TIDMLGEN
RNS Number : 8036Y
Legal & General Group Plc
08 March 2017
Legal & General Full Year Results 2016 Part 3
Capital and Investments Page 63
4.01 Group regulatory capital - Solvency II Directive
From 1 January 2016, the group has been required to comply with
the requirements established by the Solvency II Framework
Directive, as adopted by the Prudential Regulation Authority (PRA)
in the UK and to measure and monitor its capital resources on this
basis.
The Solvency II results are estimated. Further explanation of
the underlying methodology and assumptions is set out in the
sections below.
In December 2015, the group received approval to calculate its
Solvency II capital requirements using a Partial Internal Model
(together with the approval by the PRA in December 2016 of an
application for major model change). 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 group Own Funds, Solvency
Capital Requirement and Surplus Own Funds of the group, based on
the Internal Model and Matching Adjustment approved by the PRA.
This incorporates the estimated impacts of a recalculation of the
Transitional Measures for Technical Provisions (Estimated TMTP)
recalculated based on end 2016 economic conditions and changes
during 2016 to the Internal Model and Matching Adjustment. The
Estimated TMTP has been amortised to end 2016. The conditions for
the PRA to allow a formal recalculation of the group's TMTP were
not met as at end 2016. In line with PRA guidance, we expect to
undertake a formal recalculation of the TMTP on or before 1 January
2018, i.e. when PRA conditions are met or two years from the date
of commencement of the Solvency II regime.
(a) Capital position
As at 31 December 2016, and on the above basis, the group had a Solvency
II surplus of GBP5.7bn (2015: GBP5.5bn) over its Solvency Capital
Requirement, corresponding to a coverage ratio on a "shareholder view"
basis of 171% (2015: 176%). The shareholder view of Solvency II capital
position is as follows:
2016 2015
GBPbn GBPbn
Core tier 1 Own Funds 11.0 10.6
Tier 1 subordinated liabilities 0.6 0.6
Tier 2 subordinated liabilities 2.1 2.0
Eligibility restrictions (0.1) (0.4)
===================================================================================== ====== =====
Own Funds(1) 13.6 12.8
Solvency Capital Requirement (SCR)(2) (7.9) (7.3)
===============================================================================
Solvency II surplus 5.7 5.5
SCR coverage ratio(3) 171% 176%
1. Own Funds do not include an accrual for the dividend of GBP616m
(2015: GBP592m) declared after the balance sheet date.
2. The SCR is not subject to audit.
3. Coverage ratio is on an unrounded basis.
The "shareholder view" basis excludes the SCR for the
with-profits fund and the final salary pension schemes from both
Own Funds and SCR. The 2015 comparatives have been restated from
the originally reported pro-forma basis to be on a "shareholder
view". On the pro-forma basis as reported at end 2015 the coverage
ratio at end 2016 would have been 165% (2015: 169%).
(b) Methodology
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. 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. This incorporates the estimated
impacts of a recalculation of the Transitional Measures for
Technical Provisions (Estimated TMTP) recalculated based on end
2016 economic conditions and changes during 2016 to the Internal
Model and Matching Adjustment. The Estimated TMTP has been
amortised to end 2016.
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.
Capital and Investments Page 64
4.01 Group regulatory capital - Solvency II Directive
(continued)
(b) Methodology (continued)
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, as well as the non-EEA insurance firm (Legal & General
Reinsurance Company Limited (L&G Re) based in Bermuda)
contribute over 90% of the group's SCR.
Firms for which the capital requirements are less material 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.
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
group's 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.
The group completed the sale of Cofunds in January 2017 and has
announced the sale of Legal & General Netherlands (subject to
regulatory approval). The shareholder view of Solvency II capital
position as at 31 December 2016 does not reflect the expected
impacts of these sales.
Allowance is made within the Solvency II balance sheet for the
group's defined benefit pension schemes 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
consistent with those underlying the group's IFRS disclosures, but
with the removal of any prudence margins. 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 17 basis point deduction to allow for a credit risk
adjustment for sterling denominated liabilities. For annuities that
are eligible, the liability discount rate includes a Matching
Adjustment. This Matching Adjustment varies as between LGAS /
L&G Re and by currency.
At end 2016 the Matching Adjustment for UK GBP was 124bps after
allowing for the EIOPA specified Fundamental Spread 58bps.
(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.
31.12.16
surplus
GBPbn
Operational Surplus Generation(1) 1.2
New Business Strain (0.1)
-------------------------------------------------------------------- -----------
Net Surplus Generation 1.1
Dividends paid(2) (0.8)
Operating variances(3) 0.2
Market Movements(4) (0.3)
-------------------------------------------------------------------- -----------
Total Surplus movement (after dividends paid
in the year) 0.2
-------------------------------------------------------------------- -----------
1. 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 2016 these were limited to those to deliver further
eligible assets into the Matching Adjustment portfolio in respect of
a small amount of pension risk transfer business.
2. Dividends paid are the amounts from the declarations at end 2015
and HY2016.
3. Operating variances include the impact of experience variances,
changes to valuation and capital calibration assumptions, changes to
planned volumes of new business, tax rate changes, PRA approval of
changes to the Internal Model and Matching Adjustment, (in particular
the inclusion of Lifetime Mortgages as assets eligible for Matching
Adjustment), and other management actions including changes in asset
mix and hedging strategies. This incorporates an Estimated TMTP recalculated
on a basis as described at the start of 4.01.
