TIDMLGEN
RNS Number : 3227V
Legal & General Group Plc
09 August 2022
Legal & General Group Plc
Half Year Results 2022 Part 2
1 Independent review report to Legal & General Group Plc
Page 33
Conclusion
We have been engaged by Legal & General Group Plc ('the
company') to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 June
2022 which comprises the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income, Consolidated
Balance Sheet, Condensed Consolidated Statement of Changes in
Equity, Consolidated Statement of Cash Flows (pages 46 to 51) and
the related explanatory notes to the interim financial statements
(pages 35 to 45 and 52 to 72).
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 4.01, the latest annual financial
statements of the group are prepared in accordance with UK-adopted
international accounting standards. The directors are responsible
for preparing the condensed set of financial statements included in
the half-yearly financial report in accordance with IAS 34 as
adopted for use in the UK. In preparing the condensed set of
financial statements, the directors are responsible for assessing
the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
Legal & General Group Plc
Half Year Results 2022 Part 2
1 Independent review report to Legal & General Group Plc
(continued) Page 34
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Salim Tharani
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
8 August 2022
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
35
2.01 Operating profit(#)
For the six month period to 30 June 2022
6 months 6 months Full year
2022 2021 2021
Notes GBPm GBPm GBPm
Legal & General Retirement Institutional
(LGRI)(1) 2.03 560 525 1,154
Legal & General Capital (LGC) 2.04 263 250 461
Legal & General Investment Management
(LGIM) 2.05 200 204 422
Retail 2.03 332 292 620
-------- -------- ---------
- Insurance(2) 185 134 268
- Retail Retirement(1) 147 158 352
-------- -------- ---------
Operating profit from divisions 1,355 1,271 2,657
Group debt costs(3) (108) (120) (230)
Group investment projects and expenses (87) (72) (165)
Operating profit 1,160 1,079 2,262
Investment and other variances 2.06 207 244 233
Losses attributable to non-controlling
interests - (3) (7)
Adjusted profit before tax attributable
to equity holders 1,367 1,320 2,488
Tax expense attributable to equity holders 4.04 (214) (258) (445)
Profit for the period 3.01 1,153 1,062 2,043
Total tax expense 3.01 287 339 589
---------------------------------------------- ------ -------- -------- ---------
Profit before tax 3.01 1,440 1,401 2,632
---------------------------------------------- ------ -------- -------- ---------
Profit attributable to equity holders 1,153 1,065 2,050
Earnings per share:
Basic (pence per share)(4) 2.07 19.28p 17.78p 34.19p
Diluted (pence per share)(4) 2.07 18.37p 16.96p 32.57p
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period
comparatives have been restated to reflect this change in segmentation.
Further details are provided in Note 2.08.
2. Insurance operating profit includes GBP46m (H1 21: GBP38m; FY
21: GBP(52)m) from US Insurance.
3. Group debt costs exclude interest on non-recourse financing.
4. All earnings per share calculations are based on profit attributable
to equity holders of the company.
This supplementary operating profit information (one of the
group's key performance indicators) provides additional analysis of
the results reported under IFRS, and the group believes it provides
stakeholders with useful information to enhance their understanding
of the performance of the business in the period.
Operating profit measures the pre-tax result excluding the
impact of investment volatility, economic assumption changes caused
by changes in market conditions or expectations and exceptional
items. It therefore reflects longer-term economic assumptions for
the group's LGRI and Retail businesses and shareholder funds,
including the traded portfolio in LGC. For the group's direct
investments, operating profit reflects the expected long-term
economic return for those assets which are developed with the
intention of sale, or the IFRS profit before tax for the early
stage and mature businesses. Variances between actual and long-term
expected investment return on traded and real assets (including
direct investments) are excluded from operating profit, as well as
economic assumption changes caused by changes in market conditions
or expectations (e.g. credit default and inflation) and any
difference between the actual allocated asset mix and the target
long-term asset mix on new pension risk transfer business.
Operating profit also excludes the yield associated with assets
held for future new pension risk transfer business from the
valuation discount rate on insurance contract liabilities.
Exceptional income and expenses which arise outside the normal
course of business in the year, such as merger and acquisition and
start-up costs, are also excluded from operating profit.
The group reports its results across the following business
segments:
-- LGRI represents worldwide pension risk transfer business including longevity insurance.
-- LGC represents shareholder assets invested in direct
investments primarily in the areas of specialist commercial real
estate, clean energy, housing and SME finance, as well as traded
and treasury assets.
-- LGIM represents institutional and retail investment management.
-- Insurance primarily represents UK protection (both group and
retail) and Fintech business (UK Insurance and other), as well as
US retail protection business (US Insurance).
-- Retail Retirement primarily represents retail annuity and
drawdown products, workplace savings and lifetime mortgage
loans.
# All references to 'Operating profit' throughout this report
represent 'Adjusted operating profit', an alternative performance
measure defined in the glossary.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
36
2.02 Reconciliation of release from operations to operating
profit(#) before tax
Changes Operating Operating
New Net in profit/ profit/
Release business release Exper- valuation (loss) Tax (loss)
For the six month from surplus/ from ience assump- Non-cash after expense/ before
period operations(1) (strain) operations variances tions items Other(2) tax (credit) tax
to 30 June 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
LGRI(3) 310 156 466 6 - 7 - 479 81 560
LGC 208 - 208 - - - - 208 55 263
LGIM 162 - 162 - - - - 162 38 200
Retail 345 (2) 343 (3) 18 (2) (77) 279 53 332
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
- Insurance 219 (8) 211 2 18 (1) (77) 153 32 185
- Retail
Retirement(3) 126 6 132 (5) - (1) - 126 21 147
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
Total from
divisions 1,025 154 1,179 3 18 5 (77) 1,128 227 1,355
Group debt costs (87) - (87) - - - - (87) (21) (108)
Group investment
projects and
expenses (47) - (47) - - - (34) (81) (6) (87)
Total 891 154 1,045 3 18 5 (111) 960 200 1,160
1. Release from operations within Insurance includes GBP85m of dividends
from US Insurance.
2. Other includes experience variances, changes in valuation assumptions
(includes changes to assets allocation) and non-cash items relating
to US Insurance.
3. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period comparatives
have been restated to reflect this change in segmentation. Further details
are provided in Note 2.08.
Release from operations for LGRI and the UK protection business within
Retail represents the expected IFRS surplus generated in the period
from the difference between the prudent assumptions underlying the IFRS
liabilities and our best estimate of future experience. For workplace
savings within Retail Retirement, the release from operations represents
the expected annual management charges generated from the in-force business
less expected expenses. The Insurance release from operations also includes
dividends remitted from US Insurance and IFRS profit after tax for the
Fintech business.
New business surplus/(strain) for LGRI and the UK protection business
represents the initial profit or loss from writing new business. This
includes the costs associated with acquiring new business and setting
up prudent reserves, net of tax. Similarly for workplace savings, this
includes the cost of acquiring new business in the year less the annual
management charges generated by the assets under administration (AUA),
net of tax. The new business surplus and release from operations for
LGRI and Retail excludes any capital held in excess of the prudent reserves
from the liability calculation.
LGRI and Retail Retirement's new business metrics are presented based
on a single target long-term asset portfolio. At certain period ends,
depending upon the quantum and timing of pension risk transfer (PRT)
volumes, we may have sourced more or less of the high quality assets
targeted to support that business. At period end, the profit impact
of the difference between actual assets held (including alternative
surplus assets where suitable) and the long-term asset mix is reflected
in investment variance.
Net release from operations for LGRI and Retail is defined as release
from operations plus new business surplus/(strain).
Release from operations and net release from operations for LGC and
LGIM represents the operating profit (net of tax).
See Note 2.03 for more detail on experience variances, changes to valuation
assumptions and non-cash items.
# All references to 'Operating profit' throughout this report represent
'Adjusted operating profit', an alternative performance measure defined
in the glossary.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
37
2.02 Reconciliation of release from operations to operating
profit(#) before tax (continued)
Changes Operating Operating
New Net in profit/ profit/
Release business release Exper- valuation (loss) Tax (loss)
For the six month from surplus/ from ience assump- Non-cash after expense/ before
period operations(1) (strain) operations variances tions items Other(2) tax (credit) tax
to 30 June 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
LGRI(3) 252 68 320 105 8 15 - 448 77 525
LGC 213 - 213 - - - - 213 37 250
LGIM 163 - 163 - - - - 163 41 204
Retail 262 23 285 16 1 1 (64) 239 53 292
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
- Insurance 151 8 159 4 1 4 (64) 104 30 134
- Retail
Retirement(3) 111 15 126 12 - (3) - 135 23 158
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
Total from
divisions 890 91 981 121 9 16 (64) 1,063 208 1,271
Group debt costs (97) - (97) - - - - (97) (23) (120)
Group investment
projects and
expenses (30) - (30) - - - (31) (61) (11) (72)
Total 763 91 854 121 9 16 (95) 905 174 1,079
Operating
New Net Changes Operating profit/
in
Release business release Exper- valuation profit/ Tax (loss)
from surplus/ from ience assump- Non-cash (loss) expense/ before
after
For the year operations(1) (strain) operations variances tions items Other(2) tax (credit) tax
ended
31 December 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
LGRI(3) 512 193 705 40 212 27 - 984 170 1,154
LGC 379 - 379 - - - - 379 82 461
LGIM 342 - 342 - - - - 342 80 422
Retail 463 54 517 28 121 2 (138) 530 90 620
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
- Insurance 236 27 263 14 82 6 (138) 227 41 268
- Retail
Retirement(3) 227 27 254 14 39 (4) - 303 49 352
------------- -------- ---------- --------- --------- -------- -------- --------- -------- ---------
Total from
divisions 1,696 247 1,943 68 333 29 (138) 2,235 422 2,657
Group debt costs (186) - (186) - - - - (186) (44) (230)
Group investment
projects and
expenses (69) - (69) - - - (68) (137) (28) (165)
Total 1,441 247 1,688 68 333 29 (206) 1,912 350 2,262
1. Release from operations within Insurance includes GBP80m of dividends
from US Insurance.
2. Other includes experience variances, changes in valuation assumptions
and non-cash items relating to US Insurance.
3. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period comparatives
have been restated to reflect this change in segmentation. Further details
are provided in Note 2.08.
# All references to 'Operating profit' throughout this report
represent 'Adjusted operating profit', an alternative performance
measure defined in the glossary.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
38
2.03 Analysis of LGRI and Retail operating profit
For the six month period to 30 June 2022
LGRI(1) Retail(1) LGRI(1) Retail(1) LGRI(1) Retail(1)
6 months 6 months 6 months 6 months Full year Full year
2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Net release from operations 466 343 320 285 705 517
Experience variances
- Persistency - (1) - (6) 1 (5)
- Mortality/morbidity 13 13 27 18 24 29
- Expenses (7) (7) (1) (4) 6 (1)
- Project and development costs - (1) (2) (1) (11) (19)
- Other - (7) 81 9 20 24
Total experience variances 6 (3) 105 16 40 28
Changes in valuation assumptions
- Persistency - - - - - (5)
- Mortality/morbidity - 18 - - 153 46
- Expenses - - - - - (1)
- Other - - 8 1 59 81
Total changes in valuation
assumptions - 18 8 1 212 121
Movement in non-cash items
(2) 7 (2) 15 1 27 2
Other (3) - (77) - (64) - (138)
Operating profit after tax 479 279 448 239 984 530
Tax expense 81 53 77 53 170 90
Operating profit before tax 560 332 525 292 1,154 620
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period
comparatives have been restated to reflect this change in segmentation.
Further details are provided in Note 2.08.
