TIDMLGEN
RNS Number : 9182E
Legal & General Group Plc
04 March 2020
Legal & General Group Plc
Full Year Results 2019 Part 3
Asset and premium flows Page 59
4.01 LGIM Total assets under management(1) (AUM)
Active Multi Real Total
Index strategies Asset Solutions(2) assets AUM
For the year ended 31 December GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
2019
As at 1 January 2019 307.1 160.4 43.6 477.9 26.5 1,015.5
External inflows 96.2 14.0 11.2 25.5 1.8 148.7
External outflows (58.9) (11.2) (3.5) (26.2) (1.7) (101.5)
Overlay net flows - - - 38.8 - 38.8
ETF net flows 0.4 - - - - 0.4
External net flows(3) 37.7 2.8 7.7 38.1 0.1 86.4
Internal net flows (0.3) (0.4) (0.9) 1.9 2.5 2.8
Total net flows 37.4 2.4 6.8 40.0 2.6 89.2
Cash management movements(4) - (0.6) - - - (0.6)
Market and other movements(3) 59.1 15.0 7.6 8.7 1.7 92.1
As at 31 December 2019 403.6 177.2 58.0 526.6 30.8 1,196.2
Assets attributable to:
External 1,092.2
Internal 104.0
1. Assets under management (AUM) includes assets on our Investment
Only Platform that are managed by third parties, on which fees are
earned.
2. Solutions include liability driven investments and GBP335.7bn
of derivative notionals associated with the Solutions business.
3. External net flows exclude movements in short-term Solutions
assets, as their maturity dates are determined by client agreements
and are subject to a higher degree of variability. The total value
of these assets at 31 December 2019 was GBP67.1bn and the movement
in these assets is included in market and other movements for Solutions
assets.
4. Cash management movements include external holdings in money
market funds and other cash mandates held for clients' liquidity
management purposes.
Active Multi Real Total
Index(1) strategies(1) asset(1) Solutions(1,2) assets(1) AUM
For the year ended 31 December GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
2018
As at 1 January 2018 338.2 148.2 38.8 435.1 23.0 983.3
Canvas acquisition(3) 2.4 - - - - 2.4
External inflows 54.2 16.3 9.7 24.1 1.5 105.8
External outflows (69.0) (6.4) (2.3) (13.8) (1.6) (93.1)
Overlay/advisory net flows - - - 29.9 - 29.9
External net flows(4) (14.8) 9.9 7.4 40.2 (0.1) 42.6
Internal net flows (0.7) 1.5 (0.8) 0.1 2.5 2.6
Total net flows (15.5) 11.4 6.6 40.3 2.4 45.2
Cash management movements(5) - (0.5) - - - (0.5)
Market and other movements(4) (18.0) 1.3 (1.8) 2.5 1.1 (14.9)
As at 31 December 2018 307.1 160.4 43.6 477.9 26.5 1,015.5
Assets attributable to:
External 921.7
Internal 93.8
1. AUM have been reanalysed from those previously reported in order
to present Multi Asset separately. This has resulted in the removal
of the Global Fixed income and Active equities categories, the inclusion
of Multi Asset and Active Strategies, and a reallocation of AUM
across the revised categorisation. Total AUM, and the split between
external and internal, remains unchanged.
2. Solutions include liability driven investments and GBP303.9bn
of derivative notionals associated with the Solutions business.
3. The acquisition of Canvas was completed in March 2018.
4. External net flows exclude movements in short-term Solutions
assets, as their maturity dates are determined by client agreements
and are subject to a higher degree of variability. The total value
of these assets as at 31 December 2018 was GBP60.1bn and the movement
in these assets is included in market and other movements for Solutions
assets.
5. Cash management movements include external holdings in money
market funds and other cash mandates held for clients' liquidity
management purposes.
Asset and premium flows Page 60
4.02 LGIM Total assets under management(1) half-yearly
progression
Active Multi Real Total
Index strategies Asset Solutions(2) assets AUM
For the year ended 31 December GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
2019
As at 1 January 2019 307.1 160.4 43.6 477.9 26.5 1,015.5
External inflows 60.8 5.7 6.5 8.8 0.8 82.6
External outflows (26.1) (4.8) (1.4) (11.0) (0.8) (44.1)
Overlay/ advisory net flows - - - 22.0 - 22.0
ETF Net Flows (0.2) - - - - (0.2)
External net flows(3) 34.5 0.9 5.1 19.8 - 60.3
Internal net flows (0.1) (2.0) (0.3) 3.6 1.2 2.4
Total net flows 34.4 (1.1) 4.8 23.4 1.2 62.7
Cash management movements(4) - 0.5 - - - 0.5
Market and other movements(3) 43.9 12.4 6.0 (7.7) 1.2 55.8
As at 30 June 2019 385.4 172.2 54.4 493.6 28.9 1,134.5
External inflows 35.4 8.3 4.7 16.7 1.0 66.1
External outflows (32.8) (6.4) (2.1) (15.2) (0.9) (57.4)
Overlay / advisory net flows - - - 16.8 - 16.8
ETF Net Flows 0.6 - - - - 0.6
External net flows(3) 3.2 1.9 2.6 18.3 0.1 26.1
Internal net flows (0.2) 1.6 (0.6) (1.7) 1.3 0.4
Total net flows 3.0 3.5 2.0 16.6 1.4 26.5
Cash management movements(4) - (1.1) - - - (1.1)
Market and other movements(3) 15.2 2.6 1.6 16.4 0.5 36.3
As at 31 December 2019 403.6 177.2 58.0 526.6 30.8 1,196.2
1. AUM includes assets on our Investment Only Platform, that are managed
by third parties, on which fees are earned.
2. Solutions include liability driven investments and GBP335.7bn of
derivative notionals associated with the Solutions business.
3. External net flows exclude movements in short-term Solutions assets,
as their maturity dates are determined by client agreements and are
subject to a higher degree of variability. The total value of these
assets at 31 December 2019 was GBP67.1bn and the movement in these
assets is included in market and other movements for Solutions assets.
4. Cash management movements include external holdings in money market
funds and other cash mandates held for clients' liquidity management
purposes.
Asset and premium flows Page 61
4.02 LGIM Total assets under management(1) half-yearly
progression (continued)
Active Multi Real Total
Index(1) Strategies(1) asset(1) Solutions(1,2) assets(1) AUM
For the year ended 31 December GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
2018
As at 1 January 2018 338.2 148.2 38.8 435.1 23.0 983.3
Canvas Acquisition(3) 2.4 - - - - 2.4
External inflows 22.4 9.2 5.1 13.1 0.6 50.4
External outflows (41.2) (2.3) (0.9) (7.8) (0.5) (52.7)
Overlay/ advisory net flows - - - 16.7 - 16.7
ETF net flows 0.2 - - - - 0.2
External net flows(4) (18.6) 6.9 4.2 22.0 0.1 14.6
Internal net flows (0.3) (2.6) (0.4) 0.1 0.6 (2.6)
Total net flows (18.9) 4.3 3.8 22.1 0.7 12.0
Cash management movements(5) - 1.0 - - - 1.0
Market and other movements(4) (0.4) (2.3) 0.2 (12.3) 0.9 (13.9)
As at 30 June 2018 321.3 151.2 42.8 444.9 24.6 984.8
External inflows 31.8 7.1 4.6 11.0 0.9 55.4
External outflows (27.8) (4.1) (1.4) (6.0) (1.1) (40.4)
Overlay / advisory net flows - - - 13.2 - 13.2
ETF net flows (0.2) - - - - (0.2)
External net flows(4) 3.8 3.0 3.2 18.2 (0.2) 28.0
Internal net flows (0.4) 4.1 (0.4) - 1.9 5.2
Total net flows 3.4 7.1 2.8 18.2 1.7 33.2
Cash management movements(5) - (1.5) - - - (1.5)
Market and other movements(4) (17.6) 3.6 (2.0) 14.8 0.2 (1.0)
As at 31 December 2018 307.1 160.4 43.6 477.9 26.5 1,015.5
1. AUM have been reanalysed from those previously reported in order
to present Multi Asset separately. This has resulted in the removal
of the Global Fixed income and Active equities categories, the inclusion
of Multi Asset and Active Strategies, and a reallocation of AUM across
the revised categorisation. Total AUM, and the split between external
and internal, remains unchanged.