4. Market Movements is the impact of market movements over the year
and changes to future economic assumptions. It includes the capital
impact of investment portfolio changes implemented by LGC.
Capital and Investments Page 65
4.01 Group regulatory capital - Solvency II Directive
(continued)
(d) Analysis of change (continued)
Operational Surplus Generation is the expected surplus generated
from the assets and liabilities in-force at the start of the year.
It is based on real world assumed returns and best estimate
non-market assumptions. It includes the impact of management
actions to the extent that, at the start of the year, these were
reasonably expected to be implemented over the year.
New Business Strain/Surplus is the cost of acquiring, and
setting up Technical Provisions and SCR capital, on actual new
business written over the year. It is based on economic conditions
at the point of sale.
(e) Reconciliation of IFRS Net Release from Operations to Solvency
II Net Surplus Generation
(i) The table below gives a reconciliation of the group's IFRS Release
from Operations to Solvency II Operational Surplus Generation.
2016
GBPbn
IFRS Release from Operations 1.3
Expected release of IFRS prudential margins (0.5)
Releases of IFRS specific reserves(1) (0.1)
Solvency II investment margin(2,3) 0.2
Release of Solvency II Capital Requirement and Risk Margin less
TMTP amortisation(4) 0.4
Other Solvency II items and presentational differences (0.1)
Solvency II Operational Surplus Generation 1.2
------------------------------------------------------------------------- -----
1. Release of prudence from IFRS specific reserves which are not included
in Solvency II (e.g. long term expense margin or new business closure
reserves).
2. Release of prudence related to differences between the EIOPA-defined
Fundamental Spread and L&G's best estimate default assumption.
3. Expected market returns earned on LGR's free assets in excess of
risk free rates over 2016.
4. Solvency II Operational Surplus Generation includes management actions
which at the start of 2016 were expected to take place within the group
plan. These were limited to actions by LGR to deliver further eligible
assets into the Matching Adjustment portfolio in respect of a small
amount of pension risk transfer business.
(ii) The table below gives a reconciliation of the group's IFRS New
Business Surplus to Solvency II New Business Strain.
2016
GBPbn
--------------------------------------------------------------------- =====
IFRS New Business Surplus 0.2
Removal of requirement to set up prudential margins
above best estimate on New Business 0.5
Set up of Solvency II Capital Requirement on New
Business (0.7)
Set up of Risk Margin on New Business(1) (0.1)
Solvency II New Business Strain (0.1)
------------------------------------------------------------------------- -----
1. Shown net of the TMTP attached to the back book acquisition
of liabilities from Aegon.
(f) Reconciliation of IFRS shareholders' equity to Solvency II Own
Funds
The table below gives a reconciliation of the group's IFRS shareholders'
equity to the Solvency II Own Funds.
2016 2015(6)
GBPbn GBPbn
-------------------------------------------------------------- ------ -------
IFRS shareholders' equity 6.9 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) 7.7 7.5
Add value of shareholder transfers 0.2 0.2
Difference in value of net deferred tax liabilities
(resulting from valuation differences) (0.5) (0.5)
SCR for with-profits fund and final salary pension
schemes (0.7) (0.7)
Other(3) (0.3) (0.2)
Eligibility restrictions(4) (0.1) (0.4)
------ -------
Own Funds(5) 13.6 12.8
------ -------
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. This also
allows for a recalculation of TMTP using management's estimate.
3. Reflects 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.
5. Own Funds do not include an accrual for the dividend of GBP616m
(2015: GBP592m) declared after the balance sheet date.
6. The 2015 comparatives are restated on the shareholder view basis.
Capital and Investments Page 66
4.01 Group regulatory capital - Solvency II Directive
(continued)
(g) Sensitivity analysis
The following sensitivities are provided to give an indication of how
the group's Solvency II surplus as at 31 December 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.
Impact Impact
on on
net of net of
tax tax
Solvency Solvency
II II
capital coverage
surplus ratio
2016 2016
GBPbn %
Credit spreads widen by 100bps assuming a level
addition to all ratings(1) 0.4 10
Credit spreads widen by 100bps assuming an
escalating addition to ratings(1,2) 0.2 7
Credit spreads narrow by 100bps assuming a
level addition to all ratings(1) (0.4) (9)
Credit spreads narrow by 100bps assuming an
escalating addition to ratings(1,2) (0.2) (7)
Credit migration(3) (0.6) (8)
20% fall in equity
markets (0.4) (5)
40% fall in equity
markets (0.8) (9)
20% rise in equity
markets 0.5 5
15% fall in property markets (0.2) (3)
15% rise in property markets 0.2 3
100bps increase in risk free rates 1.0 22
50bps fall in risk free rates(4) (0.5) (10)
Future inflation expectation increase by 50bps (0.1) (3)
1% reduction in annuitant base mortality (0.2) (2)
1% increase in annuitant base mortality 0.2 2
Substantially reduced Risk Margin(5) 0.1 1
---------- ---------
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. Credit migration 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.
4. In the interest rate down stress negative rates are allowed, i.e.
there is no floor at zero.
5. This represents a reduction of two-thirds in Risk Margin and subsequent
recalculation of Estimated TMTP.