2. LGRI Movement in non-cash items is driven by the net effect of
the capitalisation and unwind of future asset management profits
on assets managed by LGIM, and is a function of new business volumes
and movements in the main unit cost assumptions.
3. Other includes experience variances, changes in valuation assumptions
(includes changes to assets allocation) and non-cash items relating
to US Insurance.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
39
2.04 LGC operating profit
6 months 6 months Full year
2022 2021 2021
GBPm GBPm GBPm
Direct investments(1) 202 195 350
Traded investment portfolio including treasury
assets(2) 61 55 111
Total LGC operating profit 263 250 461
1. Direct investments represents LGC's portfolio of assets across
specialist commercial real estate, clean energy, housing and SME
finance. Direct investments include operating profit in relation
to CALA Homes of GBP98m (H1 21: GBP78m; FY 21: GBP132m).
2. The traded investment portfolio holds a diversified set of
exposures across equities, fixed income, multi-asset funds and
cash.
2.05 LGIM operating profit
6 months 6 months Full year
2022 2021 2021
GBPm GBPm GBPm
Asset management revenue (excluding 3rd party
market data) (1) 485 471 980
Asset management transactional revenue (2) 9 9 32
Asset management expenses (excluding 3rd
party market data) (1) (294) (276) (590)
Total LGIM operating profit 200 204 422
1. Asset management revenue and expenses exclude income and costs
of GBP15m in relation to the provision of third party market data
(H1 21: GBP18m; FY 21: GBP32m).
2. Transactional revenue from external clients includes execution
fees, asset transition income, trigger fees, arrangement fees
on property transactions and performance fees.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
40
2.06 Investment and other variances
Full
6 months 6 months year
2022 2021 2021
GBPm GBPm GBPm
Investment variance related to protection
liabilities (1) 617 230 111
Investment variance related to the traded
investment portfolio and direct investments
(2) (308) 48 19
Other investment variance (3) (83) (23) 211
Investment variance 226 255 341
M&A related and other variances (4) (19) (11) (108)
Total investment and other variances 207 244 233
1. The positive investment variance of GBP617m reflects the
formulaic impact of an increase in UK and US government bond
yields which have resulted in a higher discount rate used to
calculate the group's protection liabilities.
2. The negative investment variance of GBP308m largely reflects
volatile global equity market performance in the traded investment
portfolio.
3. Other investment variance includes a negative variance in
respect of the defined benefit pension scheme, reflecting the
impact of the acquisition of annuity assets from LGRI and Retail
Retirement, and the difference between the IAS 19 and annuity
discount rates. This was partially offset by a positive variance
from the UK annuity businesses, driven by good quality asset
sourcing and improved cash flow matching within the portfolio.
4. M&A related and other variances includes gains and losses,
expenses and intangible amortisation relating to acquisitions,
disposals and restructuring as well as business start-up costs.
Investment variance includes differences between actual and
long-term expected investment return on traded and real assets
(including direct investments), economic assumption changes
caused by changes in market conditions or expectations (e.g.
credit default and inflation), the impact of any difference
between the actual allocated asset mix and the single target
long-term asset mix on new pension risk transfer business,
and the yield associated with assets held for future new pension
risk transfer business from the valuation discount rate.
The long-term expected investment return is based on opening
economic assumptions applied to the assets under management
at the start of the reporting year. The assumptions underlying
the calculation of the expected returns for traded equity,
commercial property and residential property are based on market
consensus forecasts and long-term historic average returns
expected to apply through the cycle.
The long-term expected investment returns are:
Full
6 months 6 months year
2022 2021 2021
Equities 7% 7% 7%
Commercial property 5% 5% 5%
Residential property (1) 3.5% RPI + RPI +
50bps 50bps
1. In previous years the assumption RPI + 50bps was in line
with average historical returns. Due to the current spike in
inflation and in order to keep the rate aligned to average
historical returns, it was updated to 3.5% in 2022.
Additionally, the LGC alternative asset portfolio comprises
investments in housing, specialist commercial real estate,
clean energy, and SME finance. The long-term expected investment
return is on average between 8% and 10%, in line with our stated
investment objectives. Rates of return specific to each asset
are determined at the point of underwriting and reviewed and
updated annually. The expected investment return includes assumptions
on appropriate discount rates and inflation as well as sector
specific assumptions including retail and commercial property
yields and power prices.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
41
2.07 Earnings per share
(a) Basic earnings per share
After Per share(1) After Per share(1) After Per share(1)
tax tax tax
6 months 6 months 6 months 6 months Full year Full year
2022 2022 2021 2021 2021 2021
GBPm p GBPm p GBPm p
Profit for the period attributable
to equity holders 1,153 19.47 1,065 17.96 2,050 34.58
Less: coupon payable in respect
of restricted Tier 1 convertible
notes net of tax relief (11) (0.19) (11) (0.18) (23) (0.39)
----------------------------------- -------- ------------ -------- ------------ --------- ------------
Total basic earnings 1,142 19.28 1,054 17.78 2,027 34.19
----------------------------------- -------- ------------ -------- ------------ --------- ------------
1. Basic earnings per share is calculated by dividing profit after
tax by the weighted average number of ordinary shares in issue
during the period, excluding employee scheme treasury shares.
(b) Diluted earnings per share
Weighted
average
number
After of
tax shares Per share(1)
For the six month period to GBPm m p
30 June 2022
Profit for the period attributable
to equity holders 1,153 5,922 19.47
Net shares under options allocable
for no further consideration - 46 (0.15)
Conversion of restricted Tier
1 notes - 307 (0.95)
Total diluted earnings 1,153 6,275 18.37
----------------------------------------------- --------- -------- ------------
Weighted
average
number
of
After tax shares Per share(1)
For the six month period to GBPm m p
30 June 2021
Profit for the period attributable to equity
holders 1,065 5,929 17.96
Net shares under options allocable for no
further consideration - 45 (0.14)
Conversion of restricted Tier
1 notes - 307 (0.86)
Total diluted earnings 1,065 6,281 16.96
----------------------------------------------- --------- -------- ------------
Weighted
average
number
of
After tax shares Per share(1)
For the year ended 31 December 2021 GBPm m p
Profit for the year attributable to equity
holders 2,050 5,929 34.58
Net shares under options allocable for no
further consideration - 59 (0.34)
Conversion of restricted Tier
1 notes - 307 (1.67)
Total diluted earnings 2,050 6,295 32.57
----------------------------------------------- --------- -------- ------------
1. For diluted earnings per share, the weighted average number
of ordinary shares in issue, excluding employee scheme treasury
shares, is adjusted to assume conversion of all potential ordinary
shares, such as share options granted to employees and conversion
of restricted Tier 1 notes.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
42
2.08 Segmental analysis
In 2021, the group operated five core businesses across four
reportable segments that are continuing operations, with Retail
Retirement and Legal & General Retirement Institutional (LGRI)
combined into a single segment for reporting purposes, being Legal
& General Retirement. From 1 January 2022, the group has made
changes to the business unit responsibilities within the Executive
Committee. Andrew Kail has become the Chief Executive Officer of
LGRI, succeeding Laura Mason who had previously moved to become CEO
of Legal & General Capital (LGC). Our two retail businesses,
Retail Retirement and Insurance (comprising UK Insurance and other,
and US Insurance), have come together under the leadership of
Bernie Hickman. Reportable segments have therefore been aligned to
the group's five core businesses. Group expenses and debt costs
continue to be reported separately. Transactions between segments
are on normal commercial terms, and are included within the
reported segments. To enable comparison, segmental information for
prior periods has been restated accordingly.
In the UK, annuity liabilities relating to LGRI and Retail
Retirement are backed by a single portfolio of assets, and once a
transaction has been completed the assets relating to any
particular transaction are not tracked to the related liabilities.
Investment variance is allocated to the two business segments based
on the relative average size of the underlying insurance contract
liabilities for the period.
Reporting of assets and liabilities by segment has not been
included, as this is not information that is provided to key
decision makers on a regular basis. The group's assets and
liabilities are managed on a legal entity rather than a segmental
basis, in line with regulatory requirements.
Financial information on the reportable segments is further
broken down where relevant in order to better explain the drivers
of the group's results.
(a) Profit/(loss) for the period
Group
expenses
Retail and
debt
LGRI(1) LGC LGIM Retirement(1) Insurance costs Total
For the six month period to GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June 2022
Operating profit/(loss)(#) 560 263 200 147 185 (195) 1,160
Investment and other variances 133 (308) (7) 53 617 (281) 207
Losses attributable to non-controlling
interests - - - - - - -
Profit/(loss) before tax attributable
to equity holders 693 (45) 193 200 802 (476) 1,367
Tax (expense)/credit attributable
to equity holders (88) 2 (39) (24) (162) 97 (214)
Profit/(loss) for the period 605 (43) 154 176 640 (379) 1,153
Group
expenses
Retail and debt
LGRI(1) LGC LGIM Retirement(1) Insurance costs Total
For the six month period to GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June 2021
Operating profit/(loss)(#) 525 250 204 158 134 (192) 1,079
Investment and other variances 75 48 (7) 30 230 (132) 244
Losses attributable to non-controlling
interests - - - - - (3) (3)
Profit/(loss) before tax attributable
to equity holders 600 298 197 188 364 (327) 1,320
Tax (expense)/credit attributable
to equity holders (110) (54) (44) (35) (91) 76 (258)
Profit/(loss) for the period 490 244 153 153 273 (251) 1,062
Group
expenses
Retail and debt
LGRI(1) LGC LGIM Retirement(1) Insurance costs Total
For the year ended 31 December GBPm GBPm GBPm GBPm GBPm GBPm GBPm
2021
Operating profit/(loss) (#) 1,154 461 422 352 268 (395) 2,262
Investment and other variances 193 19 (11) 49 111 (128) 233
Losses attributable to non-controlling
interests - - - - - (7) (7)
Profit/(loss) before tax attributable
to equity holders 1,347 480 411 401 379 (530) 2,488
Tax (expense)/credit attributable
to equity holders (213) (93) (79) (63) (59) 62 (445)
Profit/(loss) for the year 1,134 387 332 338 320 (468) 2,043
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period
comparatives have been restated to reflect this change in segmentation.
# All references to 'Operating profit' throughout this report represent
'Adjusted operating profit', an alternative performance measure defined
in the glossary.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
43
2.08 Segmental analysis (continued)
(b) Revenue
(i) Total revenue
6 months 6 months Full year
2022 2021 2021
GBPm GBPm GBPm
Total income (69,188) 14,898 45,450
Adjusted for:
Share of profit from associates and joint
ventures, net of tax (4) (21) (25)
Gain on disposal of subsidiaries, associates and joint
ventures, and other operations (10) - (149)
Total revenue (69,202) 14,877 45,276
(ii) Total income
Retail LGC and
LGRI(1) LGIM(2,3) Retirement(1) Insurance other(4) Total
For the six month period to 30 GBPm GBPm GBPm GBPm GBPm GBPm
June 2022
Internal income - 92 - - (92) -
External income (6,845) (61,289) (2,688) 1,007 627 (69,188)
Total income (6,845) (61,197) (2,688) 1,007 535 (69,188)
Retail LGC and
LGRI(1) LGIM(2,3) Retirement(1) Insurance other(4) Total
For the six month period to 30 GBPm GBPm GBPm GBPm GBPm GBPm
June 2021
Internal income - 80 - - (80) -
External income (20) 17,891 7 1,003 (3,983) 14,898
Total income (20) 17,971 7 1,003 (4,063) 14,898
Retail LGC and
LGRI(1) LGIM(2,3) Retirement(1) Insurance other(4) Total
For the year ended 31 December GBPm GBPm GBPm GBPm GBPm GBPm
2021
Internal income - 179 - - (179) -
External income 4,842 35,738 1,117 2,029 1,724 45,450
Total income 4,842 35,917 1,117 2,029 1,545 45,450
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period comparatives
have been restated to reflect this change in segmentation.