2. Solutions include liability driven investments and GBP303.9bn of
derivative notionals associated with the Solutions business.
3. The acquisition of Canvas was completed in March 2018.
4. External net flows exclude movements in short-term Solutions
assets, as their maturity dates are determined by client agreements
and are subject to a higher degree of variability. The total
value of these assets as at 31 December 2018 was GBP60.1bn and
the movement in these assets is included in market and other
movements for Solutions assets.
5. Cash management movements include external holdings in money market
funds and other cash mandates held for clients' liquidity management
purposes.
Asset and premium flows Page 62
4.03 LGIM Total external assets under management and net
flows
Assets under management(1) Net flows(2)
31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June
2019 2019 2018 2018 2019 2019 2018 2018
GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
International(1) 276.7 248.6 177.7 165.8 14.6 44.6 9.7 9.9
UK Institutional
- Defined contribution 94.3 86.4 70.8 64 3.7 3.6 4.9 3.5
- Defined benefit 679.3 659.7 640.3 625.4 4.8 10.7 12.1 (0.3)
UK Retail
- Retail intermediary 33.1 30 25.5 25.1 2.5 1.7 1.6 1.4
- Personal investing(3) 5.7 5.6 5.1 5.7 (0.1) (0.1) (0.1) (0.1)
ETF 3.1 2.4 2.3 2.8 0.6 (0.2) (0.2) 0.2
Total external 1,092.2 1,032.7 921.7 888.8 26.1 60.3 28.0 14.6
----------- -------
1. International asset are shown on the basis of client domicile.
Total International AUM including assets managed internationally on
behalf of UK clients amounted to GBP370bn as at December 2019 (2018:
GBP258bn).
2. External net flows exclude movements in short-term solutions assets,
with maturity as determined by client agreements and are subject to
a higher degree of variability.
3. Personal investing includes GBP1.6bn (2018: GBP1.8bn) of AUM relating
to legacy Banks and Building Society customers which is driving net
outflows.
4.04 Reconciliation of Assets under management to Consolidated Balance
Sheet financial investments, investment property and cash and cash
equivalents
2019 2018
GBPbn GBPbn
------------------------------------------------------------------- ------ -----
Assets under management 1,196 1,015
Derivative notionals (1) (336) (304)
Third party assets (2) (379) (284)
Other (3) 63 53
Total financial investments, investment property and
cash and cash equivalents 544 480
Less: assets of operations classified as held for sale
(4) (24) (25)
------------------------------------------------------------------- ------ -----
Financial investments, investment property and cash and
cash equivalents 520 455
------------------------------------------------------------------- ------ -----
1. Derivative notionals are included in the assets under management
measure but are not for IFRS reporting and are thus removed.
2. Third party assets are those that LGIM manage on behalf of others
which are not included on the group's Consolidated Balance Sheet.
3. Other includes assets that are managed by third parties on behalf
of the group, other assets and liabilities related to financial investments,
derivative assets and pooled funds.
4. Disclosure related to assets of operations classified as held
for sale is included in Note 3.04.
Asset and premium flows Page 63
4.05 Assets under administration
Workplace(1) Annuities(2) Workplace Annuities
2019 2019 2018 2018
GBPbn GBPbn GBPbn GBPbn
As at 1 January 30.0 63.0 27.7 58.2
Gross inflows 7.3 12.4 5.6 9.9
Gross outflows (2.0) - (1.8) -
Payments to pensioners - (4.1) - (3.5)
Net flows 5.3 8.3 3.8 6.4
Market and other movements 5.0 4.6 (1.5) (1.6)
As at 31 December 40.3 75.9 30.0 63.0
1. Workplace assets under administration as at 31 December 2019 includes
GBP40.2bn of assets under management included in Note 4.01.
2. Annuities assets under administration as at 31 December 2019 includes
GBP70.1bn of assets under management included in Note 4.01.
4.06 Assets under administration half-yearly progression
Workplace Annuities Workplace Annuities
2019 2019 2018 2018
For the year ended 31 December 2019 GBPbn GBPbn GBPbn GBPbn
As at 1 January 2019 30.0 63.0 27.7 58.2
Gross inflows 3.5 7.2 2.7 1.1
Gross outflows (0.9) - (0.8) -
Payments to pensioners - (2.0) - (1.7)
Net flows 2.6 5.2 1.9 (0.6)
Market and other movements 3.5 3.9 0.1 (1.2)
As at 30 June 2019 36.1 72.1 29.7 56.4
Gross inflows 3.8 5.2 2.9 8.8
Gross outflows (1.1) - (1.0) -
Payments to pensioners - (2.1) - (1.8)
==================================== ========= ========= ========= =========
Net flows 2.7 3.1 1.9 7.0
Market and other movements 1.5 0.7 (1.6) (0.4)
As at 31 December 2019 40.3 75.9 30.0 63.0
Asset and premium flows Page 64
4.07 LGR new business
6 months 6 months 6 months 6 months
to to to to
Total 31 December 30 June Total 31 December 30 June
2019 2019 2019 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
Pension risk transfer
- UK 10,325 4,009 6,316 8,351 7,844 507
- US 893 670 223 646 426 220
- Bermuda 174 36 138 143 135 8
Individual annuities 970 473 497 795 458 337
Lifetime mortgage advances 965 476 489 1,197 676 521
Longevity insurance(1) - - - 287 287 -
Total LGR new business 13,327 5,664 7,663 11,419 9,826 1,593
1. Represents the notional size of the transaction and is based on
the present value of the fixed leg cash flows discounted at the LIBOR
curve.
4.08 LGI new business
6 months 6 months 6 months 6 months
to to to to
Total 31 December 30 June Total 31 December 30 June
2019 2019 2019 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
UK Retail protection 174 83 91 175 88 87
UK Group protection 76 32 44 83 49 34
US protection(1) 89 46 43 85 43 42
Total LGI new business 339 161 178 343 180 163
1. In local currency, US protection reflects new business of $113m
for 2019 (H2: $58m; H1: $55m) (H2 18: $56m; H1 18: $58m).
4.09 Gross written premium on insurance business
6 months 6 months 6 months 6 months
to to to to
Total 31 December 30 June Total 31 December 30 June
2019 2019 2019 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
UK Retail protection 1,327 669 658 1,279 646 633
UK Group protection 345 112 233 329 106 223
US Protection(1) 1,057 539 518 972 511 461
Longevity insurance 376 186 190 379 192 187
Total gross written premiums
on insurance business(2) 3,105 1,506 1,599 2,959 1,455 1,504
1. In local currency, US protection reflects new business of $1,349m
for 2019 (H2: $679m; H1: $670m) (H2 18: $664m; H1 18: $635m).
2. Total insurance gross written premiums exclude gross written premiums
of the General Insurance division following the group's announcement
to sell the business to Allianz but in 2019 include GBP66m of gross
written premiums relating to a residual reinsurance treaty. Balances
for 2018 have been adjusted to reflect the removal of the General Insurance
business.