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 Estimated TMTP as at 31 December 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 67
4.01 Group regulatory capital - Solvency II Directive
(continued)
(h) 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.
2016
%
Interest Rate 1
Equity 4
Property 4
Credit(1) 40
Currency 1
Inflation 3
Total Market Risk(2) 53
Counterparty Risk 1
Life Mortality (1)
Life Longevity(3) 33
Life Lapse 2
Life Catastrophe 2
Non-life underwriting 1
Expense 1
Total Insurance Risk 38
Operational Risk 5
Miscellaneous(4) 3
Total SCR 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 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 68
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.
Further explanation of the underlying methodology and
assumptions is set out in the sections below.
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 31 December 2016, the group had an Economic Capital surplus of
GBP8.3bn (2015: GBP7.6bn), corresponding to an Economic Capital coverage
ratio of 230% (2015: 230%). The Economic Capital position is as follows:
2016 2015
GBPbn GBPbn
Core tier 1 Own Funds 11.9 10.8
Tier 1 subordinated liabilities 0.6 0.7
Tier 2 subordinated liabilities 2.1 2.3
Eligibility restrictions - (0.3)
=============================================================== ======== =======
Own Funds(1) 14.6 13.5
Economic Capital Requirement (ECR)(2) (6.3) (5.9)
Surplus 8.3 7.6
ECR coverage ratio(3) 230% 230%
1. Economic Capital Own Funds do not include an accrual for the dividend
of GBP616m (2015: GBP592m) declared after the balance sheet date.
2. The ECR is not subject to audit.
3. Coverage ratio is calculated on
unrounded values.
The Economic Capital position does not exclude the ECR for with-profits
fund and the final salary pension schemes for both Own Funds and ECR.
(b) Methodology
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. These firms, as well as the non-EEA insurance
firm (Legal and General Reinsurance Company Limited based in
Bermuda) contribute over 90% of the group's ECR.
Firms for which the capital requirements are less material, 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.
The group completed the sale of Cofunds in January 2017 and has
announced the sale of Legal & General Netherlands (subject to
regulatory approval). The Economic Capital result as at 31 December
2016 does not reflect the expected impacts of these sales.
Allowance is made within the Economic Capital balance sheet for
the group's defined benefit pension schemes 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 69
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
consistent with those used to derive the group's IFRS disclosures,
but with the removal of any prudence margins. 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 17 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 Economic
Matching Adjustment was 146bps after allowing for future defaults
and downgrades totalling 61bps.
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.
31.12.16
surplus
GBPbn
Operational Surplus Generation(1) 0.8
New Business Surplus 0.5
--------
Net Surplus Generation 1.3
Dividends paid(2) (0.8)
Operating variances(3) -
Market Movements(4) 0.2
----------------------------------------------------------------------- --------
Total Surplus (after dividends) 0.7
1. Release of surplus generated by in-force business. It may include
management actions which at the start of the year could have been reasonably
expected to take place. For 2016, no management actions were included
which impacted the Economic Capital balance sheet.
2. Dividends paid are the amounts from the declarations at year-end
2015 and HY2016.
3. Operating variances comprise of model and assumption changes and
changes in asset mix across the group (with corresponding increase in
Economic Capital Requirement).
4. Market Movements is the impact of market movements over the year
and changes to future economic assumptions. It includes the capital
impact of investment portfolio changes implemented by LGC.
Capital and Investments Page 70
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 Own Funds on an Economic Capital basis.
2016 2015
GBPbn GBPbn
IFRS shareholders' equity 6.9 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) 7.9 7.0
Add value of shareholder transfers 0.2 0.2
Difference in value of net deferred tax liabilities (resulting
from valuation differences) (0.5) (0.5)
Other (0.3) 0.2
Eligibility restrictions(3) - (0.3)
Own Funds(4) 14.6 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.
4. Own Funds do not include an accrual for the dividend of GBP616m (2015:
GBP592m) declared after the balance sheet date.
(f) Sensitivity analysis
The following sensitivities are provided to give an indication of how
the group's Economic Capital surplus as at 31 December 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.
Impact
on
Impact economic
on
net of capital
tax
capital coverage
surplus ratio
2016 2016
GBPbn %
Credit spreads widen by 100bps assuming a level
addition to all ratings(1) 0.2 9
Credit spreads widen by 100bps assuming an escalating
addition to ratings(1,2) 0.1 6
Credit migration (0.6) (10)
20% fall in equity
markets (0.4) (5)
40% fall in equity
markets (0.8) (10)
20% rise in equity
markets 0.5 5
15% fall in property
markets (0.2) (3)
100bps increase in risk free rates 0.6 21
50bps fall in risk free rates(3) (0.3) (11)
1% reduction in annuitant
base mortality (0.2) (3)
1% increase in annuitant
base mortality 0.2 3
1. All spread sensitivities apply 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. In the interest rate down stress negative rates are allowed, i.e.
there is no floor at zero.
The above sensitivity analysis does not reflect 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.
The impacts of these stresses are not linear therefore these results
should not be used to 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 71
4.02 Group Economic Capital (continued)
(g) 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.
2016
%
Interest Rate 2
Equity 10
Property 6
Credit(1) 45
Currency 1
Inflation 2
Total Market Risk(2) 66
Counterparty Risk 2
Life Longevity(3) 14
Life Lapse 3
Life Catastrophe 5
Non-life underwriting 1
Expense 1
Total Insurance Risk 24
Operational Risk 9
Miscellaneous(4) (1)
Total ECR 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.