2. LGIM internal income relates to investment management services provided
to other segments.
3. LGIM external income primarily includes fees from fund management
and investment returns on unit linked funds.
4. LGC and other includes LGC income, intra-segmental eliminations
and group consolidation adjustments.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
44
2.08 Segmental analysis (continued)
(b) Revenue (continued)
(iii) Fees from fund management and investment
contracts
Retail
LGC Total
LGIM Retirement(1) and other(2)
For the six month period to 30 June 2022 GBPm GBPm GBPm GBPm
Investment contracts - 49 - 49
Investment management fees 495 - (92) 403
Transaction fees 9 - - 9
Total fees from fund management and investment
contracts (3) 504 49 (92) 461
Retail
LGC and Total
LGIM Retirement(1) other(2)
For the six month period to 30 June 2021 GBPm GBPm GBPm GBPm
Investment contracts - 46 - 46
Investment management fees 488 - (80) 408
Transaction fees 9 - - 9
Total fees from fund management and investment
contracts (3) 497 46 (80) 463
Retail
LGC and Total
LGIM Retirement(1) other(2)
For the year ended 31 December 2021 GBPm GBPm GBPm GBPm
Investment contracts - 97 - 97
Investment management fees 1,009 - (179) 830
Transaction fees 32 - - 32
Total fees from fund management and investment
contracts (3) 1,041 97 (179) 959
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period comparatives
have been restated to reflect this change in segmentation.
2. LGC and other includes LGC income, intra-segmental eliminations
and group consolidation adjustments.
3. Fees from fund management and investment contracts are a component
of Total revenue disclosed in Note 2.08 (b)(i).
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosures on performance and Release from operations Page
45
2.08 Segmental analysis (continued)
(b) Revenue (continued)
(iv) Other operational income from contracts
with customers
Retail
Retirement(1) Insurance LGC Total
and
other
For the six month period to 30 June GBPm GBPm GBPm GBPm
2022
House building - - 763 763
Professional services
fees 4 41 - 45
Insurance broker - 21 - 21
Total other operational income from
contracts with customers(2) 4 62 763 829
Retail
Retirement(1) Insurance LGC Total
and
other
For the six month period to 30 June GBPm GBPm GBPm GBPm
2021
House building - - 651 651
Professional services
fees 1 49 - 50
Insurance broker - 2 - 2
Total other operational income from
contracts with customers(2) 1 51 651 703
Retail
Retirement(1) Insurance LGC Total
and
other
For the year ended 31 December 2021 GBPm GBPm GBPm GBPm
House building - - 1,314 1,314
Professional services
fees 5 89 - 94
Insurance broker - 11 - 11
Total other operational income from
contracts with customers(2) 5 100 1,314 1,419
1. From 1 January 2022, following changes to business unit responsibilities
within the Executive Committee, the group's reportable segments have
been updated to align with its five core businesses. Prior period comparatives
have been restated to reflect this change in segmentation.
2. Total other operational income from contracts with customers is
a component of Total revenue disclosed in Note 2.08 (b)(i) and excludes
the share of profit/loss from associates and joint ventures, and the
gain on disposal of subsidiaries, associates and joint ventures, and
other operations.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 46
3.01 Consolidated Income Statement
6 months 6 months Full year
2022 2021 2021
For the six month period to 30 June Notes GBPm GBPm GBPm
2022
Income
Gross written premiums 6,612 4,263 10,375
Outward reinsurance premiums (1,576) (1,605) (3,446)
Net change in provision for unearned
premiums 8 35 42
Net premiums earned 5,044 2,693 6,971
Fees from fund management and investment
contracts 461 463 959
Investment return (75,536) 11,018 35,927
Other operational income 843 724 1,593
Total income 2.08 (69,188) 14,898 45,450
Expenses
Claims and change in insurance contract
liabilities (10,371) 540 7,353
Reinsurance recoveries (295) (1,313) (2,968)
Net claims and change in insurance
contract liabilities (10,666) (773) 4,385
Change in investment contract liabilities (62,297) 12,232 34,206
Acquisition costs 416 436 825
Finance costs 145 157 294
Other expenses 1,774 1,445 3,108
Total expenses (70,628) 13,497 42,818
Profit before tax 1,440 1,401 2,632
Tax expense attributable to policyholder
returns (73) (81) (144)
Profit before tax attributable to
equity holders 1,367 1,320 2,488
Total tax expense (287) (339) (589)
Tax expense attributable to policyholder
returns 73 81 144
Tax expense attributable to equity
holders 4.04 (214) (258) (445)
Profit for the period 1,153 1,062 2,043
------------------------------------------ ----- -------- -------- ---------
Attributable to:
Non-controlling interests - (3) (7)
Equity holders 1,153 1,065 2,050
Dividend distributions to equity holders
during the period 4.02 792 754 1,063
Dividend distributions to equity holders
proposed after the period end 4.02 324 309 790
p p p
Total basic earnings per share(1) 2.07 19.28 17.78 34.19
Total diluted earnings per share(1) 2.07 18.37 16.96 32.57
------------------------------------------ ----- -------- -------- ---------
1. All earnings per share calculations are based on profit attributable
to equity holders of the company.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 47
3.02 Consolidated Statement of Comprehensive Income
6 months 6 months Full year
2022 2021 2021
For the six month period to 30 June 2022 GBPm GBPm GBPm
Profit for the period 1,153 1,062 2,043
---------------------------------------------------- -------- -------- ---------
Items that will not be reclassified subsequently
to profit or loss
Actuarial remeasurements on defined benefit
pension schemes 387 116 53
Tax (expense)/credit on actuarial remeasurements
on defined benefit pension schemes (97) (20) (7)
Total items that will not be reclassified
subsequently to profit or loss 290 96 46
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation of overseas
operations 84 (11) (11)
Movement in cross-currency hedge 5 6 20
Tax expense on movement in cross-currency
hedge (1) (4) (7)
Movement in financial investments designated
as available-for-sale 3 (8) (3)
Tax on movement in financial investments designated
as available-for-sale (1) 1 -
Total items that may be reclassified subsequently
to profit or loss 90 (16) (1)
Other comprehensive income after tax 380 80 45
Total comprehensive income for the period 1,533 1,142 2,088
Total comprehensive income/(expense) for
the period attributable to:
---------------------------------------------------- -------- -------- ---------
Non-controlling interests - (3) (7)
Equity holders 1,533 1,145 2,095
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 48
3.03 Consolidated Balance Sheet
As at As at As at
30 Jun 30 Jun 31 Dec
2022 2021 2021
Notes GBPm GBPm GBPm
Assets
Goodwill 71 68 68
Other intangible assets 406 377 365
Deferred acquisition costs 26 46 26
Investment in associates and joint ventures
accounted for using the equity method 387 314 375
Property, plant and equipment 311 322 316
Investment property 4.03 10,976 9,080 10,150
Financial investments 4.03 462,329 519,762 538,374
Reinsurers' share of contract liabilities 6,040 6,947 7,180
Deferred tax assets 4.04 115 12 2
Current tax assets 699 612 670
Receivables and other assets 17,857 14,331 8,625
Cash and cash equivalents 24,774 16,397 16,487
Total assets 523,991 568,268 582,638
Equity
Share capital 4.05 149 149 149
Share premium 4.05 1,017 1,011 1,012
Employee scheme treasury shares (138) (90) (99)
Capital redemption and other reserves 381 162 196
Retained earnings 9,775 8,620 9,228
Attributable to owners of the parent 11,184 9,852 10,486
Restricted Tier 1 convertible notes 4.06 495 495 495
Non-controlling interests 4.07 (36) (34) (38)
Total equity 11,643 10,313 10,943
Liabilities
Insurance contract liabilities 76,889 86,339 89,825
Investment contract liabilities 305,780 358,613 372,954
Core borrowings 4.08 4,356 4,542 4,256
Operational borrowings 4.09 1,182 1,138 932
Provisions 4.13 781 1,113 1,238
Deferred tax liabilities 4.04 407 277 251
Current tax liabilities 81 57 84
Payables and other financial liabilities 4.11 95,970 80,785 74,264
Other liabilities 894 640 925
Net asset value attributable to unit holders 26,008 24,451 26,966
Total liabilities 512,348 557,955 571,695
Total equity and liabilities 523,991 568,268 582,638
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 49
3.04 Condensed Consolidated Statement of Changes in Equity
Employee Capital Equity Restricted
Tier
scheme redemption attributable 1 Non-
and
Share Share treasury other Retained to owners convertible controlling Total
For the six month
period of the
to 30 June 2022 capital premium shares reserves(1) earnings parent notes interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January
2022 149 1,012 (99) 196 9,228 10,486 495 (38) 10,943
Total
comprehensive
income for the
period - - - 90 1,443 1,533 - - 1,533
Options exercised - 5 - - - 5 - - 5
under
share option
schemes
Net movement in
employee
scheme treasury
shares - - (39) (8) 10 (37) - - (37)
Dividends - - - - (792) (792) - - (792)
Coupon payable in
respect
of restricted
Tier 1
convertible notes
net
of tax relief - - - - (11) (11) - - (11)
Movement in third - - - - - - - 2 2
party
interests
Currency
translation
differences - - - 103 (103) - - - -
As at 30 June 2022 149 1,017 (138) 381 9,775 11,184 495 (36) 11,643
1. Capital redemption and other reserves as at 30 June 2022 include share-based
payments GBP78m, foreign exchange GBP233m, capital redemption GBP17m,
hedging GBP52m and available-for-sale reserves GBP1m.
