operating profit further removes
exceptional restructuring costs.
Advisory assets*
These are assets on which Global Index Advisors (GIA) provide
advisory services. Advisory assets are bene cially owned by GIA's
clients and all investment decisions pertaining to these assets are
also made by the clients. These are different from Assets under
Management (AUM) de ned below.
Alternative performance measures (APMs)
Measures that are not defined by an accounting or regulatory
standard, but used by the group to give shareholders a better
understanding of the underlying performance of the group. All APMs
defined within this glossary are marked with an asterisk.
Annualised return on equity*
Calculated by taking annualised profit after tax attributable to
equity holders of the company, excluding gains and losses
associated with held for sale and completed business disposals, as
a percentage of the average shareholders' capital employed, being
an average of the opening and closing shareholders' equity during
the period.
Annual premium*
Premiums that are paid regularly over the duration of the
contract such as protection policies.
Assets under administration (AUA)*
Assets administered by Legal & General which are bene cially
owned by clients. Services provided in respect of assets under
administration are of an administrative nature, including
safekeeping, collecting investment income, settling purchase and
sales transactions and record keeping.
Assets under management (AUM)*
The total amount of money investors have trusted to our fund
managers to invest across our investment products i.e. these are
funds which are managed by our fund managers on behalf of
investors.
Deduction and aggregation (D&A)
A method of calculating group solvency on a Solvency II basis,
whereby the assets and liabilities of certain entities are excluded
from the group consolidation. The net contribution from those
entities to group own funds is included as an asset on the group's
Solvency II balance sheet. Regulatory approval has been provided to
recognise the (re)insurance subsidiaries of LGA on this basis.
Direct investments
Direct investments constitute an agreement with another party
and represent an exposure to untraded and often less liquid asset
classes. They can include physical assets, bilateral loans and
private equity but exclude hedge funds.
Earnings per share (EPS)
EPS is a common nancial metric which can be used to measure the
pro tability and strength of a company over time. It is the total
shareholder pro t after tax divided by the number of shares
outstanding. EPS uses a weighted average number of shares
outstanding during the year.
Economic capital*
Economic capital is the capital that an insurer holds internally
as a result of its own assessment of risk. It differs from
regulatory capital, which is determined by regulators. It
represents an estimate of the amount of economic losses an insurer
could withstand and still remain solvent with a target level of con
dence over a speci ed time horizon.
* Represents an alternative performance measure.
Glossary Page 100
Economic Capital Requirement (ECR)*
The amount of Economic Capital required to cover the losses
occurring in a 1-in-200 year risk event.
Economic Capital Surplus*
The excess of Eligible Own Funds on an economic basis over the
Economic Capital Requirement. This represents the amount of capital
available to the company in excess of that required to sustain it
in a 1-in-200 year risk event.
ECR coverage ratio*
The Eligible Own Funds on an economic basis divided by the
Economic Capital Requirement (ECR). This represents the number of
times that the ECR is covered by Eligible Own Funds.
Eligible Own Funds
Eligible Own Funds represents the capital available to cover the
group's Economic or Solvency II Capital Requirement. Eligible Own
Funds comprise the excess of the value of assets over liabilities,
as valued on an Economic Capital or Solvency II basis, plus high
quality hybrid capital instruments, which are freely available
(fungible and transferable) to absorb losses wherever they occur
across the group.
Gross written premiums (GWP)
GWP is an industry measure of the life insurance premiums due
and the general insurance premiums underwritten in the reporting
period, before any deductions for reinsurance.
IFRS pro t before tax (PBT)
PBT measures pro t attributable to shareholders incorporating
actual investment returns experienced during the year but before
the payment of tax.
Key performance indicators (KPIs)
These are measures by which the development, performance or
position of the business can be measured effectively. The group
Board reviews the KPIs annually and updates them where
appropriate.
Lifetime mortgages
An equity release product aimed at people aged 60 years and
over. It is a mortgage loan secured against the customer's house.
Customers do not make any monthly payments and continue to own and
live in their house until they move into long term care or on
death. A no negative equity guarantee exists such that if the house
value on repayment is insufficient to cover the outstanding loan,
any shortfall is borne by the lender.
Matching adjustment
An adjustment to the discount rate used for annuity liabilities
in Economic Capital and Solvency II balance sheets. This adjustment
reflects the fact that the profile of assets held is sufficiently
well-matched to the profile of the liabilities, that those assets
can be held to maturity, and that any excess return over risk-free
(that is not related to defaults) can be earned regardless of asset
value fluctuations after purchase.
Net cash generation*
Net cash generation is de ned as operational cash generation
plus new business surplus/(strain).
New business surplus/(strain)*
The net impact of writing new business on the IFRS position,
including the benefit/cost of acquiring new business and the
setting up of reserves.