(h) 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 Estimated TMTP.
2016 2015
GBPbn GBPbn
Economic Capital surplus 8.3 7.6
LGA on a D&A basis(1) 0.1 0.1
Different annuity capital requirements(2) (2.6) (1.7)
Risk margin vs. Recapitalisation cost(3) - -
Eligibility of group Own Funds(4) (0.1) (0.5)
Solvency II surplus(5) 5.7 5.5
---------------------------------------------------------------------- ------- -----
1. To ensure consistency of risk management across the group, L&G America
remains within the Internal Model for Economic Capital purposes.
2. This includes the difference between the Economic Matching Adjustment
and the Solvency II Matching Adjustment as well as the fact that Economic
Capital and Solvency II balance sheets use different calibrations for
longevity risk.
3. 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 Estimated 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.
4. Deductions for regulatory restrictions in respect of fungibility
and transferability restrictions. These do not apply to the Economic
Capital balance sheet.
5. There are also differences in the valuation of with-profits business
and the group pension schemes that have lower order impacts on the difference
between the surpluses.
Capital and Investments Page 72
4.03 Estimated Solvency II new business contributions
(a) New business by product
Contri-
bution
from new
PVNBP business(2) Margin
For the year ended 31 December 2016 GBPm GBPm %
LGR - UK annuity business 6,661 693 10.4
UK Insurance Total 1,466 153 10.4
- Retail protection 1,255 139 11.1
- Group protection 211 14 6.6
LGA(3) 631 78 12.4
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 $855m and a contribution
from new business of $106m.
(b) Assumptions
The key economic assumptions as at 31 December 2016 are as
follows:
%
Risk Margin 3.1
Risk free rate
- UK 1.7
- US 2.1
Risk discount rate (net of tax)
- UK 4.8
- US 5.2
Long-term rate of return on non-profit annuities in LGR 3.1
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.
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 assets are
calculated net of an allowance for default risk which takes account
of the credit rating and the outstanding term of the assets. The
allowance for corporate and other unapproved credit asset defaults
within the new business contribution is based on a level rate
deduction from the expected returns for the overall annuities
portfolio of 19bps.
-- 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 enacted future reductions in corporation tax to
19% from 1 April 2017 and 17% 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 17%.
US covered business profits are also grossed up using the long
term corporate tax rate of 35%.
Capital and Investments Page 73
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, UK Insurance 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.
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 substantively enacted 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 (31 December 2016: 17bps for
UK and 15bps 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.
Capital and Investments Page 74
4.03 Estimated Solvency II new business contribution
(continued)
(c) Methodology (continued)
The cost of debt used in the WACC calculations takes account of
the actual locked-in rates for our senior and subordinated long
term debt. All debt interest attracts tax relief at a time adjusted
rate of 17.7%.
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
2016 2015
Notes GBPbn GBPbn
PVNBP 4.03(a) 8.8
Effect of capitalisation factor (1.8)
New business premiums from selected lines 7.0
Other(1) 1.9
Total LGR, Insurance and LGA new business 3.07/3.08 8.9 3.3
Annualisation impact of regular premium long-term
business (0.1) (0.2)
IFRS gross written premiums from existing long-term
insurance business 2.5 2.6
IFRS gross written premiums from Savings business 0.2 0.5
Deposit accounting for lifetime mortgage advances (0.6) (0.2)
General Insurance gross written premiums 3.09 0.3 0.3
Future premiums on longevity swap new business (0.9) -
Total gross written premiums 10.3 6.3
1. Other principally includes annuity sales in the US, lifetime mortgage
advances and discounted future cash flows on longevity swap new business.
Capital and Investments Page 75
4.04 Investment portfolio
Market Market
value value
2016 2015
GBPm GBPm
Worldwide total assets 903,886 747,944
Client and policyholder assets(1) (821,978) (679,831)
Non-unit linked with-profits
assets (11,924) (11,644)
Investments to which shareholders are
directly exposed 69,984 56,469
1. Prior year figures for client and policyholder assets have been restated
to include GBP82m of reverse repurchase agreements. The total investments
to which shareholders are directly exposed to has increased to reflect
the change.
Analysed by investment class:
Other
non profit Other
LGR insurance LGC shareholder
investments investments investments(1) investments Total Total
2016 2016 2016 2016 2016 2015
Note GBPm GBPm GBPm GBPm GBPm GBPm
Equities(1) 393 - 2,034 131 2,558 2,252
Bonds 4.06 49,470 1,769 1,689 435 53,363 43,916
Derivative assets(2) 4,611 - 82 - 4,693 3,663
Property 4.07 2,442 - 162 - 2,604 2,347
Cash, cash equivalents,
loans & receivables 1,589 544 2,194 524 4,851 4,168
Financial investments 58,505 2,313 6,161 1,090 68,069 56,346
Other assets(3) 1,883 - 32 1,915 123
Total investments 60,388 2,313 6,193 1,090 69,984 56,469
1. Equity investments include a total of GBP237m (2015: GBP180m) in
respect of CALA Group Limited, Peel Media Holdings Limited (MediaCityUK),
NTR Wind Management Ltd and Access Development Partnership, the latter
being acquired in 2016.