Employee Capital Equity Restricted
scheme redemption attributable Tier 1 Non-
Share Share treasury and other Retained to owners convertible controlling Total
For the six month
period of the
to 30 June 2021 capital premium shares reserves(1) earnings parent notes interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January
2021 149 1,006 (75) 198 8,224 9,502 495 (31) 9,966
------------------ ------- ------- -------- ----------- -------- ------------- ----------- ----------- ------
Total
comprehensive
income for the
period - - - (16) 1,161 1,145 - (3) 1,142
Options exercised
under
share option
schemes - 5 - - - 5 - - 5
Net movement in
employee
scheme treasury
shares - - (15) (15) (5) (35) - - (35)
Dividends - - - - (754) (754) - - (754)
Coupon payable in
respect
of restricted
Tier 1
convertible notes
net
of tax relief - - - - (11) (11) - - (11)
Currency
translation
differences - - - (5) 5 - - - -
As at 30 June 2021 149 1,011 (90) 162 8,620 9,852 495 (34) 10,313
1. Capital redemption and other reserves as at 30 June 2021 include share-based
payments GBP86m, foreign exchange GBP27m, capital redemption GBP17m,
hedging GBP37m and available-for-sale reserves GBP(5)m.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 50
3.04 Condensed Consolidated Statement of Changes in Equity
(continued)
Employee Capital Equity Restricted
Tier
scheme redemption attributable 1 Non-
and
Share Share treasury other Retained to owners convertible controlling Total
For the year
ended 31 of the
December 2021 capital premium shares reserves(1) earnings parent notes interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January
2021 149 1,006 (75) 198 8,224 9,502 495 (31) 9,966
Total
comprehensive
income for the
year - - - (1) 2,096 2,095 - (7) 2,088
Options exercised
under
share option
schemes - 6 - - - 6 - - 6
Net movement in
employee
scheme treasury
shares - - (24) (15) 8 (31) - - (31)
Dividends - - - - (1,063) (1,063) - - (1,063)
Coupon payable in
respect
of restricted
Tier 1
convertible
notes net
of tax relief - - - - (23) (23) - - (23)
Currency
translation
differences - - - 14 (14) - - - -
As at 31 December
2021 149 1,012 (99) 196 9,228 10,486 495 (38) 10,943
1. Capital redemption and other reserves as at 31 December 2021 include
share-based payments GBP86m, foreign exchange GBP46m, capital redemption
GBP17m, hedging GBP48m and available-for-sale reserves GBP(1)m.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Primary Financial Statements Page 51
3.05 Consolidated Statement of Cash Flows
6 months 6 months Full year
2022 2021 2021
For the six month period to 30 June 2022 Notes GBPm GBPm GBPm
Cash flows from operating activities
Profit for the period 1,153 1,062 2,043
Adjustments for non cash movements in
net profit for the period
Net losses/(gains) on financial investments
and investment property 80,187 (5,227) (26,062)
Investment income (4,651) (5,790) (9,865)
Interest expense 145 157 294
Tax expense 287 339 589
Other adjustments 88 44 137
Net decrease/(increase) in operational
assets
Investments held for trading or designated
as fair value through profit or loss 14,200 5,804 4,616
Investments designated as available-for-sale (3) 15 (21)
Other assets (8,086) (4,931) 139
Net (decrease)/increase in operational
liabilities
Insurance contracts (13,621) (2,615) 726
Investment contracts (67,182) 15,069 29,409
Other liabilities 2,481 (10,114) (11,161)
Cash utilised in operations 4,998 (6,187) (9,156)
Interest paid (139) (160) (301)
Interest received 1,808 3,368 5,060
Rent received 185 184 373
Tax paid(1) (376) (276) (564)
Dividends received 2,491 2,307 4,419
Net cash flows from operations 8,967 (764) (169)
Cash flows from investing activities
Acquisition of plant, equipment, intangibles
and other assets (60) (137) (205)
Disposal of plant, equipment, intangibles
and other assets - 2 -
Acquisition of operations, net of cash
acquired 4.16 (2) - -
Disposal of subsidiaries and other operations,
net of cash transferred - - 217
Investment in joint ventures and associates (34) (2) (56)
Disposal of joint ventures and associates 40 - 177
Net cash flows (utilised)/generated from
investing activities (56) (137) 133
Cash flows from financing activities
Dividend distributions to ordinary equity
holders during the period 4.02 (792) (754) (1,063)
Coupon payment in respect of restricted
Tier 1 convertible notes, gross of tax 4.06 (14) (14) (28)
Options exercised under share option schemes 4.05 5 5 6
Treasury shares purchased for employee
share schemes (50) (24) (34)
Payment of lease liabilities (18) (17) (37)
Proceeds from borrowings 4.10 385 252 449
Repayment of borrowings 4.10 (210) (162) (798)
Net cash flows utilised in financing activities (694) (714) (1,505)
Net increase/(decrease) in cash and cash
equivalents 8,217 (1,615) (1,541)
Exchange gains/(losses) on cash and cash
equivalents 70 (8) 8
Cash and cash equivalents at 1 January 16,487 18,020 18,020
Cash and cash equivalents at 30 June/31
December 24,774 16,397 16,487
1. Tax comprises UK corporation tax paid of GBP223m (H1 21: GBP155m;
FY 21: GBP368m), withholding tax of GBP147m (H1 21: GBP118m; FY
21: GBP188m) and overseas corporate tax of GBP6m (H1 21: GBP3m;
FY 21: GBP8m).
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 52
4.01 Basis of preparation
The group financial information for the six months ended 30 June
2022 has been prepared in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority and with IAS 34, 'Interim Financial Reporting'. The
group's financial information has also been prepared in line with
the accounting policies which the group expects to adopt for the
2022 year end. These policies are consistent with the principal
accounting policies which were set out in the group's 2021
consolidated financial statements, except where changes have been
outlined below in "New standards, interpretations and amendments to
published standards that have been adopted by the group". These are
consistent with UK-adopted international accounting standards,
issued by the International Accounting Standards Board and adopted
by the UK Endorsement Board for use in the United Kingdom.
The preparation of the Interim Management Report includes the
use of estimates and assumptions which affect items reported in the
Consolidated Balance Sheet and Income Statement and the disclosure
of contingent assets and liabilities at the date of the financial
statements. The economic and non-economic actuarial assumptions
used to establish the liabilities in relation to insurance and
investment contracts are significant. For half year financial
reporting, economic assumptions have been updated to reflect market
conditions. Non-economic assumptions are consistent with those used
in the 31 December 2021 financial statements, except as disclosed
in Note 2.03.
The results for the half year ended 30 June 2022 are unaudited
but have been reviewed by KPMG LLP. The interim results do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The results from the full year 2021 have been
taken from the group's 2021 Annual Report and Accounts. Therefore,
these interim accounts should be read in conjunction with the 2021
Annual Report and Accounts that have been prepared in accordance
with UK-adopted international accounting standards, comprising
International Accounting Standards and International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), and related interpretations
issued by the IFRS Interpretations Committee, and with the
requirements of the Companies Act 2006 applicable to companies
reporting under IFRS. KPMG LLP reported on the 2021 financial
statements, and their report was unqualified and did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
The group's 2021 Annual Report and Accounts has
been filed with the Registrar of Companies.
Key technical terms and definitions
The interim management report refers to various key performance
indicators, accounting standards and other technical terms. A
comprehensive list of these definitions is contained within the
glossary section of these interim financial statements.
Alternative performance measures
The group uses a number of alternative performance measures
(APMs), including net release from operations and adjusted
operating profit, in the discussion of its business performance and
financial position, as the group believes that they, complemented
with figures determined according to other regulations, enhance
understanding of the group's performance. Definitions and further
information in relation to the group's APMs can be found in the
Alternative Performance Measures section of these interim financial
statements.
Tax attributable to policyholders and equity holders
The total tax expense shown in the group's Consolidated Income
Statement includes income tax borne by both policyholders and
shareholders. This has been split between tax attributable to
policyholders' returns and equity holders' profits. Policyholder
tax comprises the tax suffered on policyholder investment returns,
while shareholder tax is corporation tax charged on shareholder
profit. The separate presentation is intended to provide more
relevant information about the tax that the group pays on the
profits that it makes.
(a) Going concern
The group's business activities, together with the factors
likely to affect its future development, performance and position
in the current economic climate are set out in this Interim
Management Report. The financial position of the group, its cash
flows, liquidity position and borrowing facilities as at 30 June
2022 are described in the IFRS Primary Financial Statements and
IFRS Disclosure Notes. Principal risks and uncertainties are
detailed on pages 26 to 28.
The directors have made an assessment of the group's going
concern, considering both the group's current performance and
outlook for a period of at least, but not limited to, 12 months
from the date of approval of the interim financial information
using the information available up to the date of issue of this
Interim Management Report.
The group manages and monitors its capital and liquidity, and
applies various stresses, including high inflationary scenarios, to
those positions to understand potential impacts from market
downturns. Our key sensitivities and the impacts on our capital
position from a range of stresses is disclosed on page 80. These
stresses do not give rise to any material uncertainties over the
ability of the group to continue as a going concern. Based upon the
available information, the directors consider that the group has
the plans and resources to manage its business risks successfully
and that it remains financially strong and well diversified.
Having reassessed the principal risks and uncertainties (both
financial and operational) in light of the current economic
climate, as detailed on pages 26 to 28, the directors are confident
that the group and company will have sufficient funds to continue
to meet their liabilities as they fall due for a period of, but not
limited to, 12 months from the date of approval of this Interim
Management Report and therefore have considered it appropriate to
adopt the going concern basis of accounting when preparing the
interim financial information.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 53
4.01 Basis of preparation (continued)
(b) New standards, interpretations and amendments to published
standards that have been adopted by the group
The group has applied the following amendments for the first
time in its six months reporting period commencing 1 January
2022.
Annual Improvements to IFRS Standards 2018-2020
These amendments, issued in May 2020, make minor amendments to
IFRS 1 'First-time Adoption of IFRS', IFRS 9 'Financial
instruments', IAS 41 'Agriculture' and the Illustrative Examples
accompanying IFRS 16 'Leases'. These amendments did not have a
material impact on the group's consolidated financial
statements.
Amendments to IAS 16 - Property, plant and equipment
These amendments, issued in May 2020, prohibit a company from
deducting from the cost of property, plant and equipment amounts
received from selling items produced while the company is preparing
the asset for its intended use. Instead, a company will recognise
such sales proceeds and related cost in profit or loss. These
amendments did not have a material impact on the group's
consolidated financial statements.
Amendments to IAS 37 - Provisions, contingent liabilities and
contingent assets
These amendments, issued in May 2020, specify which costs a
company includes when assessing whether a contract will be
loss-making. These amendments did not have a material impact on the
group's consolidated financial statements.
Amendments to IFRS 3 - Business Combinations
These amendments, issued in May 2020, update a reference in IFRS
3 to the Conceptual Framework for Financial Reporting without
changing the accounting requirements for business combinations.
These amendments did not have a material impact on the group's
consolidated financial statements.
(c) Future accounting developments
IFRS 17 - Insurance Contracts
IFRS 17, 'Insurance Contracts' was originally issued in May 2017
by the IASB, and subsequent amendments were issued in June 2020.
The standard is effective for annual periods beginning on or after
1 January 2023 following endorsement for use in the UK in May 2022.
The standard will be applied retrospectively, subject to the
transitional options provided for in the standard and provides a
comprehensive approach for accounting for insurance contracts
including their measurement, income statement presentation and
disclosure.
The key general principles of IFRS 17 are that an entity:
-- Identifies insurance contracts as those under which the
entity accepts significant insurance risk from another party (the
policyholder) by agreeing to compensate the policyholder if a
specified uncertain future event (the insured event) adversely
affects the policyholder;
-- Separates specified embedded derivatives, distinct investment
components and distinct non-insurance goods or services from
insurance contracts and accounts for them in accordance with other
accounting standards;
-- Aggregates the insurance contracts into groups it will recognise and measure;
-- Recognises and measures groups of insurance contracts at:
o A risk-adjusted present value of the future cash flows (the
fulfilment cash flows) that incorporates all available information
about the fulfilment cash flows; and
o An amount representing the unearned profit in the group of
contracts (the contractual service margin or CSM);
-- Recognises profit from a group of insurance contracts over
the period the group provides insurance coverage. If a group of
contracts is expected to be onerous (i.e. loss making) over the
remaining coverage period, a loss is recognised immediately.
IFRS 17 is an accounting change and therefore, while it will
have an impact on the timing and profile of profit recognition, we
expect the underlying economics and cash generation of the group's
businesses to remain the same. While the group continues to refine
its methodology and completes the development of models and
operational capabilities, it is not possible to provide a reliable
estimate of the impact of adopting IFRS 17, nor of the ongoing
impact on the group's financial results. However, it is expected
that there will be a significant reduction in group equity on
adoption, as previously recognised profit will be deferred in the
balance sheet within the insurance liability contractual service
margin, and released in the future.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 54
4.01 Basis of preparation (continued)
(c) Future accounting developments (continued)
In terms of key accounting policies and approaches relating to
IFRS 17, the group is able to set out the following at this
time:
-- The group will be applying the General Measurement Model to
all business measured under IFRS 17.
-- On transition to IFRS 17, the group will apply the fully
retrospective approach unless impracticable. In some instances,
this will lead to the modified retrospective and fair value
approaches being used for specific groups of insurance
contracts.