Capital Page 65
5.01 Group regulatory capital - Solvency II
The group complies 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 and unaudited. Further
explanation of the underlying methodology and assumptions are set
out in the sections below.
The group calculates 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 Partial Internal Model
basis approved by the PRA. Capital requirements for a few 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 to use the
Deduction and Aggregation method of including these businesses in
the group solvency calculation.
The table below shows the "shareholder view" of the group Own
Funds, Solvency Capital Requirement (SCR) and Surplus Own Funds,
based on the Partial Internal Model, Matching Adjustment and
Transitional Measures on Technical Provisions (TMTP) (recalculated
as at end December 2019).
(a) Capital position
As at 31 December 2019, and on the above basis, the group had a
surplus of GBP7.3bn (31 December 2018: GBP6.9bn) over its Solvency
Capital Requirement, corresponding to a Solvency II capital coverage
ratio on a "shareholder view" basis of 184% (31 December 2018: 188%).
The shareholder view of the Solvency II capital position is as follows:
2019 2018
GBPbn GBPbn
Tier 1 Own Funds 12.4 11.5
Tier 2 subordinated liabilities(1) 3.9 3.5
Eligibility restrictions (0.2) (0.2)
=========================================================================== === ====== =====
Solvency II Own Funds(2,3) 16.1 14.8
Solvency Capital Requirement (8.8) (7.9)
Solvency II surplus 7.3 6.9
SCR coverage ratio(4) 184% 188%
1. Tier 2 subordinated liabilities include redemption of a GBP0.4bn
and an issuance of GBP0.6bn during the year.
2. Solvency II Own Funds do not include an accrual for the final
dividend of GBP753m (31 December 2018: GBP704m) declared after the
balance sheet date.
3. Solvency II Own Funds allow for a risk margin of GBP5.9bn (31
December 2018: GBP5.5bn) and TMTP of GBP5.7bn (31 December 2018:
GBP5.2bn).
4. Coverage ratio is based on unrounded inputs.
The "shareholder view" basis excludes the contribution that the
with-profits fund and the final salary pension schemes would
normally make to the group position. This is reflected by reducing
the group's Own Funds and the group's SCR by the amount of the SCR
for the with-profits fund and the final salary pension schemes.
On a proforma basis, which includes the contribution of
with-profits fund and that of the final salary pension schemes in
the group's Own Funds and corresponding SCR in the group's SCR, the
coverage ratio at 31 December 2019 is 179% (31 December 2018:
181%).
On 6 December 2017 the group announced the sale of its Mature
Savings business to ReAssure Limited (a subsidiary of Swiss Re).
ReAssure Limited assumed the economic exposure of the business from
1 January 2018 via a risk transfer agreement. It is expected that
the formal transfer of the business will be completed in 2020,
subject to satisfaction of normal conditions for a transaction
including court sanction. The transfer will be effected by way of a
Part VII transfer under the Financial Services markets Act 2000.
The impact of the risk transfer agreement is reflected in both Own
Funds and SCR.
On 31 May 2019, the group announced the sale of its General
Insurance business to Allianz and the transaction completed on 31
December 2019, improving the Group's Solvency II coverage ratio by
c.1%.
Capital Page 66
5.01 Group regulatory capital - Solvency II (continued)
(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. Own Funds incorporate changes to
the Internal Model and Matching Adjustment during 2019 and the
impacts of a recalculation of the TMTP as at end December 2019. The
recalculated TMTP of GBP5.7bn (31 December 2018: GBP5.2bn) is net
of amortisation to 31 December 2019.
The liabilities include a Risk Margin of GBP5.9bn (31 December
2018: GBP5.5bn) which represents an allowance for the cost of
capital for a purchasing insurer to take on the portfolio of
liabilities and residual risks that are deemed to be not hedgeable
under Solvency II. 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 and General
Assurance Society Limited (LGAS) and Legal and General Assurance
(Pensions Management) Limited, 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 (LGRe) based in Bermuda) contribute
over 93% of the group's SCR.
Insurance 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 the
group's 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
(LGA) 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 Company Action Level RBC (CAL RBC). The contribution
to group's Own Funds is the SCR together with any surplus capital
in excess of 250% of CAL RBC.
All non-insurance regulated firms are included using their
current regulatory surplus.
Allowance is made within the Solvency II balance sheet for the
group's defined benefit pension schemes using results on an IFRS
basis. Within the SCR an allowance is made 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 an 11 basis point (2018: 10 basis points) 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
between LGAS and LGRe and by the currency of the relevant
liabilities.
At 31 December 2019 the Matching Adjustment for UK GBP was 110
basis points (31 December 2018: 138 basis points) after deducting
an allowance for the EIOPA fundamental spread equivalent to 53
basis points (31 December 2018: 52 basis points).
(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.
Capital Page 67
5.01 Group regulatory capital - Solvency II (continued)
(d) Analysis of change
The table below shows the movement (net of tax) during the year
ended 31 December 2019 in the group's Solvency II surplus.
2019 2018
GBPbn GBPbn
Surplus arising from back-book (including release
of SCR) 1.5 1.4
Release of risk margin(1) 0.4 0.4
Amortisation of TMTP(2) (0.3) (0.4)
--------------------------------------------------------------- ------ ------
Operational surplus generation (3) 1.6 1.4
New business strain (0.6) (0.5)
--------------------------------------------------------------- ------ ------
Net surplus generation 1.0 0.9
Operating variances(4) 0.3 0.1
Mergers, acquisitions and disposals(5) 0.1 -
Market movements(6) (0.2) (0.5)
Subordinated debt 0.2 0.4
Dividends paid(7) (1.0) (0.9)
Total surplus movement (after dividends paid in the
year) 0.4 -
--------------------------------------------------------------- ------ ------
1. Based on the risk margin in force at end 2018 and does not include
the release of any risk margin added by new business written in
2019.
2. TMTP amortisation based on a linear run down of the end-2018
TMTP of GBP4.4bn (net of tax, GBP5.2bn before tax), based on management's
estimate of the TMTP on end-2019 market conditions.
3. Release of surplus generated by in-force business and includes
management actions which at the start of the year could have been
reasonably expected to take place. For 2019 these are primarily
related to the optimisation of structures used to make assets matching
adjustment eligible and the planned reinsurance of backbook liabilities.
4. Operating variances include the impact of experience variances,
changes to valuation and capital calibration assumptions, other
management actions including changes in asset mix, hedging strategies,
and Matching Adjustment optimisation.
5. Mergers, acquisitions and disposals include the impacts of the
sale of Legal & General Insurance Limited and group's stake in IndiaFirst
Life Insurance Company Limited.
6. Market movements represent the impact of changes in investment
market conditions over the period and changes to future economic
assumptions. Market movements in 2019 include an increase in the
risk margin of GBP0.5bn (net of tax) and an increase to TMTP of
GBP0.6bn (net of tax).
7. Dividends paid are the amounts from the 2018 final and 2019 interim
dividend declarations paid in 2019 (2018: 2017 final and 2018 interim
dividend declarations).
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 assumed real world 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 is the cost of acquiring, and setting up
Technical Provisions and SCR (net of any premium income), on actual
new business written over the year. It is based on economic
conditions at the point of sale.
Capital Page 68
5.01 Group regulatory capital - Solvency II (continued)
(e) Reconciliation of IFRS Net Release from Operations to Solvency
II Net Surplus Generation
(i) The table below provides a reconciliation of the group's IFRS
Release from Operations to Solvency II Operational Surplus Generation.