2. Derivative assets are shown gross of derivative liabilities of GBP2.9bn
(2015: 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 GBP1,883m (2015:
GBP82m).
Capital and Investments Page 76
4.05 Direct Investments
(a) Analysed by asset class
Direct(1, Traded(3) Direct(1, Traded(3)
2) 2)
Investments securities Total Investments securities Total
2016 2016 2016 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm GBPm
Equities 595 1,963 2,558 432 1,820 2,252
Bonds(4) 6,256 47,107 53,363 3,929 39,987 43,916
Derivative assets - 4,693 4,693 - 3,663 3,663
Property 2,604 - 2,604 2,347 - 2,347
Cash, cash equivalents, loans &
receivables 518 4,333 4,851 425 3,743 4,168
Other assets 32 1,883 1,915 41 82(5) 123
10,005 59,979 69,984 7,174 49,295 56,469
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. 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.
4. Direct Investment bonds now include lifetime mortgages of GBP852m.
Prior year figures have been adjusted, showing an increase of
GBP207m in Direct Investments bonds.
5. 2015 traded securities now include GBP82m of reverse repurchase
agreements.
(b) Analysed by segment
LGI
LGI (UK and
LGR LGC (US) Other) Total
2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm
Equities - 595 - - 595
Bonds(1) 5,655 228 373 - 6,256
Property(2) 2,442 162 - - 2,604
Cash, cash equivalents, loans &
receivables 33 120 365 - 518
Other assets - 32 - - 32
8,130 1,137 738 - 10,005
1. Direct Investments bonds now include lifetime mortgages of GBP852m.
Prior year figures have been adjusted, showing an increase of GBP207m
in Direct Investments bonds.
2. A further breakdown of property is provided in note 4.07.
Capital and Investments Page 77
4.05 Direct Investments
(a) Analysed by segment (continued)
LGI
LGI (UK and
LGR LGC (US) Other) Total
2015 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm
Equities - 432 - - 432
Bonds(1) 3,543 93 293 - 3,929
Property(2) 2,157 186 - 4 2,347
Cash, cash equivalents, loans &
receivables - 115 310 - 425
Other assets - 41 - - 41
5,700 867 603 4 7,174
1. Direct Investments bonds now include lifetime mortgages of GBP852m.
Prior year figures have been adjusted, showing an increase of GBP207m
in Direct Investments bonds.
2. A further breakdown of property is provided in note 4.07.
(c) Movement in the period
Carrying Change Carrying
in
value market value
01.01.16 Additions Disposals(1) value 31.12.16
GBPm GBPm GBPm GBPm GBPm
Equities 432 202 (74) 35 595
Bonds 3,929 2,121 (286) 492 6,256
Property 2,347 596 (328) (11) 2,604
Cash, cash equivalents,
loans & receivables 425 60 (33) 66 518
Other assets 41 6 - (15) 32
7,174 2,985 (721) 567 10,005
1. Disposals include GBP91m of assets transferred to held for
sale.
Capital and Investments Page 78
4.06 Bond portfolio summary
(a) LGR analysed by sector
Sectors analysed by credit rating
BB or
AAA AA A BBB below LGR LGR
2016 2016 2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 888 9,874 285 230 34 11,311 23
Banks:
- Tier 1 - - - - 12 12 -
- Tier 2 and other
subordinated 211 49 61 41 - 362 1
- Senior 6 330 1,019 58 - 1,413 3
- Covered 259 - 16 - - 275 1
Financial Services:
- Tier 1 - - - - - - -
- Tier 2 and other
subordinated - - 13 11 - 24 -
- Senior - 458 171 155 - 784 2
Insurance:
- Tier 1 - - - 1 - 1 -
- Tier 2 and other
subordinated - 45 3 68 - 116 -
- Senior 8 88 485 76 - 657 1
Consumer Services and
Goods:
- Cyclical - 387 1,088 1,755 164 3,394 7
- Non-cyclical 260 647 1,380 1,290 116 3,693 7
- Health care 3 12 16 10 - 41 -
Infrastructure:
- Social - 346 3,161 675 148 4,330 9
- Economic - - 873 1,313 45 2,231 5
Technology and Telecoms 57 202 610 2,104 84 3,057 6
Industrials - 142 741 362 37 1,282 3
Utilities - 101 4,903 3,142 12 8,158 16
Energy - 171 617 1,134 211 2,133 4
Commodities - - 304 475 77 856 2
Oil and Gas - 111 32 53 - 196 -
Property - 278 99 339 - 716 1
Property backed securities - 305 628 1,063 48 2,044 4
Structured finance ABS /
RMBS / CMBS / Other 121 671 572 46 49 1,459 3
Lifetime mortgage loans 388 322 91 51 - 852 2
CDOs(1) - - 59 14 - 73 -
Total GBPm 2,201 14,539 17,227 14,466 1,037 49,470 100
Total % 4 30 35 29 2 100
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding
the levered super senior swaps. As the notes are now unlevered they
have been reclassified to reflect the nature of the exposure.