-- For annuity business the selection of a rate at which to
discount future cashflows for groups of insurance contracts is a
key determinant in the valuation of the insurance liability. We
intend to apply a top down discount rate to such groups, starting
from an appropriate asset portfolio with economic deductions.
-- IFRS 17 requires an accounting policy decision as to whether
to recognise all finance income or expense in profit or loss, or
whether to disaggregate the income or expense that relates to
changes in financial assumptions into other comprehensive income.
All finance income and expense will be included in profit or loss
except for protection business where we intend to disaggregate such
changes.
The group has a fully mobilised and well progressed programme to
implement the new standard. Work is continuing throughout 2022 to
finalise technical compliance as well as to test and embed the
required systems and operational capability. Communication and
training plans are in place for impacted employees, and the Finance
function operating model is being refined to ensure the business is
ready to implement the new standard.
IFRS 9 - Financial Instruments
In July 2014, the IASB issued IFRS 9, 'Financial Instruments'
which was effective for annual periods beginning on or after 1
January 2018. The standard replaces IAS 39, 'Financial Instruments:
Recognition and Measurement'. It includes new principles around
classification and measurement of financial instruments, introduces
an impairment model based on expected credit losses (replacing the
current model based on incurred losses) and new requirements on
hedge accounting. The IASB subsequently issued 'Amendments to IFRS
4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts' which allows entities which meet certain requirements to
defer their implementation of IFRS 9 until adoption of IFRS 17,
'Insurance Contracts' or 1 January 2021, whichever is the earlier.
In June 2020, the IASB agreed to extend the temporary exemption in
IFRS 4 from applying IFRS 9 to annual reporting periods beginning
on or after 1 January 2023. The group qualifies for, and is making
use of, this deferral option.
In December 2021, in order to alleviate operational complexities
and potential one-off accounting mismatches in comparative
information between insurance contract liabilities and related
financial assets on the initial application of IFRS 17, the IASB
issued an amendment to IFRS 17 titled 'Initial Application of IFRS
9 and IFRS 17 - Comparative Information'. If an entity applies IFRS
17 and IFRS 9 at the same time, this amendment permits it to
present comparative information about financial assets derecognised
in the comparative period as if the classification and measurement
requirements of IFRS 9 had been applied to them. The group has
chosen to restate comparative information and to apply this
classification overlay to all financial assets in scope. Due to the
application of the new classification and impairment requirements,
the transition to IFRS 9 will generate a day-one impact on group
equity, which is not expected to be significant. Similarly, the
ongoing impact of IFRS 9 on the group's financial results is not
expected to be significant.
IFRS 9 classifies financial assets into the following three
categories: amortised cost, fair value through other comprehensive
income (FVOCI) and fair value through profit or loss (FVTPL). The
classification of financial assets is based on the entity's
business model for managing them, as well as their contractual cash
flow characteristics. The group expects to reclassify a certain
amount of financial assets as a result of these assessments, in
order to better align the accounting treatment of assets that are
backing insurance contract liabilities under IFRS 17.
With the exception of financial assets measured under FVTPL, the
group will apply an expected credit loss impairment model to all
financial assets in scope (including lease receivables and contract
assets). The new impairment model requires utilising not only past
events and current conditions but also reasonable and supportable
forward-looking information, in order to assess the credit risk
profiles of those financial assets in scope. The group will
recognise either twelve months or lifetime expected credit losses
in the Consolidated Income Statement at each reporting period. The
group intends to use the practical expedient for financial assets
deemed to have low credit risk at the reporting date, which allows
recognising twelve months' expected credit losses. Additionally,
for trade receivables, contract assets and lease receivables, the
group plans to use a provision matrix method to calculate and
recognise lifetime expected credit losses.
Most requirements around financial liabilities in IAS 39 have
been retained by IFRS 9. Therefore, financial liabilities are
expected to be classified and measured under their current
categories (either FVTPL or amortised cost).
Finally, hedge accounting requirements have been revised by
replacing some of the prescriptive rules in IAS 39 with more
principle-based requirements, to be better aligned with the risk
management activities of an entity and reflected accordingly in the
financial statements. As such, going forward more risk management
strategies should be able to qualify for hedge accounting.
The group has a fully mobilised programme to implement the
standard. Work will continue throughout the remainder of 2022 to
finalise technical compliance as well as to test and embed the
required systems and operational capability. Communication and
training plans are in place for impacted employees, and the Finance
function operating model is being refined to ensure the business is
ready to implement the new standard.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 55
4.02 Dividends and appropriations
Dividend Per share(1) Dividend Per share(1) Dividend Per share(1)
6 months 6 months 6 months 6 months Full year Full year
2022 2022 2021 2021 2021 2021
GBPm p GBPm p GBPm p
Ordinary dividends paid and charged
to equity in the period:
- Final 2020 dividend paid
in June 2021 - - 754 12.64 754 12.64
- Interim 2021 dividend paid
in September 2021 - - - - 309 5.18
- Final 2021 dividend paid
in June 2022 792 13.27 - - - -
Total dividends(2) 792 13.27 754 12.64 1,063 17.82
1. The dividend per share calculation is based on the number of equity
shares registered on the ex-dividend date.
2. The dividend proposed at 31 December 2021 was GBP790m based on
the current number of eligible equity shares on that date.
Subsequent to 30 June 2022, the directors declared an interim dividend
of 5.44 pence per ordinary share. This dividend will be paid on 26
September 2022. It will be accounted for as an appropriation of retained
earnings in the year ended 31 December 2022 and is not included as
a liability in the Consolidated Balance Sheet as at 30 June 2022.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 56
4.03 Financial investments and investment property
30 Jun 30 Jun 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Equities(1) 182,847 207,803 213,049
Debt securities(2,3) 237,976 278,858 296,930
Derivative assets(4) 28,017 15,449 16,792
Loans(5) 13,489 17,652 11,603
Financial investments 462,329 519,762 538,374
------------------------------------------------- -------- -------- --------
Investment property 10,976 9,080 10,150
------------------------------------------------- -------- -------- --------
Total financial investments and investment
property 473,305 528,842 548,524
------------------------------------------------- -------- -------- --------
1. Equity securities include investments in unit trusts of GBP17,572m
(30 June 2021: GBP15,681m; 31 December 2021: GBP18,248m).
2. Debt securities include accrued interest of GBP1,497m (30 June
2021: GBP1,389m; 31 December 2021: GBP1,420m).
3. A detailed analysis of debt securities to which shareholders
are directly exposed is disclosed in Note 7.03.
4. Derivatives are used for efficient portfolio management, especially
the use of interest rate swaps, inflation swaps, credit default
swaps and foreign exchange forward contracts for asset and liability
management. Derivative assets are shown gross of derivative liabilities
of GBP34,044m (30 June 2021: GBP18,249m; 31 December 2021: GBP15,718m).
5. Loans include GBP101m (30 June 2021: GBP149m; 31 December 2021:
GBP92m) of loans valued at amortised cost.
(a) Fair value hierarchy
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
Fair value measurements are based on observable and unobservable
inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the group's
view of market assumptions in the absence of observable market
information. The group utilises techniques that maximise the use of
observable inputs and minimise the use of unobservable inputs.
The levels of fair value measurement bases are defined as
follows:
Level 1: fair values measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all
inputs significant to the measurement other than quoted prices
included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
Level 3: fair values measured using valuation techniques for any
input for the asset or liability significant to the measurement
that is not based on observable market data (unobservable
inputs).
All of the group's Level 2 assets have been valued using
standard market pricing sources, such as IHS Markit, ICE and
Bloomberg, or Index Providers such as Barclays, Merrill Lynch or
JPMorgan. Each uses mathematical modeling and multiple source
validation in order to determine consensus prices, with the
exception of OTC Derivative holdings; OTCs are marked to market
using an in-house system (Lombard Oberon), external vendor (IHS
Markit), internal model or Counterparty Broker marks. In normal
market conditions, we would consider these market prices to be
observable market prices. Following consultation with our pricing
providers and a number of their contributing brokers, we have
considered that these prices are not from a suitably active market
and have therefore classified them as Level 2.
The group's investment properties are valued by appropriately
qualified external valuers using unobservable inputs, resulting in
all investment property being classified as Level 3.
The group's policy is to re-assess categorisation of financial
assets at the end of each reporting period and to recognise
transfers between levels at that point in time. At 30 June 2022
debt securities totalling net GBP0.8bn transferred from Level 1 to
Level 2 in the fair value hierarchy.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 57
4.03 Financial investments and investment property
(continued)
(a) Fair value hierarchy
(continued)
Total Level Level Level
1 2 3
For the six month period to 30 June 2022 GBPm GBPm GBPm GBPm
Shareholder (1)
Equity securities 3,492 1,995 22 1,475
Debt securities 76,814 27,622 27,265 21,927
Derivative assets 25,071 6 25,065 -
Loans at fair value(2) 1,701 - 1,701 -
Investment property 6,156 - - 6,156
--------------------------------------------------------------------- ------- ------- ------- ------
Total Shareholder 113,234 29,623 54,053 29,558
Unit linked
Equity securities 179,355 178,691 25 639
Debt securities 161,162 129,689 30,836 637
Derivative assets 2,946 125 2,821 -
Loans at fair value 11,687 - 11,687 -
Investment property 4,820 - - 4,820
--------------------------------------------------------------------- ------- ------- ------- ------
Total Unit linked 359,970 308,505 45,369 6,096
Total financial investments and investment
property at fair value(2) 473,204 338,128 99,422 35,654
Total Level Level Level
1 2 3
For the six month period to 30 June 2021 GBPm GBPm GBPm GBPm
Shareholder (1)
Equity securities 3,088 1,821 4 1,263
Debt securities 82,699 34,034 26,375 22,290
Derivative assets 14,019 2 14,017 -
Loans at fair value (2) 4,152 - 4,152 -
Investment property 5,103 - - 5,103
Total Shareholder 109,061 35,857 44,548 28,656
--------------------------------------------------------------------- ------- ------- ------- ------
Unit linked
Equity securities 204,715 204,055 23 637
Debt securities 196,159 146,780 49,029 350
Derivative assets 1,430 89 1,341 -
Loans at fair value 13,351 - 13,351 -
Investment property 3,977 - - 3,977
Total Unit linked 419,632 350,924 63,744 4,964
Total financial investments and investment
property at fair value(2) 528,693 386,781 108,292 33,620
1. All non-unit linked assets are classified as Shareholder assets.
Shareholders of the group are directly exposed to market and credit
risk on those assets including those backing the non-profit-non-unit
linked business.
2. The above tables exclude loans (including accrued interest) of GBP101m,
which are held at amortised cost (30 June 2021: GBP149m).
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 58
4.03 Financial investments and investment property
(continued)
(a) Fair value hierarchy (continued)
Total Level Level Level
1 2 3
For the year ended 31 December 2021 GBPm GBPm GBPm GBPm
Shareholder (1)
Equity securities 3,185 1,854 63 1,268
Debt securities 86,803 32,593 29,887 24,323
Derivative assets 13,203 9 13,194 -
Loans at fair value (2) 2,240 - 2,240 -
Investment property 5,710 - - 5,710
Total Shareholder 111,141 34,456 45,384 31,301
Unit linked
Equity securities 209,864 209,119 25 720
Debt securities 210,127 170,838 38,726 563
Derivative assets 3,589 90 3,499 -
Loans at fair value 9,271 - 9,271 -
Investment property 4,440 - - 4,440
Total Unit linked 437,291 380,047 51,521 5,723
Total financial investments and investment
property at fair value (2) 548,432 414,503 96,905 37,024
1. All non-unit linked assets are classified as Shareholder assets.
Shareholders of the group are directly exposed to market and credit
risk on those assets including those backing the non-profit-non-unit
linked business.