2019 2018
GBPbn GBPbn
IFRS Release from Operations 1.3 1.3
Expected release of IFRS prudential margins (0.5) (0.5)
Releases of IFRS specific reserves(1) (0.1) (0.1)
Solvency II investment margin(2,3) 0.2 0.1
Release of Solvency II Capital Requirement and Risk
Margin less TMTP amortisation 0.7 0.6
Solvency II Operational Surplus Generation (4) 1.6 1.4
------------------------------------------------------------------ ------ ------
1. Release of prudence from IFRS specific reserves which are not
included in Solvency II (e.g. long term longevity and expense margins).
2. Release of prudence related to differences between the EIOPA-defined
fundamental spread and Legal & General's best estimate default assumption.
3. Expected market returns earned on LGR's free assets in excess
of risk free rates over 2019.
4. Solvency II Operational Surplus Generation includes management
actions which at the start of 2019 were expected to take place within
the group plan.
(ii) The table below provides a reconciliation of the group's IFRS
New Business Surplus to Solvency II New Business Strain.
2019 2018
GBPbn GBPbn
---------------------------------------------------------------- ====== ------
IFRS New business surplus 0.3 0.2
Removal of requirement to set up prudential margins
above best estimate on New Business 0.2 0.2
Set up of SCR on new business (0.9) (0.7)
Set up of risk margin on new business (0.2) (0.2)
Solvency II New business strain (1) (0.6) (0.5)
------------------------------------------------------------------ ------ ------
1. UK PRT new business volumes over 2019 were GBP10.3bn, compared
to GBP8.4bn over 2018.
(f) Reconciliation of IFRS shareholders' equity to Solvency II
Own Funds
A reconciliation of the group's IFRS shareholders' equity to Solvency
II Own Funds is given below:
2019 2018
GBPbn GBPbn
------------------------------------------------------------ ----- -----
IFRS shareholders' equity(1) 9.4 8.6
Remove DAC, goodwill and other intangible assets and
associated liabilities (0.5) (0.8)
Add IFRS carrying value of subordinated borrowings(2) 3.5 3.3
Insurance contract valuation differences(3) 5.2 5.1
Difference in value of net deferred tax liabilities (0.5) (0.3)
SCR for with-profits fund and final salary pension schemes (0.8) (0.8)
Other(4) - (0.1)
Eligibility restrictions(5) (0.2) (0.2)
Solvency II Own Funds(6) 16.1 14.8
-------------------------------------------------------------- ----- -----
1. Value is as per the Consolidated Balance Sheet.
2. Treated as available capital on the Solvency II balance sheet
as the liabilities are subordinate to policyholder claims.
3. Differences in the measurement of technical provisions between
IFRS and Solvency II.
4. Reflects valuation differences on other assets and liabilities,
predominantly in respect of borrowings measured at fair value under
Solvency II which are largely offsetting in 2019.
5. Relating to the Own Funds of non-insurance regulated entities
that are subject to local regulatory rules.
6. Solvency II Own Funds do not include an accrual for the final
dividend of GBP753m (31 December 2018: GBP704m) declared after the
balance sheet date.
Capital Page 69
5.01 Group regulatory capital - Solvency II (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 2019 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 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(1) ratio(1) surplus(1) ratio(1)
2019 2019 2018 2018
GBPbn % GBPbn %
Credit spreads widen by 100bps assuming
an escalating addition to ratings(2,3) 0.3 8 0.3 10
Credit spreads narrow by 100bps assuming
an escalating addition to ratings(2,3) (0.4) (9) (0.4) (10)
Credit migration(4) (0.8) (9) (0.8) (10)
25% rise in equity markets(5) 0.5 4 0.5 6
25% fall in equity markets(5) (0.5) (5) (0.5) (6)
15% rise in property markets(6) 0.6 6 0.5 5
15% fall in property markets(6) (0.7) (6) (0.6) (7)
100bps increase in risk free rates(7) 1.0 22 0.9 24
50bps decrease in risk free rates(7,8) (0.6) (11) (0.5) (12)
Substantially reduced Risk Margin(9) 0.6 6 0.4 5
1. Both the 2019 and 2018 sensitivities exclude the impact from
the Mature Savings business (including the With-Profits fund) as
the risks have been transferred to ReAssure Limited from 1 January
2018.
2. The spread sensitivity applies to the group's corporate bond
(and similar) holdings, with no change in long term default expectations.
Restructured lifetime mortgages are excluded.
3. The stress for AA bonds is twice that for AAA bonds, for A bonds
it is three times, for BBB four times and so on, such that the weighted
average spread stress for the portfolio is 100 basis points.
4. Credit migration stress covers the cost of an immediate big letter
downgrade on 20% of all assets where the capital treatment depends
on a credit rating (including corporate bonds, sale and leaseback
rental strips and lifetime mortgage senior notes).
5. This relates primarily to equity exposure in LGC but will also
include equity-based mutual funds and other investments that receive
an equity stress (for example, certain investments in subsidiaries).
Some assets have factors that increase or decrease the stress relative
to general equity levels via a beta factor.
6. Assets stressed include residual values from sale and leaseback,
the full amount of lifetime mortgages and direct investments treated
as property.
7. Assuming a recalculation of the Transitional Measure on Technical
Provisions that partially offsets the impact on Risk Margin.
8. In the interest rate down stress negative rates are allowed,
i.e. there is no floor at zero rates.
9. Assuming a 2/3 reduction in the Risk Margin, allowing for offset
from the Transitional Measure on Technical Provisions.
The above sensitivity analysis does not reflect all management actions
which could be taken to reduce the impacts. In practice, the group
actively manages its asset and liability positions to respond to
market movements. Other than in the interest rate stresses, we have
not allowed for the recalculation of TMTP.
The impacts of these stresses are not linear therefore these results
should not be used to interpolate or extrapolate the impact of a
smaller or larger stress. The results of these tests are indicative
of the market conditions prevailing at the balance sheet date. The
results would be different if performed at an alternative reporting
date.
Capital Page 70
5.01 Group regulatory capital - Solvency II (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 before the effects of diversification and tax.
2019 2018
% %
Interest rate 1 1
Equity 6 5
Property 9 8
Credit(1) 27 23
Currency 4 3
Inflation 6 5
Total Market risk (2) 53 45
Counterparty risk 2 2
Life mortality 3 3
Life longevity(3) 22 30
Life mass lapse 2 1
Life non-mass lapse 2 2
Life catastrophe 5 5
Expense 3 2
Total Insurance risk 37 43
Non-life underwriting 1 3
Operational risk 5 5
Miscellaneous(4) 2 2
Total SCR 100 100
-------------------------------------------------------- ---------- -----
1. Credit risk is one of the group's most significant exposures,
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 the group's most significant insurance risk
exposure, arising from the annuity book on which the majority of
the longevity risk on the backbook is retained. However we expect
this to reduce over time as we continue to reinsure the majority
of the exposure on the new business written post the implementation
of Solvency II.
4. Miscellaneous includes LGA on a Deduction and Aggregation basis
and the sectoral capital requirements for non-insurance regulated
firms.
Capital Page 71
5.02 Estimated Solvency II new business contribution
(a) New business by product
(1)
Management estimates of the present value of new business premium
(PVNBP) and the margin for selected lines of business are provided
below:
Contri- Contri-
bution bution
from new from new
PVNBP business(2) Margin(3) PVNBP business(2) Margin(3)
2019 2019 2019 2018 2018 2018
GBPm GBPm % GBPm GBPm %
LGR - UK annuity business 11,295 890 7.9 9,148 722 7.9
UK Protection Total 1,604 122 7.6 1,609 115 7.1
- Retail Protection 1,284 98 7.6 1,271 93 7.3
- Group Protection 320 24 7.5 338 22 6.4
US Protection(4) 850 94 11.1 812 91 11.2
1. Selected lines of business only.
2. The contribution from new business is defined as the present
value at the point of sale of expected future Solvency II surplus
emerging from new business written in the period using the risk
discount rate applicable at the end of the reporting period.