Capital and Investments Page 79
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
2015 2015 2015 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 1,041 6,396 275 206 31 7,949 21
Banks:
- Tier 1 - - - 5 30 35 -
- Tier 2 and other
subordinated - - 91 137 - 228 1
- Senior 25 296 869 111 - 1,301 3
- Covered 258 - - 15 - 273 1
Financial Services:
- Tier 1 - - - - - - -
- Tier 2 and other
subordinated - 3 45 7 - 55 -
- Senior - 360 200 246 4 810 2
Insurance:
- Tier 1 - - - 6 - 6 -
- Tier 2 and other
subordinated - - 93 103 - 196 -
- Senior - 70 422 76 - 568 1
Consumer Services and
Goods:
- Cyclical - 292 582 1,475 141 2,490 6
- Non-cyclical 198 489 1,205 939 100 2,931 7
- Health care 2 1 24 3 - 30 -
Infrastructure:
- Social - 518 2,086 412 131 3,147 8
- Economic - - 729 735 19 1,483 4
Technology and Telecoms 47 137 404 1,991 110 2,689 7
Industrials - 82 504 345 28 959 2
Utilities - 76 3,886 2,681 28 6,671 17
Energy 22 315 471 897 268 1,973 5
Commodities - - 262 361 23 646 2
Oil and Gas 1 6 15 4 - 26 -
Property - 257 93 343 - 693 2
Property backed securities - 414 291 989 12 1,706 4
Structured finance ABS /
RMBS / CMBS / Other 123 713 237 72 70 1,215 3
Lifetime mortgage loans - - - 207 - 207 1
CDOs(1) - 552 468 14 47 1,081 3
Total GBPm 1,717 10,977 13,252 12,380 1,042 39,368 100
Total % 4 28 34 31 3 100
1. 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 80
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
2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras and Sub-Sovereigns 9,071 782 950 508 11,311
Banks 816 682 388 176 2,062
Financial Services 389 76 342 1 808
Insurance 176 528 15 55 774
Consumer Services and Goods:
- Cyclical 783 2,229 255 127 3,394
- Non-cyclical 1,059 2,420 201 13 3,693
- Health care 4 36 1 - 41
Infrastructure:
- Social 4,158 137 - 35 4,330
- Economic 1,934 74 - 223 2,231
Technology and Telecoms 582 1,306 745 424 3,057
Industrials 148 656 301 177 1,282
Utilities 3,673 1,191 2,387 907 8,158
Energy 176 1,030 303 624 2,133
Commodities 16 290 27 523 856
Oil and Gas 8 43 120 25 196
Property 709 7 - - 716
Property backed securities 1,629 340 17 58 2,044
Structured finance ABS / RMBS / CMBS
/ Other 1,016 50 375 18 1,459
Lifetime mortgages 852 - - - 852
CDOs(1) - - - 73 73
Total 27,199 11,877 6,427 3,967 49,470
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding
the levered super senior swaps. As the notes are now unlevered they
have been reclassified to reflect the nature of the exposure.
Capital and Investments Page 81
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
2015 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras and Sub-Sovereigns 5,845 557 955 592 7,949
Banks 872 594 243 128 1,837
Financial Services 382 281 198 4 865
Insurance 277 380 40 73 770
Consumer Services and Goods:
- Cyclical 593 1,556 156 185 2,490
- Non-cyclical 905 1,824 138 64 2,931
- Health care 3 26 1 - 30
Infrastructure: - - - -
- Social 3,065 66 - 16 3,147
- Economic 1,348 29 - 106 1,483
Technology and Telecoms 506 1,200 786 197 2,689
Industrials 139 469 244 107 959
Utilities 3,024 974 1,902 771 6,671
Energy 194 983 325 471 1,973
Commodities 21 187 13 425 646
Oil and Gas 3 14 4 5 26
Property 689 4 - - 693
Property backed securities 1,342 320 12 32 1,706
Structured finance ABS / RMBS /
CMBS / Other 972 29 211 3 1,215
Lifetime mortgages 207 - - - 207
CDOs(1) - - 1,046 35 1,081
Total 20,387 9,493 6,274 3,214 39,368
1. 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 82
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
2016 2016 2016 2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 1,115 10,216 370 394 102 - 12,197 23
Banks:
- Tier 1 - - - 1 12 - 13 -
- Tier 2 and other
subordinated 210 49 73 54 1 - 387 1
- Senior 15 687 1,388 128 12 - 2,230 4
- Covered 259 - 16 - - - 275 1
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other
subordinated - - 13 18 - - 31 -
- Senior - 468 193 174 3 112 950 2
Insurance:
- Tier 1 - - 2 4 - - 6 -
- Tier 2 and other
subordinated - 48 8 72 1 - 129 -
- Senior 29 88 495 80 - - 692 1
Consumer Services and
Goods:
- Cyclical - 403 1,167 1,808 244 - 3,622 7
- Non-cyclical 300 665 1,454 1,391 152 - 3,962 7
- Health Care 3 29 46 44 4 - 126 -
Infrastructure:
- Social - 346 3,164 675 148 - 4,333 8
- Economic - - 903 1,318 45 - 2,266 4
Technology and Telecoms 73 238 662 2,162 122 - 3,257 6
Industrials - 146 840 487 107 - 1,580 3
Utilities - 108 4,967 3,193 28 - 8,296 16
Energy - 174 619 1,156 240 - 2,189 4
Commodities - - 313 478 98 - 889 2
Oil and Gas - 120 69 111 39 - 339 1
Property - 278 109 394 6 - 787 1
Property backed securities - 305 628 1,066 53 - 2,052 4
Structured finance
ABS / RMBS / CMBS /
Other 341 729 617 90 53 - 1,830 3
Lifetime mortgage loans 388 322 91 51 - - 852 2
CDOs(1) - - 59 14 - - 73 -
Total GBPm 2,733 15,419 18,266 15,363 1,470 112 53,363 100
Total % 5 29 34 29 3 - 100
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding
the levered super senior swaps. As the notes are now unlevered they
have been reclassified to reflect the nature of the exposure.
