1 MORE. Half-Year Results 3 rd August 2 FORWARD LOOKING STATEMENTS. This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forwardlooking statements involve uncertainty because they relate to future events and circumstances which are beyond Legal & General s control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact of these events and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group s actual future condition, performance and results may differ materially from the plans, goals and expectations set out in these forward-looking statements and persons reading this announcement should not place reliance on forward-looking statements. These forward-looking statements are made only as at the date on which such statements are made and Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.
3 : Delivering on our strategy A strong track record of performance. Financial highlights ( m) Operational cash Net cash Worldwide new business 498 427 920 417 373 881 2009 333 302 746 IFRS profit before tax 523 473 542 537 404 (143) EEV operating profit EEV per share 662 139 589 119 656 95 IGD Surplus 1 ( bn) 4.0 3.3 1.9 Interim dividend (p) 1.66 1.33 1.11 (1) Estimated 4 CASH: Consistent growth in operational and net cash. Operational cash 2007 ( m) 580 654 726 840 H2 423 498 417 m Net cash 2007 2008 2009 11 2007 2008 2009 236 320 699 760 427
5 Material progress in diversification of net cash. Source of net cash 2009-2009 699m 760m 427m 22% 30% % 52% 38% 26% Annuities Housing and Protection Savings LGIM International Group capital and financing 6 Continued strong profitability and returns. Summary IFRS income statement ( m) Risk Savings Investment management International Group capital and financing Investment projects Operating profit Variation from longer term investment return Property losses attributable to non-controlling interests Profit from ordinary activities before tax Tax Profit from ordinary activities after tax IFRS shareholders equity Annualised return on equity (%) Operating earnings per share (p) Interim dividend per share (p) 236 68 117 66 (25) 523 (49) (1) 473 (115) 8 4,987 14.6 6.69 1.66 3 54 98 33 (14) 542 (4) (1) 537 (136) 401 4,467 18.6 6.73 1.33
7 Sales: Solid performance, confident about H2. New business sales ( m) Protection APE Annuities APE Savings APE International APE Worldwide new business APE 94 76 662 88 920 85 6 609 81 881 LGIM gross new business ( bn) 17.9 21.2 LGIM net asset flows ( bn) Savings net asset flows ( bn) net asset flows ( bn) 3.0 1.1 4.1 8.3 1.5 9.8 8 Investment management: Another record six months for LGIM. Operating profit of 117m. Financial highlights ( m) Investment management Net cash 117 91 98 70 LGIM highlights revenue costs 205 (88) 117 182 (84) 98 Average ad valorem fee margin (bps) Average expense margin (bps).9 5.2.6 5.5 Gross new fund management mandates ( bn) 17.9 21.2 Closing funds under management ( bn) 1 362 320 (1) Includes annuities and some savings assets
9 Investment management: LDI and international from 39bn to 62bn in 18 months. Assets under management ( bn) Opening assets under management of which international of which LDI 3.5 14.6 40.8 FY 315.1 8.9 29.9 UK gross new business of which LDI new business International gross new business Gross outflows Net new business 14.7 2.7 3.2 (14.9) 3.0 26.5 4.9 6.1 (26.0) 6.6 Market and other movements 5.9 31.8 Closing assets under management of which international of which LDI 362.4 17.3 44.9 3.5 14.6 40.8 Savings: Another record six months for sales, assets, profits and cash. Financial highlights ( m) Operational cash New business strain Net cash Experience variance, assumption changes, tax and other variances 89 (31) 58 68 72 (34) 38 16 54 Savings new business APE Assets under administration ( bn) Net new funds ( bn) 662 66 1.1 609 56 1.5 Non profit new business strain / PVNBP (%) 2.6 3.1
11 Savings: All business units generating cash and profits. Financial highlights ( m) Savings Investments With-profits Insured Savings Operational cash New business strain Net cash 13 13 26 26 23 23 51 (31) 20 36 (34) 2 Assumption changes, experience and other variances Tax gross up (4) 5 (4) 5-9 - 9 (4) 4 4 2 13 14 32 20 8 Savings Investments includes unit trusts, ISAs, structured products, platform business and uninsured SIPPs With-profits includes all business written within the with-profits fund Insured Savings includes all non profit bond business and non profit pension business Risk: Another good six months. Healthy cash and profit contribution. Financial Highlights ( m) Operational cash New business strain Net cash Experience variance, assumption changes, tax and other variances Investment variances Profit before tax 233 (40) 193 43 236 15 251 2 () 202 8 3 1 422
13 Risk: Good growth in operational cash, masked by one off movements. Movement in operating profit ( m) Risk operating profit Increase in operational cash Lower expense assumptions Reduction in positive annuity new business strain Group protection negative mortality experience inflation modelling not repeated in Other changes Risk operating profit 3 21 18 (34) (27) (72) 20 236 14 Risk: operational cash growth in all areas. Financial highlights ( m) Annuities Protection GI and other Operational cash New business strain Net cash 1 1 113 6 141 9 (41) 68 96 (45) 51 - - Assumption changes, experience and other variances Tax gross up (7) 39 (3) 56 (13) 20 24 29-4 1 1 145 194 75 4 16