2. This table excludes loans (including accrued interest) of GBP92m,
which are held at amortised cost.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 59
4.03 Financial investments and investment property
(continued)
(b) Level 3 assets measured at fair value
Level 3 assets, where modelling techniques are used, comprise property,
unquoted securities, untraded debt securities and securities where unquoted
prices are provided by a single broker. Unquoted securities include
suspended securities, investments in private equity and property vehicles.
Untraded debt securities include private placements, commercial real
estate loans, income strips, retirement interest only and other lifetime
mortgages.
In many situations, inputs used to measure the fair value of an asset
or liability may fall into different levels of the fair value hierarchy.
In these situations, the group determines the level in which the fair
value falls based upon the lowest level input that is significant to
the determination of the fair value. As a result, both observable and
unobservable inputs may be used in the determination of fair values
that the group has classified within Level 3.
The group determines the fair values of certain financial assets and
liabilities based on quoted market prices, where available. The group
also determines fair value based on estimated future cash flows discounted
at the appropriate current market rate. As appropriate, fair values
reflect adjustments for counterparty credit quality, the group's credit
standing, liquidity and risk margins on unobservable inputs.
Fair values are subject to a control framework designed to ensure that
input variables and outputs are assessed independent of the risk taker.
These inputs and outputs are reviewed and approved by a valuation committee
and validated independently as appropriate.
Climate risk
The group's asset portfolio can be exposed to climate change through
both:
-- Transition risks from the move to a low-carbon economy and the impact
this has on asset valuation and the wider economic environment; and
-- Physical risks from the impact on asset holdings as a result of
severe weather events and longer-term shifts in climate.
Exposure to the physical risks of climate change are minimised in the
direct investment portfolio through rigorous assessment of potential
investments, particularly in ensuring there is low susceptibility to
extreme weather events. The group monitors the carbon intensity of the
investments held at a portfolio level to help understand the environmental
impact and reduce high carbon intensive investments in the future. Further
detail can be found in our Climate Report (TCFD).
The group's assets are valued, where possible, using standard market
pricing sources or appropriately qualified external valuers and therefore
reflect current market sentiments in respect of climate risk.
Equity securities
Level 3 equity securities amount to GBP2,114m (30 June 2021: GBP1,900m;
31 December 2021: GBP1,988m), of which the majority is made up of holdings
in investment property vehicles and private investment funds. They are
valued at the proportion of the group's holding of the Net Asset Value
reported by the investment vehicles. Other equity securities are valued
by a number of third party specialists using a range of techniques which
are often dependent on the maturity of the underlying investment but
can also depend of the characteristics of individual investments. Such
techniques include transaction values underpinned by analysis of milestone
achievement, and cash runway for early/start-up stage investments, discounted
cash flow models for investments at the next stage of development and
earnings multiples for more mature investments.
Other financial investments
Lifetime mortgage (LTM) loans and retirement interest only mortgages
amount to GBP5,758m (30 June 2021: GBP6,325m; 31 December 2021: GBP6,857m).
Lifetime mortgages are valued using a discounted cash flow model by
projecting best-estimate net asset proceeds and discounted using rates
inferred from current LTM loan pricing. The inferred illiquidity premiums
for the majority of the portfolio range between 100 and 250bps. This
ensures the value of loans at outset is consistent with the purchase
price of the loan, and achieves consistency between new and in-force
loans. The mortgages include a no negative equity guarantee (NNEG) to
borrowers. This ensures that if there is a shortfall between the sale
proceeds of the property and the outstanding loan balance on redemption
of the loan, the value of the loan will be reduced by this amount. The
NNEG on loan redemption is valued as a series of put options, which
we calculate using a variant of the Black-Scholes formula. Key assumptions
in the valuation of lifetime mortgages include short-term and long-term
property growth rates, property index volatility, voluntary early repayments
and longevity assumptions. The valuation as at 30 June 2022 reflects
a long-term property growth rate assumption of 2.9% annually, after
allowing for the effects of dilapidation. The values of the properties
collateralising the LTM loans are updated from the date of the last
property valuation to the valuation date by indexing using UK regional
house price indices.
Private credit loans (including commercial real estate loans) amount
to GBP12,115m (30 June 2021: GBP12,232m; 31 December 2021: GBP13,521m).
Their valuation is determined by discounted future cash flows which
are based on the yield curve of the LGIM approved comparable bonds and
the initial spread, both of which are agreed by IHS Markit who also
provide an independent valuation of comparable bonds. Unobservable inputs
that go into the determination of comparators include: rating, sector,
sub-sector, performance dynamics, financing structure and duration of
investment. Existing private credit investments, which were executed
back as far as 2011, are subject to a range of interest rate formats,
although the majority are fixed rate. The weighted average duration
of the portfolio is 9.1 years, with a weighted average life of 11.9
years. Maturities in the portfolio currently extend out to 2064. The
private credit portfolio of assets has internal ratings assigned by
an independent credit team in line with internally developed methodologies.
These credit ratings range from AAA to BB-.
Private placements held by the US business amount to GBP1,932m (30 June
2021: GBP2,090m; 31 December 2021: GBP1,762m). They are valued using
a pricing matrix comprised of a public spread matrix, internal ratings
assigned to each holding, average life of each holding, and a premium
spread matrix. These are added to the risk-free rate to calculate the
discounted cash flows and establish a market value for each investment
grade private placement. The valuation as at 30 June 2022 reflects illiquidity
premiums between 10 and 70bps.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 60
4.03 Financial investments and investment property
(continued)
(b) Level 3 assets measured at fair value (continued)
Commercial mortgage loans amount to GBP1,080m (30 June 2021: GBP408m;
31 December 2021: GBP1,021m) and are determined by incorporating credit
risk for performing loans at the portfolio level and for loans identified
to be distressed at the loan level. The projected cash flows of each
loan are discounted along stochastic risk free rate paths and are inclusive
of an Option Adjusted Spread (OAS), derived from current internal pricing
on new loans, along with the best observable inputs. The valuation as
at 30 June 2022 reflects illiquidity premiums between 20 and 30bps.
Income strip assets amount to GBP1,580m (30 June 2021: GBP1,527m; 31
December 2021: GBP1,626m). Their valuation is outsourced to Knight Frank
and CBRE who apply a yield to maturity to discounted future cash flows
to derive valuations. The overall valuation takes into account the property
location, tenant details, tenure, rent, rental break terms, lease expiries
and underlying residual value of the property. The valuation as at 30
June 2022 reflects equivalent yield ranges between 2% and 7% and estimated
rental values (ERV) between GBP16 and GBP310 per sq.ft.
Other debt securities which are not traded in an active market amount
to GBP100m (30 June 2021: GBP143m; 31 December 2021: GBP99m). They have
been valued using third party or counterparty valuations, and these
prices are considered to be unobservable due to infrequent market transactions.
Investment property
Level 3 investment property amounting to GBP10,976m (30 June 2021: GBP9,080m;
31 December 2021: GBP10,150m) is valued with the involvement of external
valuers. All property valuations are carried out in accordance with
the latest edition of the Valuation Standards published by the Royal
Institute of Chartered Surveyors, and are undertaken by appropriately
qualified valuers as defined therein. Whilst transaction evidence underpins
the valuation process, the definition of market value, including the
commentary, in practice requires the valuer to reflect the realities
of the current market. In this context valuers must use their market
knowledge and professional judgement and not rely only upon historic
market sentiment based on historic transactional comparables.
The valuation of investment properties also includes an income approach
that is based on current rental income plus anticipated uplifts, where
the uplift and discount rates are derived from rates implied by recent
market transactions. These inputs are deemed unobservable. The valuation
as at 30 June 2022 reflects equivalent yield ranges between 2% and 16%
and ERV between GBP1 and GBP396 per sq.ft.
The below table breaks down the investment property
by sector.
30 Jun 30 Jun 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Retail 951 962 1,025
Leisure 505 453 482
Distribution 1,613 1,277 1,552
Office space 4,688 3,832 4,223
Industrial and other
commercial 2,005 1,803 1,767
Accommodation 1,214 753 1,101
Total investment property 10,976 9,080 10,150
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 61
4.03 Financial investments and investment property
(continued)
(b) Level 3 assets measured at fair value (continued)
Other Other
Equity financial Investment Equity financial Investment
securities investments property Total securities investments property Total
2022 2022 2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 1,988 24,886 10,150 37,024 1,801 21,957 8,475 32,233
Total gains/(losses)
for the period
- in other comprehensive
income - 3 - 3 - (8) - (8)
- realised gains/(losses)
(1) 6 (5) 30 31 1 (9) - (8)
- unrealised
gains/(losses)
(1) 144 (3,643) 571 (2,928) 97 (422) 249 (76)
Purchases/Additions 179 2,110 330 2,619 90 2,007 449 2,546
Sales/Disposals (266) (1,105) (105) (1,476) (59) (821) (93) (973)
Transfers into Level
3 67 - - 67 - 8 - 8
Transfers out of Level
3 (10) - - (10) (30) (44) - (74)
Foreign exchange rate
movements 6 318 - 324 - (28) - (28)
As at 30 June 2,114 22,564 10,976 35,654 1,900 22,640 9,080 33,620
Other
Equity financial Investment
securities investments property Total
2021 2021 2021 2021
GBPm GBPm GBPm GBPm
As at 1 January 1,801 21,957 8,475 32,233
Total gains/(losses)
for the year
- in other comprehensive
income - (3) - (3)
- realised gains/(losses)
(1) 31 12 (4) 39
- unrealised gains
or (losses) (1) 208 (87) 1,028 1,149
Purchases/Additions 130 5,429 985 6,544
Sales/Disposals (153) (2,351) (334) (2,838)
Transfers into Level
3 2 10 - 12
Transfers out of Level
3 (31) (112) - (143)
Foreign exchange rate
movements - 31 - 31
As at 31 December 1,988 24,886 10,150 37,024
1. Realised and unrealised gains/(losses) are recognised in investment
return in the Consolidated Income Statement.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 62
4.03 Financial investments and investment property
(continued)
(c) Effect of changes in assumptions on Level 3 assets
Fair values of financial instruments are, in certain
circumstances, measured using valuation techniques that incorporate
assumptions that are not evidenced by prices from observable
current market transactions in the same instrument and are not
based on observable market data.
Where material, the group assesses the sensitivity of fair
values of Level 3 investments to changes in unobservable inputs to
reasonable alternative assumptions. The table below shows the
impact of applying these sensitivities on the fair value of Level 3
assets as at 30 June 2022. Further disclosure on how these
sensitivities have been applied can be found in the descriptions
following the table.
Sensitivities
Fair value Positive Negative
30 June 2022 impact impact
GBPm GBPm GBPm
Lifetime mortgages 5,758 216 (216)
Private credit portfolios 15,127 821 (821)
Investment property 10,976 915 (1,075)
Other investments(1) 3,793 339 (274)
Total Level 3 assets 35,654 2,291 (2,386)
1. Other investments include Level 3 equity securities, income
strip assets and other traded debt securities which are Level 3.
The sensitivities are not a function of sensitising a single variable
relating to the valuation of the asset, but rather a function of
flexing multiple factors often at individual asset level. The following
sets out a number of key factors by asset type, and how they have
been flexed to derive reasonable alternative valuations.
Lifetime mortgages
Key assumptions used in the valuation of Lifetime mortgage assets
are listed in Note 4.03 (b) and sensitivities are applied to each
assumption to arrive at the overall sensitised values in the above
table. The most significant sensitivity by value is +/-10% instant
reduction in property valuation across the portfolio which, applied
in isolation produces sensitised values of GBP71m and GBP(143)m.