3. Margin is based on unrounded inputs.
4. In local currency, US Protection reflects PVNBP of $1,085m (31
December 2018: $1,088m) and a contribution from new business of
$120m (31 December 2018: $122m). US Protection PVNBP and contribution
from new business for 2018 have been restated for conversion of
USD values based average exchange rate. The use of average exchange
rate has no impact on the margins previously reported in 2018.
LGR margin remains at similar levels to 2018 on increased volumes,
reflecting our strong pricing discipline, which we have maintained
in a competitive market.
For UK Protection new business the increase in profitability was
driven by a shift in the mix of business by product combined with
continued price optimisation.
The US Protection margin remains robust and broadly unchanged compared
to the prior year. The 0.1% decrease in 2019 is being driven by
the competitive environment for term life business in the US.
Capital Page 72
5.02 Estimated Solvency II new business contribution
(continued)
(b) Assumptions
The key economic assumptions are as follows:
2019 2018
%%
Margin for Risk 3.5 3.2
Risk free rate
- UK 1.1 1.5
- US 1.9 2.7
Risk discount rate (net of tax)
- UK 4.6 4.7
- US 5.4 5.9
Long-term rate of return on non profit annuities in
LGR 2.8 3.4
The future earnings are discounted using duration-based discount
rates, which is the sum of a duration-based risk free rate and a
flat Margin for risk. 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.
Other than updating for recent experience, 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 previously used by the group for its European Embedded
Value reporting, 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 calculated explicitly for
each bulk annuity scheme written, and the weighted average
deduction for business written in 2019 equates to a level rate
deduction from the expected returns for the overall annuities
portfolio of 15 basis points.
-- 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 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.
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
19% and subsequent enacted future tax rate of 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 grossed up using the long term
corporate tax rate of 21%.
Capital Page 73
5.02 Estimated Solvency II new business contribution
(continued)
(c) Methodology
Basis of preparation
Solvency II new business contribution reflects the portion of
Solvency II value added by new business written in the period. It
has been calculated in a manner consistent with principles and
methodologies as set out in the group's 2019 Annual Report and
Accounts and Full Year Results.
Solvency II new business contribution has been calculated for
the group's most material insurance-related businesses, namely,
LGR, LGI 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 2019.
The Solvency II new business contribution has been calculated as
the present value of future shareholder profits arising from
business written in 2019. Cash flow projections are determined
using best estimate assumptions for each component of cash flow and
for each policy group. Best estimate assumptions including
mortality, morbidity, persistency and expenses reflect recent
operating experience and are set in accordance with the CFO Forum
EEV Principles, dated April 2016.
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. Intra-group reinsurance arrangements
are in place between US, UK and Bermudan businesses and it is
expected that these arrangements will be periodically extended to
cover future new business. The LGA new business margin looks
through the intra-group arrangements.
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 Margin for Risk.
The risk free rates have been based on a swap curve net of the
EIOPA-specified Credit Risk Adjustment of 11 basis points for GBP
and 13 basis points for USD (31 December 2018: 10 basis points for
GBP and 18 basis points for USD).
The Margin for Risk 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.
Capital Page 74
5.02 Estimated Solvency II new business contribution
(continued)
(c) Methodology (continued)
The WACC is derived from the group's cost of equity, cost of
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 17.17% (31 December 2018: 17.3%).
Whilst the WACC approach is a relatively simple and transparent
calculation to apply, subjectivity remains within a number of the
assumptions. Management believes that the chosen margin, together
with the levels of required capital and the inherent strength of
the group's regulatory reserves, is appropriate to reflect the
risks within the covered business.
(d) Reconciliation of PVNBP to gross written
premium
A reconciliation of PVNBP and gross written
premium is given below:
2019 2018
Notes GBPbn GBPbn
PVNBP 13.7 11.6
Effect of capitalisation factor (1.9) (2.0)
New business premiums from selected lines 11.8 9.6
Other(1) 1.9 2.1
Total LGR and LGI new business 4.07,4.08 13.7 11.7
Annualisation impact of regular premium long-term
business (0.2) (0.2)
IFRS gross written premiums from existing long-term
insurance business 2.9 2.8
Deposit accounting for investment products (1.2) (1.2)
Future premiums on longevity swap new business - (0.3)
Total gross written premiums(2) 2.01 15.2 12.8
1. Other principally includes annuity sales in the US and lifetime
mortgage advances. In 2018 it also included discounted future cash
flows on longevity swap new business.
2. Total gross written premiums exclude gross written premiums
from discontinued operations. 2018 balances have been restated
to reflect the removal of the General Insurance business.
Investments Page 75
6.01 Investment portfolio
Market Market
value value
2019 2018
GBPm GBPm
Worldwide total assets under management(1) 1,202,425 1,019,858
Client and policyholder assets (1,092,626) (930,516)
Non-unit linked with-profits assets (10,190) (9,893)
Investments to which shareholders are directly exposed 99,609 79,449
1. Worldwide total assets under management include LGIM AUM and other
group assets not managed by LGIM.
Analysed by investment class:
Other
non profit Other
LGR insurance LGC shareholder
investments investments investments investments Total Total
2019 2019 2019 2019 2019 2018
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Equities (2) 203 14 2,843 71 3,131 2,785
Bonds 6.03 70,061 2,065 2,933 83 75,142 63,096
Derivative assets (3) 11,448 - 108 - 11,556 4,411
Property 6.04 3,798 - 159 - 3,957 3,055
Loans and other receivables
(4) 1,769 579 1,489 438 4,275 4,894
Financial investments 87,279 2,658 7,532 592 98,061 78,241
Other assets (5) 90 - 1,458 - 1,548 1,208
Total investments 87,369 2,658 8,990 592 99,609 79,449
2. Equity investments include a total of GBP324m (31 December 2018:
GBP259m) in respect of associates and joint ventures.
3. Derivative assets are shown gross of derivative liabilities of GBP11.5bn
(31 December 2018: GBP3.3bn). Exposures arise from use of derivatives
for efficient portfolio management, especially the use of interest
rate swaps, inflation swaps, credit default swaps and foreign exchange
forward contracts for asset and liability management.
4. Loans include reverse repurchase agreements of GBP1,262m (31 December
2018 GBP857m).
5. Other assets include finance leases of GBP90m (2018: GBP91m) and
the consolidated net asset value of the group's investments in CALA
Homes and other housing businesses.
Investments Page 76
6.02 Direct investments
(a) Analysed by asset class
Direct(1) Traded(2) Direct(1) Traded(2)
Investments securities Total Investments securities Total
2019 2019 2019 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
Equities 1,282 1,849 3,131 1,166 1,619 2,785
Bonds (3) 18,553 56,589 75,142 13,369 49,727 63,096
Derivative assets - 11,556 11,556 - 4,411 4,411
Property (4) 3,957 - 3,957 3,055 - 3,055
Loans and other receivables 408 3,867 4,275 418 4,476 4,894
Financial investments 24,200 73,861 98,061 18,008 60,233 78,241
Other assets 1,548 - 1,548 1,208 - 1,208
Total investments 25,748 73,861 99,609 19,216 60,233 79,449
---------------------------- ----------- ---------- ------ ----------- ---------- ------
1. Direct investments, which generally constitute an agreement with
another party, represent an exposure to untraded and often less volatile
asset classes. Direct Investments also include physical assets, bilateral
loans and private equity, but exclude hedge funds.