Operating pro t*
Operating pro t measures the pre-tax result excluding the impact
of investment volatility, economic assumption changes and
exceptional items. Operating pro t therefore re ects longer-term
economic assumptions and changes in insurance risks such as
mortality and longevity for the group's insurance business and
shareholder funds, except for LGA which excludes unrealised
investment returns to align with the liability measurement under US
GAAP. Variances between actual and smoothed assumptions are
reported below operating pro t. Exceptional income and expenses
which arise outside the normal course of business in the period,
such as merger and acquisition and start-up costs are excluded from
operating pro t.
* Represents an alternative performance measure.
Glossary Page 101
Operational cash generation*
The expected release of IFRS surplus from in-force business for
the UK non-profit Insurance and Savings and LGR businesses, the
shareholder's share of bonuses on with-profits business, the
post-tax operating profit on other UK businesses, including the
medium term expected investment return on LGC invested assets, and
dividends remitted from LGA and Legal & General Netherlands.
2015 included dividends remitted from Legal & General France,
which was disposed of on 31 December 2015.
Overlay assets
Overlay assets are derivative assets that are managed alongside
the physical assets held by LGIM. These instruments include
interest rate swaps, in ation swaps, equity futures and options.
These are typically used to hedge risks associated with pension
scheme assets during the derisking stage of the pension life
cycle.
Pension risk transfer (PRT)
PRT represents bulk annuities bought by entities that run nal
salary pension schemes to reduce their responsibilities by closing
the schemes to new members and passing the assets and obligations
to insurance providers.
Present value of future new business profits (PVNBP)*
PVNBP is equivalent to total single premiums plus the discounted
value of annual premiums expected to be received over the term of
the contracts using the same economic and operating assumptions
used for the new business value at the end of the financial period.
The discounted value of longevity insurance regular premiums and
quota share reinsurance single premiums are calculated on a net of
reinsurance basis to enable a more representative margin
figure.
Recapitalisation Cost*
An additional liability required in the L&G Economic Capital
balance sheet, to allow for the cost of recapitalising the balance
sheet following a 1-in-200 year risk event, in order to maintain
confidence that our future liabilities will be met. This is
calculated using a cost of capital that reflects the long term
average rates at which it is expected that the group could raise
debt and allows for diversification between all group entities.
Return on equity (ROE)*
ROE measures the return earned by shareholders on shareholder
capital retained within the business. ROE is calculated as IFRS pro
t after tax divided by average IFRS shareholders' funds.
Single premiums*
Single premiums arise on the sale of new contracts where the
terms of the policy do not anticipate more than one premium being
paid over its lifetime, such as in individual and bulk annuity
deals.
Solvency II
Taking effect from 1 January 2016, the Solvency II regulatory
regime is a harmonised prudential framework for insurance rms in
the EEA. This single market approach is based on economic
principles that measure assets and liabilities to appropriately
align insurers' risk with the capital they hold to safeguard
policyholder.
Solvency II Risk Margin
An additional liability required in the Solvency II balance
sheet, to ensure the total value of technical provisions is equal
to the current amount a (re)insurer would have to pay if it were to
transfer its insurance and reinsurance obligations immediately to
another (re)insurer. The value of the risk margin represents the
cost of providing an amount of Eligible Own Funds equal to the
Solvency Capital Requirement (relating to non-market risks)
necessary to support the insurance and reinsurance obligations over
the lifetime thereof.
Solvency II Surplus
The excess of Eligible Own Funds on a regulatory basis over the
Solvency Capital Requirement. This represents the amount of capital
available to the company in excess of that required to sustain it
in a 1-in-200 year risk event.
Solvency Capital Requirement (SCR)
The amount of Solvency II capital required to cover the losses
occurring in a 1-in-200 year risk event.
SCR coverage ratio
The Eligible Own Funds on a regulatory basis divided by the
Solvency Capital Requirement (SCR). This represents the number of
times that the SCR is covered by Eligible Own Funds.
* Represents an alternative performance measure
Glossary Page 102
SCR coverage ratio (shareholder basis)*
In order to represent a shareholder view of group solvency on a
regulatory basis, the capital requirement in relation to the
ring-fenced LGAS With-profits fund is excluded from both Eligible
Own Funds and the SCR in the calculation of the SCR coverage
ratio.
Transitional Measures on Technical Provisions (TMTP)
This is an adjustment to Solvency II technical provisions to
bring them into line with the pre-Solvency II equivalent as at 1
January 2016 when the regulatory basis switched over, to smooth the
introduction of the new regime. This will decrease linearly over
the 16 years following Solvency II implementation but may be
recalculated to allow for changes impacting the relevant business,
subject to agreement with the PRA.
* Represents an alternative performance measure.
IR AKFDDOBKDBFK
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August 09, 2016 02:01 ET (06:01 GMT)
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