Private credit portfolios
The sensitivity in the private credit portfolio has been determined
through a method which estimates investment spread value premium
differences as compared to the institutional investment market.
Individual investment characteristics of each holding, such as
credit rating and duration are used to determine spread differentials
for the purposes of determining alternate values. Spread differentials
are determined to be lower for highly rated and/or shorter duration
assets as compared to lower rated and/or longer duration assets.
A significant component of the spread differential is in relation
to the selection of comparator bonds, which is the potential difference
in spread of the basket of relevant comparators determined by respective
investors. If we were to take an AA rated asset it may attract
a spread differential of 15bps on the selection of comparator bonds
as opposed to 40bps for a similar duration BBB rated asset. Applied
in isolation the sensitivity used to reflect the spread in comparator
bond selection results in sensitised values of GBP274m and GBP(274)m.
Investment property
Investment property holdings are valued by independent valuers
on the basis of open market value as defined in the appraisal and
valuation manual of the Royal Institute of Chartered Surveyors
(RICS). As such, sensitivities are calculated through a mixture
of asset level and portfolio level methodologies which make reference
to individual investment characteristics of the holding but do
not flex individual assumptions used by the independent expert
in valuing the holdings. Each method is applied individually and
aggregated with equal weighting to determine the overall sensitivity
determined for the portfolio. One method is similar to that used
in the private credit portfolio as it determines the impact of
an alternate property yield determined in reference to credit ratings,
remaining term and other characteristics of each holding. In this
methodology we would apply a lower yield sensitivity to a highly
rated and/or shorter remaining term asset compared with a lower
rated and/or longer remaining term asset. If we were to take an
AA rated asset with remaining term of 25 years in normal market
conditions this would lead to a 15bps yield flex (as opposed to
a 35bps yield flex for a BBB rated asset with 30 year remaining
term). The methodology which leads to the most significant sensitivity
at the balance sheet date is related to an example in case law
where it was found that an acceptable margin of error in a valuation
dispute is 10% either way, subject to the valuation being undertaken
with due care. If this sensitivity were to be taken without a weighting
it would produce sensitised values of GBP723m and GBP(723)m.
It should be noted that some sensitivities described above are
non-linear, and larger or smaller impacts should not be interpolated
or extrapolated from these results.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 63
4.04 Tax
(a) Tax expense in the Consolidated Income Statement
The tax expense attributable to equity holders differs from
the tax calculated at the standard UK corporation tax rate as
follows:
6 months 6 months Full year
2022 2021 2021
GBPm GBPm GBPm
Profit before tax attributable to equity holders 1,367 1,320 2,488
Tax calculated at 19.00% 260 251 473
Adjusted for the effects of:
Recurring reconciling items:
(Lower)/higher rate of tax on profits taxed
overseas(1) (32) (32) (104)
Non-deductible expenses - 4 6
Differences between taxable and accounting
investment gains (6) (9) (13)
Foreign tax 1 - -
Unrecognised tax losses 1 - 1
Other 3 - -
Non-recurring reconciling items:
Adjustments in respect of prior years(2) (1) 12 24
Impact of the revaluation of deferred tax
balances(3) (12) 32 58
Tax expense attributable to equity holders 214 258 445
Equity holders' effective tax rate 15.7% 19.5% 17.9%
1. The lower rate of tax on overseas profits is principally
driven by the 0% rate of taxation arising in our Bermudan reinsurance
company, which
provides the group with regulatory capital flexibility for both
our PRT business and our US term insurance business. This also
includes the impact of our US operations which are taxed at
21%.
2. Adjustments in respect of prior years relate to revisions
of prior estimates.
3. The Finance Act 2021 increased the rate of corporation tax
from 19% to 25% from 1 April 2023. The prevailing rate of UK
corporation tax for the year remained at 19%. The future enacted
tax rate of 25% has been used in the calculation of UK deferred
tax assets and liabilities in respect of temporary differences
arising in the period, being the rate of corporation tax that
is expected to apply when the majority of those deferred tax
balances reverse.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 64
4.04 Tax (continued)
(b) Deferred tax
30 Jun 30 Jun 31 Dec
2022 2021 2021
Deferred tax (liabilities)/assets GBPm GBPm GBPm
Overseas deferred acquisition expenses 110 88 95
Difference between the tax and accounting
value of insurance contracts (901) (652) (695)
- UK (198) (231) (269)
- Overseas (703) (421) (426)
Realised and unrealised gains on investments(1) 79 (22) (83)
Excess of depreciation over capital allowances 20 23 22
Excess expenses - 1 -
Accounting provisions and other 32 (37) 55
Trading losses(2) 410 320 348
Pension fund deficit (42) 15 9
Acquired intangibles - (1) -
Net deferred tax liabilities (292) (265) (249)
Analysed by:
- Deferred tax assets(1) 115 12 2
- UK deferred tax liabilities (218) (209) (215)
- Overseas deferred tax liabilities(2) (189) (68) (36)
Net deferred tax liabilities (292) (265) (249)
1. The deferred tax asset represents GBP113m of US unrealised losses
on investments (H1 21: GBPnil; FY 21: GBPnil) and GBP2m of UK restricted
losses (H1 21: GBP12m; FY 21: GBP2m) that are not capable of being
offset against other deferred tax liabilities or future trading
profits.
2. Trading losses include UK trade and US operating losses of GBP3m
(H1 21: GBP12m; FY 21: GBP2m) and GBP407m (H1 21: GBP308m; FY 21:
GBP346m) respectively. Overseas net deferred tax liabilities is
wholly comprised of US balances as at 30 June 2022 and includes
the US deferred tax asset. The losses are not time restricted, and
we expect to recover them over a period of 15 to 20 years, commensurate
with the lifecycle of the underlying insurance contracts. In reaching
this conclusion, we have considered past results, the different
basis under which US companies are taxed, temporary differences
that are expected to generate future profits against which the deferred
tax can be offset, management actions, and future profit forecasts.
The recoverability of deferred tax assets is routinely reviewed
by management.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 65
4.05 Share capital and share premium
Number
of
Authorised share capital shares GBPm
At 30 June 2022, 30 June 2021 and 31 December
2021: ordinary shares of 2.5p each 9,200,000,000 230
Share Share
Number capital premium
of
Issued share capital, shares GBPm GBPm
fully paid
As at 1 January
2022 5,970,415,817 149 1,012
Options exercised under share option 2,162,898 - 5
schemes
As at 30 June 2022 5,972,578,715 149 1,017
Share Share
Number capital premium
of
Issued share capital, shares GBPm GBPm
fully paid
As at 1 January
2021 5,967,358,713 149 1,006
Options exercised under share option
schemes 2,500,221 - 5
As at 30 June 2021 5,969,858,934 149 1,011
Options exercised under share option
schemes 556,883 - 1
As at 31 December
2021 5,970,415,817 149 1,012
There is one class of ordinary shares of 2.5p each. All shares issued
carry equal voting rights.
The holders of the company's ordinary shares are entitled to receive
dividends as declared and are entitled to one vote per share at
shareholder meetings of the company.
4.06 Restricted Tier 1 convertible notes
On 24 June 2020, Legal & General Group Plc issued GBP500m of
5.625% perpetual restricted Tier 1 contingent convertible notes.
The notes are callable at par between 24 March 2031 and 24
September 2031 (the First Reset Date) inclusive and every 5 years
after the First Reset Date. If not called, the coupon from 24
September 2031 will be reset to the prevailing five year benchmark
gilt yield plus 5.378%.
The notes have no fixed maturity date. Optional cancellation of
coupon payments is at the discretion of the issuer and mandatory
cancellation is upon the occurrence of certain conditions. The Tier
1 notes are therefore treated as equity and coupon payments are
recognised directly in equity when paid. During the period a coupon
payment of GBP14m was made (H1 21: GBP14m; FY 21: GBP28m). The
notes rank junior to all other liabilities and senior to equity
attributable to owners of the parent. On the occurrence of certain
conversion trigger events the notes are convertible into ordinary
shares of the Issuer at the prevailing conversion price.
The notes are treated as restricted Tier 1 own funds for
Solvency II purposes.
4.07 Non-controlling interests
Non-controlling interests represent third party interests in
direct equity investments, including private equity, which are
consolidated in the group's results.
As at 30 June 2022, non-controlling interests primarily
represent third party ownership in Thorpe Park Holdings, a mixed
residential/commercial retail space in which the group holds
50%.
No other individual non-controlling interest is considered to be
material on the basis of the period end carrying value or share of
profit or loss.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 66
4.08 Core borrowings
Carrying Carrying Carrying
amount Fair amount Fair amount Fair
value value value
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Subordinated borrowings
10% Sterling subordinated
notes 2041(1) - - 313 315 - -
5.5% Sterling subordinated
notes 2064 590 546 589 771 590 776
5.375% Sterling subordinated
notes 2045 604 610 604 699 604 673
5.25% US Dollar subordinated
notes 2047 707 690 621 703 635 694
5.55% US Dollar subordinated
notes 2052 414 416 364 413 373 428
5.125% Sterling subordinated
notes 2048 400 391 400 478 400 461
3.75% Sterling subordinated
notes 2049 598 523 598 659 598 632
4.5% Sterling subordinated
notes 2050 500 456 500 582 500 558
Client fund holdings of group
debt(2) (50) (46) (41) (49) (44) (51)
Total subordinated borrowings 3,763 3,586 3,948 4,571 3,656 4,171
Senior borrowings
Sterling medium term notes
2031-2041 602 707 603 866 609 846
Client fund holdings of group
debt(2) (9) (10) (9) (12) (9) (11)
Total senior borrowings 593 697 594 854 600 835
Total core borrowings 4,356 4,283 4,542 5,425 4,256 5,006
1. These notes were redeemed in full on 23 July 2021.
2. GBP59m (30 June 2021: GBP50m; 31 December 2021: GBP53m) of the
group's subordinated and senior borrowings are held by Legal & General
customers through unit linked products. These borrowings are shown
as a deduction from total core borrowings in the table above.
The presented fair values of the group's core borrowings reflect
quoted prices in active markets and they have been classified as
Level 1 in the fair value hierarchy.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 67
4.08 Core borrowings (continued)
Subordinated borrowings
10% Sterling subordinated notes 2041
In 2009, Legal & General Group Plc issued GBP300m of 10%
dated subordinated notes. These notes were called at par on 23 July
2021.
5.5% Sterling subordinated notes 2064
In 2014, Legal & General Group Plc issued GBP600m of 5.5%
dated subordinated notes. The notes are callable at par on 27 June
2044 and every five years thereafter. If not called, the coupon
from 27 June 2044 will be reset to the prevailing five year
benchmark gilt yield plus 3.17% p.a. These notes mature on 27 June
2064.
5.375% Sterling subordinated notes 2045
In 2015, Legal & General Group Plc issued GBP600m of 5.375%
dated subordinated notes. The notes are callable at par on 27
October 2025 and every five years thereafter. If not called, the
coupon from 27 October 2025 will be reset to the prevailing five
year benchmark gilt yield plus 4.58% p.a. These notes mature on 27
October 2045.
5.25% US Dollar subordinated notes 2047
On 21 March 2017, Legal & General Group Plc issued $850m of
5.25% dated subordinated notes. The notes are callable at par on 21
March 2027 and every five years thereafter. If not called, the
coupon from 21 March 2027 will be reset to the prevailing US Dollar
mid-swap rate plus 3.687% p.a. These notes mature on 21 March
2047.
5.55% US Dollar subordinated notes 2052
On 24 April 2017, Legal & General Group Plc issued $500m of
5.55% dated subordinated notes. The notes are callable at par on 24
April 2032 and every five years thereafter. If not called, the
coupon from 24 April 2032 will be reset to the prevailing US Dollar
mid-swap rate plus 4.19% p.a. These notes mature on 24 April
2052.