2. Traded securities are defined by exclusion. If an instrument is
not a Direct Investment, then it is classed as a traded security.
3. Bonds include lifetime mortgages of GBP4,733m (31 December 2018:
GBP3,227m).
4. A further breakdown of property is provided in Note 6.04.
Investments Page 77
6.02 Direct Investments (continued)
(b) Analysed by segment
LGR LGC (1) LGI Total
2019 2019 2019 2019
GBPm GBPm GBPm GBPm
-
---------------------------------------- --- --------- ---------- ------- ------
Equities 9 1,211 62 1,282
Bonds(2) 17,711 4 838 18,553
Property(3) 3,798 159 - 3,957
Loans and other receivables - 93 315 408
----------------------------------------------- --------- ---------- ------- ------
Financial investments 21,518 1,467 1,215 24,200
------------------------------------------------ --------- ---------- ------- ------
Other assets(4) 90 1,458 - 1,548
----------------------------------------------- --------- ---------- ------- ------
Total direct investments 21,608 2,925 1,215 25,748
------------------------------------------------ --------- ---------- ------- ------
1. LGC includes GBP48m of equities that belong to other shareholder
funds.
2. Bonds include lifetime mortgages of GBP4,733m.
3. A further breakdown of property is provided in Note 6.04.
4. Other assets include finance leases of GBP90m and the consolidated
net asset value of the group's investments in CALA Homes and other
housing businesses.
LGR LGC(1) LGI(2) Total
2018 2018 2018 2018
GBPm GBPm GBPm GBPm
Equities 6 1,124 36 1,166
Bonds(2) 12,716 3 650 13,369
Property(3) 2,930 125 - 3,055
Loans and other receivables - 64 354 418
------------------------------------------ --------- -------- ------- -------
Financial investments 15,652 1,316 1,040 18,008
------------------------------------------- --------- -------- ------- -------
Other assets(4) 91 1,117 - 1,208
Total direct investments 15,743 2,433 1,040 19,216
------------------------------------------- --------- -------- ------- -------
1. LGC included GBP51m of equities and GBP23m of property that belong
to other shareholder funds.
2. Bonds include lifetime mortgages of GBP3,227m.
3. A further breakdown of property is provided in Note 6.04.
4. Other assets include finance leases of GBP91m and the consolidated
net asset value of the group's investments in CALA Homes and other
housing businesses.
Investments Page 78
6.03 Bond portfolio summary
(a) Sectors analysed by credit rating
BB or
AAA AA A BBB below Other Total(2) Total(2)
As at 31 December 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras and
Sub-Sovereigns 2,188 9,543 535 390 27 - 12,683 17
Banks:
- Tier 1 - - - 1 - 1 2 -
- Tier 2 and other subordinated - - 73 24 3 - 100 -
- Senior 6 1,893 2,794 758 1 - 5,452 7
- Covered 165 - 2 - - - 167 -
Financial Services:
- Tier 2 and other subordinated - 196 91 10 - 4 301 -
- Senior 4 381 231 322 9 - 947 1
Insurance:
- Tier 2 and other subordinated 49 131 6 56 - - 242 -
- Senior - 232 549 207 - - 988 1
Consumer Services and
Goods:
- Cyclical - 425 963 1,985 134 2 3,509 5
- Non-cyclical 260 868 2,185 3,827 217 1 7,358 10
- Health Care - 309 728 425 7 - 1,469 2
Infrastructure:
- Social 121 772 4,044 781 80 - 5,798 8
- Economic 338 27 1,436 3,148 102 - 5,051 7
Technology and Telecoms 202 173 1,196 2,805 42 - 4,418 6
Industrials - 11 817 588 27 - 1,443 2
Utilities - 190 5,885 4,669 2 32 10,778 15
Energy - - 340 814 12 - 1,166 2
Commodities - - 244 654 14 - 912 1
Oil and Gas - 593 799 702 108 1 2,203 3
Real estate 3 8 1,787 1,629 125 - 3,552 5
Structured finance ABS
/ RMBS / CMBS / Other 406 735 247 367 32 1 1,788 2
Lifetime mortgage loans(1) 2,798 1,253 362 309 - 11 4,733 6
CDOs - - 68 14 - - 82 -
Total GBPm 6,540 17,740 25,382 24,485 942 53 75,142 100
Total % 9 23 34 33 1 - 100
1. The credit ratings attributed to lifetime mortgages are allocated
in accordance with the internal Matching Adjustment structuring.
Unstructured lifetime mortgages have been categorised as AA.
2. The group's bond portfolio is dominated by LGR investments. These
account for GBP70,061m, representing 93% of the total group portfolio.
Investments Page 79
6.03 Bond portfolio summary (continued)
(a) Sectors analysed by credit rating
(continued)
BB or
AAA AA A BBB below Other Total(2) Total(2)
As at 31 December 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Sovereigns, Supras and
Sub-Sovereigns 1,385 9,591 181 410 48 - 11,615 18
Banks:
- Tier 1 - - - 1 - 1 2 -
- Tier 2 and other subordinated - - 87 24 2 - 113 -
- Senior 18 1,971 2,946 59 - 42 5,036 8
- Covered 191 1 - - - - 192 -
Financial Services:
- Tier 2 and other subordinated - 165 91 11 - 6 273 -
- Senior - 282 69 305 8 - 664 1
Insurance:
- Tier 2 and other subordinated - 113 1 46 - - 160 -
- Senior - 177 543 94 - - 814 1
Consumer Services and
Goods:
- Cyclical - 604 663 1,343 134 2 2,746 4
- Non-cyclical 216 970 1,138 2,639 308 1 5,272 8
- Health care - 150 375 405 4 - 934 2
Infrastructure:
- Social 92 768 3,425 829 38 - 5,152 8
- Economic 331 23 1,420 2,335 42 - 4,151 7
Technology and Telecoms 93 166 933 2,296 53 1 3,542 7
Industrials - 3 709 629 42 - 1,383 2
Utilities - 153 5,498 4,129 5 27 9,812 16
Energy - - 464 590 10 - 1,064 2
Commodities - - 242 481 11 - 734 1
Oil and Gas - 382 583 535 110 - 1,610 3
Real estate - - 1,233 1,425 125 - 2,783 4
Structured finance ABS
/ RMBS / CMBS / Other 430 873 180 250 8 1 1,742 3
Lifetime mortgage loans(1) 1,938 718 249 219 - 103 3,227 5
CDOs - - 61 14 - - 75 -
Total GBPm 4,694 17,110 21,091 19,069 948 184 63,096 100
Total % 7 27 34 30 2 - 100
1. The credit ratings attributed to lifetime mortgages are allocated
in accordance with the internal Matching Adjustment structuring.
Unstructured lifetime mortgages have been categorised as AA.
2. The group's bond portfolio is dominated by LGR investments. These
account for GBP57,355m, representing 91% of the total group portfolio.