15 International: Strong performance from the US, continuing to invest in emerging markets. Financial highlights ( m) USA 50 44 Europe (France and Netherlands) 18 21 Middle East and Asia (Egypt, the Gulf and India) 1 (2) (4) 66 New business APE USA Europe (France and Netherlands) Middle East and Asia (Egypt, the Gulf and India) 1 88 32 48 8 81 22 46 13 Net cash 33 (1) Includes international divisional head office costs 16 Group capital and financing: Assets increased by over 1bn, profits up 85%. Balance Sheet Profit and Loss Group capital and financing ( m) Equities Property Bonds Derivative Assets Cash Debt Investment expense and unallocated corporate expenses IFRS operating Profit 989 131 1,868 298 1,083 4,369 2,742 820 140 1,198 273 821 3,252 2,565 130 (62) (7) 96 (59) (4) 33 Additional 1.5bn ( : 1.6bn) of other shareholder funds outside of Group capital and financing
17 Operational cash : Close and transparent link between cash and profit. Half-Year ( m) Annuities Housing and protection Operational cash 6 6 New business strain (45) Net cash 141 International Tax and other 8 IFRS profit before tax 3 Savings 72 (34) 38 16 54 Investment management 70 70 28 98 International 33 33 7 21 Group capital and financing 30 30 3 33 Investment projects (14) (14) 417 (44) 373 7 162 542 18 Operational cash : Close and transparent link between cash and profit. Half-Year ( m) Annuities Housing and protection Savings Investment management International Group capital and financing Investment projects Operational cash 1 1 89 91 50 498 New business strain 1 (41) (31) (71) Net cash 113 80 58 91 50 427 International 9 9 Tax and other 43 26 22 11 (25) 87 IFRS profit before tax 236 68 117 66 (25) 523
19 Assets: High quality with PIIGS sovereign debt and bank debt exposure only 1.4% of shareholder assets. Worldwide assets under management at 30/06/11( bn) Shareholder assets, With-profits, 20 Group capital & finance assets, 4.4 By business unit Other group shareholder assets, 1.5 Shareholder assets at 30/06/11 ( bn) PIIGS sovereigns, 0.3 PIIGS banks, 0.2 By asset class Sovereign Debt, 5.0 Equities, 1.0 Derivatives, 1.6 Property, 0.3 Cash, 2.3 370bn Other insurance assets, 3.7.1bn Banks Debt, 4.4.1bn Client funds, 315 Assets backing annuity business, 25.5 Non bank, non sovereign bonds, 20.0 High degree of confidence over cash. Insured savings With-profits Savings investments and other savings GI and other risk LGIM International dividends 53 26 91 New business strain ( m) Annuities 1 1 113 c. 220 UK UVIF 1 : 8.7bn Operational cash ( m) (31) 22 HY Net cash ( m) 26 91 Operational cash ( m) Protection 9 (41) 68 c. 230 c. 0 In-force cash 274 (71) 203 c. 550 c. 50 c. 50 New business strain ( m) FY Net cash ( m) 20 Group capital and financing Return on assets 0 Cost of Debt (50) 50 Variances and other International (excl. dividends) Tax gross up Operating profit 498 (71) 427 (46) 9 133 523 1. Undiscounted VIF
21 Modelling IGD. IGD Surplus ( m) At start of period Operational cash New business strain Dividends Experience variances and assumption changes Investment variance (Increase) / decrease in operational regulatory capital requirement Release of capital from US capital management programme Other At end of period 3,745 498 (71) (97) 27 (27) (8) - (32) 4,0 FY 3,148 840 (80) (279) 138 46 (155) 132 (45) 3,745 22 Modelling VIF. Reconciliation of UK long term Risk and Savings VIF bn Opening VIF at 1 January Contribution from new business Unwind of discount rate Expected release from non profit and with-profits businesses Closing operational VIF at 30 June Experience variances / assumption changes Investment variance / economic assumption changes Other 2 Closing VIF at 30 June Discounted 1 3.89 0.16 0.15 (0.30) 3.90 0.06 (0.02) 0.14 4.08 Undiscounted 8.0 0.3 n/a (0.3) 8.0 0.2 0.2 0.3 8.7 1. After cost of capital 2. Includes the effect of UK budget changes of 0.15bn (discounted) and 0.3bn (undiscounted)
23 EEV per share increased to 139p. Estimated additional value of LGIM on discounted cashflow basis 1 160 21 95 119 139 09 11 1. Management estimates, assuming stable margins and % outflows per annum 24 Interim dividend up 25%. 3.84p Full up 24% 4.75p 2.73 Interim up 20% 3.42 Interim up 25% 1.11 1.33 1.66 2009 m Cash cover (x) Earnings cover (x) 2009 3.1 2.6 3.9 3.0 Cash cover to move towards two times over the medium term and potential to fall further thereafter as risks recede
25 Positive outlook for L&G. Difficult macro-economic environment Low growth Economic and market risks remain high Attractive trends in the UK Demographic shifts favour our model Pension fund de-risking driving demand in LGIM and BPA Government agenda plays to L&G s strengths Significant and prolonged regulatory change L&G distribution model well positioned for RDR Direction of Solvency 2 remains broadly positive Uncertainty and delay is unhelpful and expensive 26 Business growth and opportunities. Cash and dividend growth. Strong balance sheet.