5.125% Sterling subordinated notes 2048
On 14 November 2018, Legal & General Group Plc issued
GBP400m of 5.125% dated subordinated notes. The notes are callable
at par on 14 November 2028 and every five years thereafter. If not
called, the coupon from 14 November 2028 will be reset to the
prevailing five year benchmark gilt yield plus 4.65% p.a. These
notes mature on 14 November 2048.
3.75% Sterling subordinated notes 2049
On 26 November 2019, Legal & General Group Plc issued
GBP600m of 3.75% dated subordinated notes. The notes are callable
at par on 26 November 2029 and every five years thereafter. If not
called, the coupon from 26 November 2029 will be reset to the
prevailing five year benchmark gilt yield plus 4.05% p.a. These
notes mature on 26 November 2049.
4.5% Sterling subordinated notes 2050
On 1 May 2020, Legal & General Group Plc issued GBP500m of
4.5% dated subordinated notes. The notes are callable at par on 1
November 2030 and every five years thereafter. If not called, the
coupon from 1 November 2030 will be reset to the prevailing five
year benchmark gilt yield plus 5.25% p.a. These notes mature on 1
November 2050.
All of the above subordinated notes are treated as Tier 2 own
funds for Solvency II purposes unless stated otherwise.
Senior borrowings
Between 2000 and 2002 Legal & General Finance Plc issued
GBP600m of senior unsecured Sterling medium term notes 2031-2041 at
coupons between 5.75% and 5.875%. These notes have various maturity
dates between 2031 and 2041.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 68
4.09 Operational borrowings
Carrying Carrying Carrying
amount Fair amount Fair amount Fair
value value value
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Euro Commercial Paper 50 50 50 50 50 50
Non-recourse borrowings 1,004 1,004 1,064 1,064 874 874
Bank loans and overdrafts 91 91 2 2 - -
Operational borrowings (1) 1,145 1,145 1,116 1,116 924 924
1. Unit linked borrowings with a carrying value of GBP37m (30 June
2021: GBP22m; 31 December 2021: GBP8m) are excluded from the analysis
above as the risk is retained by policyholders. Operational borrowings
including unit linked borrowings are GBP1,182m (30 June 2021: GBP1,138m;
31 December 2021: GBP932m).
Syndicated Credit Facility
As at 30 June 2022, the group had in place a GBP1bn syndicated committed
revolving credit facility provided by a number of its key relationship
banks, maturing in December 2024. No amounts were outstanding at 30
June 2022.
4.10 Movement in borrowings
30 Jun 30 Jun 31 Dec
2022 2021 2021
GBPm GBPm GBPm
As at 1 January 5,188 5,613 5,613
Cash movements:
- Proceeds from borrowings 265 269 503
- Repayment of borrowings (210) (162) (798)
- Net increase/(decrease) in bank
loans and overdrafts 120 (17) (54)
Non-cash movements:
- Amortisation 1 1 3
- Foreign exchange rate movements 184 (19) 10
- Other (10) (5) (89)
Core and operational borrowings 5,538 5,680 5,188
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 69
4.11 Payables and other financial liabilities
30 Jun 30 Jun 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Derivative liabilities 34,044 18,249 15,718
Repurchase agreements (1) 47,103 47,703 46,331
Other financial liabilities (2) 14,823 14,833 12,215
Total payables and other financial
liabilities 95,970 80,785 74,264
1. The repurchase agreements are presented gross, however they
and their related assets (included within debt securities) are
subject to master netting arrangements. The significant majority
of the repurchase agreements are unit linked.
2. Other financial liabilities includes trail commission, lease
liabilities, FX spots and the value of short positions taken out
to cover reverse repurchase agreements. The value of short positions
as at 30 June 2022 was GBP4,779m (30 June 2021: GBP4,320m; 31
December 2021: GBP5,418m).
Fair value hierarchy
Amortised
Total Level Level Level cost(1)
1 2 3
As at 30 June 2022 GBPm GBPm GBPm GBPm GBPm
Derivative liabilities 34,044 291 33,713 40 -
Repurchase agreements 47,103 - 47,103 - -
Other financial liabilities 14,823 4,815 81 - 9,927
Total payables and other financial
liabilities 95,970 5,106 80,897 40 9,927
Amortised
Total Level Level Level cost(1)
1 2 3
As at 30 June 2021 GBPm GBPm GBPm GBPm GBPm
Derivative liabilities 18,249 397 17,780 72 -
Repurchase agreements 47,703 - 47,703 - -
Other financial liabilities 14,833 5,484 15 10 9,324
Total payables and other financial
liabilities 80,785 5,881 65,498 82 9,324
Amortised
Total Level Level Level cost(1)
1 2 3
As at 31 December 2021 GBPm GBPm GBPm GBPm GBPm
Derivative liabilities 15,718 331 15,316 71 -
Repurchase agreements 46,331 - 46,331 - -
Other financial liabilities 12,215 5,438 55 - 6,722
Total payables and other financial
liabilities 74,264 5,769 61,702 71 6,722
1. The carrying value of payables and other financial liabilities
at amortised cost approximates its fair value.
Significant transfers between levels
There have been no significant transfers of liabilities between
Levels 1, 2 and 3 for the period ended 30 June 2022 (30 June 2021
and 31 December 2021: no significant transfers).
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 70
4.12 Foreign exchange rates
Principal rates of exchange used
for translation are:
Period end exchange rates 30 Jun 30 Jun 31 Dec
2022 2021 2021
United States dollar 1.22 1.38 1.35
Euro 1.16 1.17 1.19
6 months 6 months Full year
Average exchange rates 2022 2021 2021
United States dollar 1.30 1.39 1.38
Euro 1.19 1.15 1.16
4.13 Provisions
30 Jun 30 Jun 31 Dec
2022 2021 2021
Note GBPm GBPm GBPm
Other provisions 4.13 (a) 182 108 213
Retirement benefit obligations 4.13 (b) 599 1,005 1,025
Total provisions 781 1,113 1,238
(a) Other provisions
Included within Other provisions are amounts relating to new and
existing M&A and restructuring transactions. This includes
costs that Legal & General Investment Management (LGIM) has
committed to incur to extend its existing partnership with State
Street, to increase the use of Charles River technology across the
front office and to deliver middle office services going
forward.
(b) Retirement benefit obligations
The Legal & General Group UK Pension and Assurance Fund
(Fund) and the Legal & General Group UK Senior Pension Scheme
(Scheme) account for the majority of the UK and worldwide assets
of, and contributions to, such arrangements. The Fund and Scheme
were closed to future accrual on 31 December 2015.
As at 30 June 2022, the combined obligation arising from these
arrangements has been estimated at GBP594m (30 June 2021: GBP980m;
31 December 2021: GBP1,020m). The retirement benefit obligations
are a component of Provisions on the Consolidated Balance Sheet.
The after tax surplus, net of annuity obligations insured by Legal
and General Assurance Society (LGAS), has been calculated to be
GBP131m (30 June 2021: deficit of GBP28m; 31 December 2021: deficit
of GBP22m).
The group operates two other defined benefit pension schemes,
both of which are closed to future accrual and have a combined
retirement benefit obligation of GBP5m (30 June 2021: GBP25m; 31
December 2021: GBP5m).
4.14 Contingent liabilities, guarantees and indemnities
Provision for the liabilities arising under contracts with
policyholders is based on certain assumptions. The variance between
actual experience from that assumed may result in those liabilities
differing from the provisions made for them. Liabilities may also
arise in respect of claims relating to the interpretation of
policyholder contracts, or the circumstances in which policyholders
have entered into them. The extent of these liabilities is
influenced by a number of factors including the actions and
requirements of the PRA, FCA, ombudsman rulings, industry
compensation schemes and court judgments.
Various group companies receive claims and become involved in
actual or threatened litigation and regulatory issues from time to
time. The relevant members of the group ensure that they make
prudent provision as and when circumstances calling for such
provision become clear, and that each has adequate capital and
reserves to meet reasonably foreseeable eventualities. The
provisions made are regularly reviewed. It is not possible to
predict, with certainty, the extent and the timing of the financial
impact of these claims, litigation or issues.
Group companies have given warranties, indemnities and
guarantees as a normal part of their business and operating
activities or in relation to capital market transactions or
corporate disposals. Legal & General Group Plc has provided
indemnities and guarantees in respect of the liabilities of group
companies in support of their business activities including Pension
Protection Fund compliant guarantees in respect of certain group
companies' liabilities under the group pension Fund and Scheme.
LGAS has provided indemnities, a liquidity and expense risk
agreement, a deed of support and a cash and securities liquidity
facility in respect of the liabilities of group companies to
facilitate the group's matching adjustment reorganisation pursuant
to Solvency II.
Legal & General Group Plc
Half Year Results 2022 Part 2
IFRS Disclosure Notes Page 71
4.15 Related party transactions
(i) Key management personnel transactions
and compensation
There were no material transactions between key management and
the Legal & General group of companies during the period. All
transactions between the group and its key management are on commercial
terms which are no more favourable than those available to employees
in general. Contributions to the post-employment defined benefit
plans were GBP51m (30 June 2021: GBP52m; 31 December 2021: GBP109m)
for all employees.
At 30 June 2022, 30 June 2021 and 31 December 2021 there were
no loans outstanding to officers of the company.
The aggregate compensation for key management personnel, including
executive and non-executive directors, is as follows:
6 months 6 months Full year
2022 2021 2021
GBPm GBPm GBPm
Salaries 3 3 10
Share-based incentive awards 5 5 5
Key management personnel compensation 8 8 15
(ii) Services provided to and by related parties
All transactions between the group and associates, joint
ventures and other related parties during the period are on
commercial terms which are no more favourable than those available
to companies in general.
Loans and commitments to related parties are made in the normal
course of business.
The group has the following material related party
transactions:
- Assured Payment Policies (APPs) have been transacted between
the group's defined benefit pension schemes and LGAS. An APP is an
investment contract product sold by LGRI which, issued to a pension
scheme, provides the scheme with a fixed or inflation-linked
schedule of payments to match the scheme's expected liabilities. As
at 30 June 2022, LGAS recognised a liability related to the APP
transactions of GBP968m (30 June 2021: GBP1,251m; 31 December 2021:
GBP1,214m) which is included in the group's investment contract
liabilities. The UK defined benefit pension schemes hold
transferable plan assets of the same amounts, which do not
eliminate on consolidation.
- Loans outstanding from related parties at 30 June 2022 of
GBP20m (30 June 2021: GBP22m; 31 December 2021: GBP15m), with a
further commitment of GBP2m;
- The group has total other commitments of GBP1,061m to related
parties (30 June 2021: GBP1,206m; 31 December 2021: GBP1,158m), of
which GBP736m has been drawn at 30 June 2022 (30 June 2021:
GBP738m; 31 December 2021: GBP726m).
4.16 Acquisitions
Ancora L&G LLC
On 25 May 2022 Legal & General Capital (LGC) announced that
it has formed a 50:50 partnership with US based real estate
developer to create a real estate platform dedicated to driving
life science, research and technology growth across the US.
As part of the transaction, the group transferred consideration
of $4m (GBP3m) in cash, in return for a 50% shareholding in Ancora
L&G LLC. As a result of the transaction, in line with IFRS 3
'Business Combinations', the group controls Ancora, and therefore
the assets and liabilities acquired have been included in the
group's consolidated financial statements, using the group's
accounting policies. Goodwill of GBP3m has been recognised on
consolidation.
Legal & General Group Plc
Half Year Results 2022 Part 2
Page 72
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