Investments Page 80
6.03 Bond portfolio summary (continued)
(b) Sectors analysed by domicile
EU
excluding Rest of
UK US UK the World Total
As at 31 December 2019 GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras and Sub-Sovereigns 9,764 1,995 645 279 12,683
Banks 2,002 1,328 1,669 722 5,721
Financial Services 501 95 639 13 1,248
Insurance 103 858 186 83 1,230
Consumer Services and Goods:
- Cyclical 637 2,325 341 206 3,509
- Non-cyclical 1,716 5,123 479 40 7,358
- Health care 182 1,233 54 - 1,469
Infrastructure:
- Social 5,357 290 106 45 5,798
- Economic 3,823 705 174 349 5,051
Technology and Telecoms 685 2,321 673 739 4,418
Industrials 76 1,036 273 58 1,443
Utilities 6,259 1,927 2,108 484 10,778
Energy 265 768 11 122 1,166
Commodities 5 305 137 465 912
Oil and Gas 288 665 583 667 2,203
Real estate 2,290 377 489 396 3,552
Structured Finance ABS / RMBS /
CMBS / Other 979 766 21 22 1,788
Lifetime mortgages 4,733 - - - 4,733
CDOs - - - 82 82
Total 39,665 22,117 8,588 4,772 75,142
Investments Page 81
6.03 Bond portfolio summary (continued)
(b) Sectors analysed by domicile (continued)
EU
excluding Rest of
UK US UK the World Total
As at 31 December 2018 GBPm GBPm GBPm GBPm GBPm
Sovereigns, Supras and Sub-Sovereigns 9,238 1,038 1,009 330 11,615
Banks 1,817 1,012 1,373 1,141 5,343
Financial Services 287 104 544 2 937
Insurance 134 542 215 83 974
Consumer Services and Goods
- Cyclical 479 1,692 427 148 2,746
- Non-cyclical 1,328 3,478 430 36 5,272
- Health care 9 916 9 - 934
Infrastructure
- Social 4,819 295 - 38 5,152
- Economic 3,340 463 87 261 4,151
Technology and Telecoms 688 1,814 549 491 3,542
Industrials 196 848 253 86 1,383
Utilities 5,154 1,740 2,374 544 9,812
Energy 363 610 2 89 1,064
Commodities 11 285 35 403 734
Oil and Gas 270 524 349 467 1,610
Real estate 1,864 373 241 305 2,783
Structured finance ABS / RMBS / CMBS
/ Other 985 681 45 31 1,742
Lifetime mortgage loans 3,227 - - - 3,227
CDOs - - - 75 75
Total 34,209 16,415 7,942 4,530 63,096
Investments Page 82
6.03 Bond portfolio summary (continued)
(c) Bond portfolio analysed by credit rating
Externally Internally
rated rated(1) Total
As at 31 December 2019 GBPm GBPm GBPm
AAA 3,364 3,176 6,540
AA 14,568 3,172 17,740
A 19,320 6,062 25,382
BBB 18,990 5,495 24,485
BB or below 655 287 942
Other 12 41 53
Total 56,909 18,233 75,142
Externally Internally
rated rated(1) Total
As at 31 December 2018 GBPm GBPm GBPm
AAA 2,390 2,304 4,694
AA 14,386 2,724 17,110
A 16,731 4,360 21,091
BBB 14,928 4,141 19,069
BB or below 723 225 948
Other 55 129 184
Total 49,213 13,883 63,096
1. Where external ratings are not available an internal rating
has been used where practicable to do so.
Investments Page 83
6.04 Property analysis
Property exposure within direct investments
by status
LGR(1) LGC(2) Total
As at 31 December GBPm GBPm GBPm %
2019
Fully let 3,414 - 3,414 87
Development 384 23 407 10
Land - 136 136 3
3,798 159 3,957 100
1. The fully let LGR property includes GBP3.2bn let to investment
grade tenants.
2. The above analysis does not include assets related to the
group's investments in CALA Homes and other housing businesses,
which are accounted for as inventory within Receivables and
other assets on the group's Consolidated Balance Sheet and
measured at the lower of cost and net realisable value. At
31 December 2019 the group held a total of GBP2,120m of such
assets.
LGR(1) LGC(2,3) Total
As at 31 December GBPm GBPm GBPm %
2018
Fully let 2,685 - 2,685 88
Development(4) 245 23 268 9
Land - 102 102 3
2,930 125 3,055 100
1. The fully let LGR property includes GBP2.5bn let to investment
grade tenants.
2. Development within LGC represents shareholder investment
property.
3. The above analysis does not include assets related to the
group's investments in CALA Homes and other housing businesses,
which are accounted for as inventory within Receivables and
other assets on the group's Consolidated Balance Sheet and
measured at the lower of cost and net realisable value. At
31 December 2018 the group held a total of GBP1,687m of such
assets.
4. The 2018 balance for LGR has been represented, by reallocating
GBP245m from Fully let to Development, to more appropriately
reflect the status of that property exposure.
Investments Page 84
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Alternative Performance Measures Page 85
An alternative performance measure (APM) 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. APMs offer investors additional
information on the company's performance and the financial effect
of 'one-off' events and the group uses a range of these metrics to
provide a better understanding of its underlying performance. The
APMs used by the group are listed in this section, along with their
definition/ explanation, their closest IFRS measure and reference
to the reconciliations to those IFRS measures.
Group adjusted operating profit
Definition
Group adjusted operating profit measures the pre-tax result
excluding the impact of investment volatility, economic assumption
changes and exceptional items. It therefore reflects longer-term
economic assumptions for the group's insurance businesses and
shareholder funds, except for LGC's trading businesses (which
reflects the IFRS profit before tax) and LGIA non-term business
(which excludes unrealised investment returns to align with the
liability measurement under US GAAP). Variances between actual and
smoothed investment return assumptions are reported below group
adjusted operating profit, as well as any differences between
investment return on actual assets and the long-term asset mix.
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 also excluded from group adjusted operating
profit.
Group adjusted operating profit was previously described as
'operating profit'. In order to maintain a consistent understanding
of the group's performance the term 'operating profit' will
continue to be used throughout the annual report and accounts as a
substitute for group adjusted operating profit.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Note 1.01 Operating Profit.
Return on Equity (ROE)
Definition
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 (by
reference to opening and closing shareholders' funds as provided in
the IFRS consolidated statement of changes in equity for the
period).
Closest IFRS measure
Calculated using:
- Profit for the year
- Equity attributable to owners of the parent
Reconciliation
Calculated using profit for the year of GBP1,834m (2018:
GBP1,872m) and average equity attributable to the owners of the
parent of GBP8,974m (2018: GBP8,048m).
Assets under Management
Definition
Funds which are managed by our fund managers on behalf of
investors. It represents the total amount of money investors have
trusted with our fund managers to invest across our investment
products.
Closest IFRS measures
- Financial investments
- Investment property
- Cash and cash equivalents
Reconciliation
Note 4.04 Reconciliation of Assets under management to
Consolidated Balance sheet financial investments, investment
property and cash and cash equivalents.
Net release from operations
Definition
Release from operations plus new business surplus / (strain).
Net release from operations was previously referred to as net cash,
and includes the release of prudent margins from the back book,
together with the premium received less the setup of prudent
reserves and associated acquisition costs for new business.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Notes 1.01 Operating Profit and 1.02 Reconciliation of release
from operations to operating profit before tax .
Adjusted profit before tax attributable to equity holders
Definition
The APM measures profit before tax attributable to shareholders
incorporating actual investment returns experienced during the year
and the pre-tax results of discontinued operations.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Note 1.01 Operating Profit.
Glossary Page 86
* These items represent an alternative performance measure
(APM)
Ad valorem fees
Ongoing management fees earned on assets under management,
overlay assets and advisory assets as defined below.
Adjusted profit before tax attributable to equity holders*
Refer to the alternative performance measures section.
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.
Annual premium
Premiums that are paid regularly over the duration of the
contract such as protection policies.
Annual premium equivalent (APE)
A standardised measure of the volume of new life insurance
business written. It is calculated as the sum of (annualised) new
recurring premiums and 10% of the new single premiums written in an
annual reporting period.
Annuity
Regular payments from an insurance company made for an agreed
period of time (usually up to the death of the recipient) in return
for either a cash lump sum or a series of premiums which the
policyholder has paid to the insurance company during their working
lifetime.