Capital and Investments Page 83
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
2015 2015 2015 2015 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras
and Sub-Sovereigns 2,069 6,645 324 420 63 6 9,527 23
Banks:
- Tier 1 - - - 5 30 - 35 -
- Tier 2 and other
subordinated - - 102 148 1 1 252 1
- Senior 97 698 1,004 140 11 1 1,951 4
- Covered 311 - - 15 - - 326 1
Financial Services:
- Tier 1 - - - - - - - -
- Tier 2 and other
subordinated - 3 51 8 - - 62 -
- Senior 1 380 267 309 7 80 1,044 2
Insurance:
- Tier 1 - - - 6 - - 6 -
- Tier 2 and other
subordinated - 3 93 105 1 1 203 -
- Senior 1 76 435 85 - - 597 1
Consumer Services and
Goods:
- Cyclical - 304 661 1,521 191 - 2,677 6
- Non-cyclical 231 506 1,259 1,055 125 3 3,179 7
- Health care 4 8 68 22 9 - 111 -
Infrastructure:
- Social - 519 2,089 413 131 - 3,152 7
- Economic - - 729 737 19 14 1,499 3
Technology and Telecoms 61 169 467 2,077 135 1 2,910 7
Industrials - 99 600 514 66 1 1,280 3
Utilities 1 83 3,939 2,767 39 1 6,830 17
Energy 24 318 472 913 283 - 2,010 5
Commodities - - 270 365 23 - 658 1
Oil and Gas 4 24 48 44 19 1 140 -
Property - 257 111 386 7 1 762 2
Property backed securities - 414 292 990 15 - 1,711 4
Structured finance
ABS / RMBS / CMBS /
Other 530 730 299 76 71 - 1,706 4
Lifetime mortgage loans - - - 207 - - 207 -
CDOs(1) - 552 468 14 47 - 1,081 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. 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 84
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
2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras and Sub-Sovereigns 9,362 1,038 1,068 729 12,197
Banks 1,141 810 457 497 2,905
Financial Services 502 125 353 1 981
Insurance 189 566 18 54 827
Consumer Services and Goods:
- Cyclical 795 2,410 272 145 3,622
- Non-cyclical 1,073 2,653 209 27 3,962
- Health care 18 102 6 - 126
Infrastructure:
- Social 4,161 137 - 35 4,333
- Economic 1,937 102 1 226 2,266
Technology and Telecoms 588 1,468 753 448 3,257
Industrials 166 904 312 198 1,580
Utilities 3,687 1,293 2,401 915 8,296
Energy 178 1,044 321 646 2,189
Commodities 16 292 33 548 889
Oil and Gas 13 128 144 54 339
Property 709 71 4 3 787
Property backed securities 1,631 345 17 59 2,052
Structured Finance ABS / RMBS /
CMBS / Other 1,020 323 469 18 1,830
Lifetime mortgages 852 - - - 852
CDOs(1) - - - 73 73
Total 28,038 13,811 6,838 4,676 53,363
1. In October 2016 the Lagoon CDOs were restructured effectively unwinding
the levered super senior swaps. As the notes are now unlevered they
have been reclassified to reflect the nature of the exposure.
Capital and Investments Page 85
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
2015 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras
and Sub-Sovereigns 6,200 878 1,696 753 9,527
Banks 979 710 455 420 2,564
Financial Services 472 368 252 14 1,106
Insurance 282 404 45 75 806
Consumer Services and
Goods
- Cyclical 595 1,724 158 200 2,677
- Non-cyclical 926 2,007 169 77 3,179
- Health care 16 90 4 1 111
Infrastructure
- Social 3,068 67 - 17 3,152
- Economic 1,363 29 - 107 1,499
Technology and Telecoms 513 1,361 822 214 2,910
Industrials 175 678 301 126 1,280
Utilities 3,033 1,049 1,964 784 6,830
Energy 195 993 337 485 2,010
Commodities 22 187 12 437 658
Oil and Gas 11 71 22 36 140
Property 699 52 7 4 762
Property backed securities 1,342 324 11 34 1,711
Structured finance ABS / RMBS / CMBS / Other 975 518 209 4 1,706
Lifetime mortgage loans 207 - - - 207
CDOs(1) - - 1,046 35 1,081
Total 21,073 11,510 7,510 3,823 43,916
1. 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 86
4.06 Bond portfolio summary (continued)
(c) LGR and total group analysed by credit rating
Externally Internally Externally Internally Total
rated rated(1) LGR rated rated(1) Group
2016 2016 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm
AAA 1,813 388 2,201 2,345 388 2,733
AA 13,303 1,236 14,539 13,916 1,503 15,419
A 14,454 2,773 17,227 15,384 2,882 18,266
BBB 12,405 2,061 14,466 13,068 2,295 15,363
BB or below 960 77 1,037 1,322 148 1,470
Other - - - - 112 112
42,935 6,535 49,470 46,035 7,328 53,363
Externally Internally Externally Internally Total
rated rated(1) LGR rated rated(1) Group
2015 2015 2015 2015 2015 2015
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
Capital and Investments Page 87
4.07 Property analysis
Property exposure within Direct Investments
Group property Direct Investments by status
LGI
(UK and
LGR(1) LGC Other) Total
At At At At
2016 2016 2016 2016
GBPm GBPm GBPm GBPm %
Fully let 2,442 16 - 2,458 94
Part let - - - - -
Development - 101 - 101 4
Land - 45 - 45 2
2,442 162 - 2,604 100
1. The fully let LGR property includes GBP2.1bn let to investment grade
tenants.