Assets under administration (AUA)
Assets administered by Legal & General which are bene cially
owned by clients and are therefore not reported on the Consolidated
Balance Sheet. 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)*
Refer to the alternative performance measures section.
Back book 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.
CAGR
Compound annual growth rate.
Credit rating
A measure of the ability of an individual, organisation or
country to repay debt. The highest rating is usually AAA and the
lowest Unrated. Ratings are usually issued by a credit rating
agency (e.g. Moody's or Standard & Poor's) or a credit
bureau.
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 LGI US on this
basis.
Defined benefit pension scheme (DB scheme)
A type of pension plan in which an employer/sponsor promises a
specified monthly benefit on retirement that is predetermined by a
formula based on the employee's earnings history, tenure of service
and age, rather than depending directly on individual investment
returns.
Defined contribution pension scheme (DC scheme)
A type of pension plan where the pension benefits at retirement
are determined by agreed levels of contributions paid into the fund
by the member and employer. They provide benefits based upon the
money held in each individual's plan specifically on behalf of each
member. The amount in each plan at retirement will depend upon the
investment returns achieved and on the member and employer
contributions.
Derivatives
Derivatives are not a separate asset class but are contracts
usually giving a commitment or right to buy or sell assets on
specified conditions, for example on a set date in the future and
at a set price. The value of a derivative contract can vary.
Derivatives can generally be used with the aim of enhancing the
overall investment returns of a fund by taking on an increased
risk, or they can be used with the aim of reducing the amount of
risk to which a fund is exposed.
Direct investments
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.
Dividend cover
Dividend cover measures how many times over the net release from
operations in the year could have paid the full year dividend. For
example, if the dividend cover is 3, this means that the net
release from operations was three times the amount of dividend paid
out.
Glossary Page 87
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.
Eligible Own Funds
Eligible Own Funds represents the capital available to cover the
group's Solvency II Capital Requirement. Eligible Own Funds
comprise the excess of the value of assets over liabilities, as
valued on a 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
group's solvency capital requirement of with-profits funds and
final salary pension schemes.
Employee engagement index
The Employee engagement index measures the extent to which
employees are committed to the goals of Legal & General and are
motivated to contribute to the overall success of the company,
whilst working with their manager to enhance their own sense of
development and well-being.
ETF
LGIM's European Exchange Traded Fund platform.
Euro Commercial paper
Short term borrowings with maturities of up to 1 year typically
issued for working capital purposes.
FVTPL
Fair value through profit or loss. A financial asset or
financial liability that is measured at fair value in the
Consolidated Balance Sheet reports gains and losses arising from
movements in fair value within the Consolidated Income Statement as
part of the profit or loss for the year.
Full year dividend
Full year dividend is the total dividend per share declared for
the year (including interim dividend but excluding, where
appropriate, any special dividend).
Generally accepted accounting principles (GAAP)
These are a widely accepted collection of guidelines and
principles, established by accounting standard setters and used
by the accounting community to report financial information.
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.
Group adjusted operating profit*
Refer to the alternative performance measures section.
ICAV - Irish Collective Asset-Management Vehicle
A legal structure investment fund, based in Ireland and aimed at
European investment funds looking for a simple, tax-efficient
investment vehicle.
Index tracker (passive fund)
Index tracker funds invest in most or all of the same shares,
and in a similar proportion, as the index they are tracking, for
example the FTSE 100 index. Index tracker funds aim to produce a
return in line with a particular market or sector, for example,
Europe or technology. They are also sometimes known as 'tracker
funds'.
International financial reporting standards (IFRS)
These are accounting guidelines and rules that companies and
organisations follow when completing financial statements.
They are designed to enable comparable reporting between
companies, and they are the standards that all publicly listed
groups in the European Union (EU) are required to use.
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.
LGA
Legal & General America.
LGAS
Legal and General Assurance Society Limited.
LGC
Legal & General Capital.
LGI
Legal & General Insurance.
LGI new business
New business arising from new policies written on retail
protection products and new deals and incremental business on group
protection products.
LGIA
Legal & General Insurance America.
LGIM
Legal & General Investment Management
LGR
Legal & General Retirement, which includes Legal &
General Retirement Institutional (LGRI) and Legal & General
Retirement Retail (LGRR).
LGR new business
Single premiums arising from annuity sales and back book
acquisitions (including individual annuity and pension risk
transfer), the volume of lifetime mortgage lending and the notional
size of longevity insurance transactions, based on the present
value of the fixed leg cash flows discounted at the LIBOR
curve.
Glossary Page 88
Liability driven investment (LDI)
A form of investing in which the main goal is to gain sufficient
assets to meet all liabilities, both current and future. This form
of investing is most prominent in final salary pension plans, whose
liabilities can often reach into billions of pounds for the largest
of plans.
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 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.
Mortality rate
Rate of death, influenced by age, gender and health, used in
pricing and calculating liabilities for future policyholders of
life and annuity products, which contain mortality risks.
Net release from operations*
Refer to the alternative performance measures section.
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.
Open architecture
Where a company offers investment products from a range of other
companies in addition to its own products. This gives customers a
wider choice of funds to invest in and access to a larger pool of
money management professionals.
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.
Platform
Online services used by intermediaries and consumers to view and
administer their investment portfolios. Platforms usually provide
facilities for buying and selling investments (including, in the UK
products such as Individual Savings Accounts (ISAs), Self-Invested
Personal Pensions (SIPPs) and life insurance) and for viewing an
individual's entire portfolio to assess asset allocation and risk
exposure.
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.
Purchased interest in long term business (PILTB)
An estimate of the future profits that will emerge over the
remaining term of life and pensions policies that have been
acquired via a business combination.
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. Release from operations was previously
referred to as operational cash generation.
Return on Equity (ROE)*
Refer to the alternative performance measures section.
Risk appetite
The aggregate level and types of risk a company is willing to
assume in its exposures and business activities in order
to achieve its business objectives.
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
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 the policyholders' interest.
Glossary Page 89
Solvency II capital coverage ratio
The Eligible Own Funds on a regulatory basis divided by the
group solvency capital requirement. This represents the number of
times the SCR is covered by Eligible Own Funds.
Solvency II capital coverage ratio (proforma basis)
The proforma basis Solvency II SCR coverage ratio incorporates
the impacts of a recalculation of the Transitional Measures for
Technical Provisions and the contribution of with-profits funds and
our defined benefit pension schemes in both Own Funds and the SCR
in the calculation of the SCR coverage ratio.
Solvency II capital coverage ratio (shareholder view basis)
In order to represent a shareholder view of group solvency
position, the contribution of with-profits funds and our defined
benefit pension schemes are excluded from both, the group's Own
Funds and the group's solvency capital requirement, by the amount
of their respective solvency capital requirements, in the
calculation of the SCR coverage ratio. This incorporates the
impacts of a recalculation of the Transitional Measures for
Technical Provisions based on end of period economic conditions.
The shareholder view basis does not reflect the regulatory capital
position as at 31 December 2019. This will be submitted to the PRA
in April 2020.
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
SCR. 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.
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.
With-profits funds
Individually identifiable portfolios where policyholders have a
contractual right to receive additional benefits based on factors
such as the performance of a pool of assets held within the fund,
as a supplement to any guaranteed benefits. An insurer may either
have discretion as to the timing of the allocation of those
benefits to participating policyholders or
may have discretion as to the timing and the amount of the
additional benefits.
Yield
A measure of the income received from an investment compared to
the price paid for the investment. It is usually expressed as a
percentage.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKNBBKBKBDNK
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