LGI
(UK and
LGR(1) LGC Other) Total
At At At At
2015 2015 2015 2015
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 88
This page has been left intentionally blank
Glossary Page 89
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. Excluding the impact of anticipated and
completed disposals provides an indication of the earnings per
share from ongoing operations.
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. Excluding the impact of
anticipated and completed disposals provides an indication of the
return on equity from ongoing operations.
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 to demonstrate the profitability
before these costs which are non-recurring in nature.
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)
An alternative performance measure is a financial measure of
historic or future financial performance, financial position, or
cash flows, other than a financial measure defined under IFRS or
the regulations of Solvency II. The group uses a range of these
metrics to provide a better understanding of the underlying
performance of the group. Where appropriate, reconciliations of
alternative performance measures to IFRS measures are provided. All
APMs defined within this glossary are marked with an asterisk.
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.
Backbook acquisition
New business transacted with an insurance company which allows
the business to continue to utilise solvency II transitional
measures associated with the business.
Bundled DC solution
Where investment and administration services are provided to a
scheme by the same service provider. Typically, all investment and
administration costs are passed onto the scheme members.
Bundled pension schemes
Where the fund manager bundles together the investment provider
role and third-party administrator role, together with the role of
selecting funds and providing investment education, into one
proposition.
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.
Glossary Page 90
Direct investments
Direct investments, which generally constitute an agreement with
another party and 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.
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.
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. Eligible own funds (shareholder view basis)
excludes the contribution to the groups solvency capital
requirement of with-profits fund and final salary pension
schemes.
Euro Commercial paper
Short term borrowings with maturities of up to 1 year typically
issued for working capital purposes.
General insurance combined operating ratio
The combined ratio is calculated as the sum of incurred losses
and expenses divided by earned premium.
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.
ICAV - Irish Collective Asset-Management Vehicle
A legal structure investment funds, based in Ireland and aimed
at European investment funds looking for a simple, tax-efficient
investment vehicle.
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.
Long dated debt
Debt issued in either subordinated or senior format which forms
part of the Group's core borrowings.
Glossary Page 91
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 release from operations*
Net release from operations is de ned as release from operations
plus new business surplus/(strain). Net release from operations was
previously referred to as Net Cash and provides information on the
underlying release of prudent margins from the back book.
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, for UK non profit annuities, workplace
savings, protection and savings, net of tax. This metric provides
an understanding of the impact of new contracts on the IFRS profit
for the year.
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.
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 premiums (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.
PVNBP therefore provides an estimate of the present value of the
premiums associated with new business written in the year.
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.
Real assets
Real assets encompass a wide variety of tangible debt and equity
investments, primarily real estate, infrastructure and energy. They
have the ability to serve as stable sources of long term income in
weak markets, while also providing capital appreciation
opportunities in strong markets.
Release from operations*
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. Release from operations
was previously referred to as pperational cash generation.
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.
Glossary Page 92
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 new business contribution
Reflects 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.
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 (shareholder view basis)
In order to present a shareholder view of group SCR the Solvency
capital requirement of LGAS With-profits fund and defined benefit
final salary pension scheme is excluded from SCR.
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.
SCR coverage ratio (proforma basis)
The proforma basis solvency II coverage incorporates the
estimated impacts of a recalculation of the Transitional Measures
for Technical Provisions recalculated based on end 2016 economic
conditions, changes during 2016 to the Internal Model and Matching
Adjustment and management's updated Solvency I basis. The proforma
basis does not reflect the regulatory capital position as at 31
December 2016. This will be made public in May 2017.
SCR coverage ratio (shareholder view basis)*
In order to represent a shareholder view of group solvency
position, the capital requirement in relation to the ring-fenced
LGAS With-profits fund and our defined benefit pension schemes is
excluded from both Eligible Own Funds and the SCR in the
calculation of the SCR coverage ratio. The shareholder view basis
does not reflect the regulatory capital position as at 31 December
2016. This will be made public in May 2017.
Total shareholder return (TSR)
TSR is a measure used to compare the performance of different
companies' stocks and shares over time. It combines the share price
appreciation and dividends paid to show the total return to the
shareholder.
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.
Unbundled DC solution
When investment services and administration services are
supplied by separate providers. Typically the sponsoring employer
will cover administration costs and scheme members the investment
costs.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKODQDBKBQNK
(END) Dow Jones Newswires
March 08, 2017 02:02 ET (07:02 GMT)
Legal & General (LSE:LGEN)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Legal & General (LSE:LGEN)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
