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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Legal & General Group Plc | LSE:LGEN | London | Ordinary Share | GB0005603997 | ORD 2 1/2P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
5.10 | 2.16% | 240.90 | 240.70 | 240.90 | 241.80 | 237.00 | 237.40 | 9,557,305 | 16:35:23 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Ins Agents,brokers & Service | 36.48B | 457M | 0.0764 | 31.52 | 14.4B |
TIDMLGEN
RNS Number : 4745H
Legal & General Group Plc
04 August 2021
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 73
5.01 LGIM total assets under management(1) (AUM)
Active Multi Real Total Index strategies asset Solutions(2) assets AUM For the six month period to GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn 30 June 2021 As at 1 January 2021 429.9 193.6 63.4 559.5 32.5 1,278.9 External inflows 44.5 10.0 4.9 20.2 0.6 80.2 External outflows (41.9) (7.7) (3.1) (8.0) (0.8) (61.5) Overlay net flows - - - 6.6 - 6.6 ETF net flows 2.1 - - - - 2.1 External net flows(3) 4.7 2.3 1.8 18.8 (0.2) 27.4 Internal net flows(4) (0.3) (2.3) 0.1 (0.2) 1.0 (1.7) Total net flows 4.4 - 1.9 18.6 0.8 25.7 Cash management movements(5) - (0.4) - - - (0.4) Market and other movements(3) 37.1 (3.1) 2.8 (14.6) 0.4 22.6 As at 30 June 2021 471.4 190.1 68.1 563.5 33.7 1,326.8 Assets attributable to: External 1,213.6 Internal 113.2 1. Assets under management (AUM) includes assets on our Investment Only Platform that are managed by third parties, on which fees are earned. 2. Solutions include liability driven investments and GBP345.3bn (30 June 2020: GBP348.3bn; 31 December 2020: GBP340.1bn) of derivative notionals associated with the Solutions business. 3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2021 was GBP51.5bn (30 June 2020: GBP62.3bn; 31 December 2020: GBP45.8bn) and the movement in these assets is included in market and other movements for Solutions assets. 4. Internal includes legacy assets from the Mature Savings business sold to ReAssure in 2020. 5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 74
5.01 LGIM total assets under management(1) (AUM) (continued)
Active Multi Real Total Index strategies asset Solutions(2) assets AUM For the six month period GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn to 30 June 2020 As at 1 January 2020 403.6 177.2 58.0 526.6 30.8 1,196.2 External inflows 27.7 9.5 4.3 10.9 0.6 53.0 External outflows (32.3) (9.0) (2.7) (22.7) (0.4) (67.1) Overlay net flows - - - 20.1 - 20.1 ETF net flows 0.2 - - - - 0.2 External net flows(3) (4.4) 0.5 1.6 8.3 0.2 6.2 Internal net flows - (0.2) (0.7) (0.1) 0.4 (0.6) Total net flows (4.4) 0.3 0.9 8.2 0.6 5.6 Cash management movements(4) - 2.8 - - - 2.8 Market and other movements(3) (4.1) 9.2 (1.8) 32.0 0.7 36.0 As at 30 June 2020 395.1 189.5 57.1 566.8 32.1 1,240.6 Assets attributable to: External 1,134.9 Internal 105.7 1. Assets under management (AUM) includes assets on our Investment Only Platform that are managed by third parties, on which fees are earned. 2. Solutions include liability driven investments and GBP348.3bn of derivative notionals associated with the Solutions business. 3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 30 June 2020 was GBP62.3bn and the movement in these assets is included in market and other movements for Solutions assets. 4. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 75
5.01 LGIM total assets under management(1) (AUM) (continued)
Active Multi Real Total Index strategies asset Solutions(2) assets AUM For the year ended 31 December GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn 2020 As at 1 January 2020 403.6 177.2 58.0 526.6 30.8 1,196.2 External inflows 76.6 17.7 8.5 27.0 1.0 130.8 External outflows (84.7) (17.8) (5.3) (36.6) (1.4) (145.8) Overlay net flows - - - 33.9 - 33.9 ETF net flows 1.5 - - - - 1.5 External net flows(3) (6.6) (0.1) 3.2 24.3 (0.4) 20.4 Internal net flows(4) (0.2) 2.6 (0.4) (0.3) 0.4 2.1 Total net flows (6.8) 2.5 2.8 24.0 - 22.5 Cash management movements(5) - 2.4 - - - 2.4 Market and other movements(3) 33.1 11.5 2.6 8.9 1.7 57.8 As at 31 December 2020 429.9 193.6 63.4 559.5 32.5 1,278.9 Assets attributable to: External 1,162.6 Internal 116.3 1. Assets under management (AUM) includes assets on our Investment Only Platform, that are managed by third parties, on which fees are earned. 2. Solutions include liability driven investments and GBP340.1bn of derivative notionals associated with the Solutions business. 3. External net flows exclude movements in short-term Solutions assets, as their maturity dates are determined by client agreements and are subject to a higher degree of variability. The total value of these assets at 31 December 2020 was GBP45.8bn and the movement in these assets is included in market and other movements for Solutions assets. 4. Internal net flows include flows in legacy assets from the Mature Savings business sold to ReAssure in 2020. 5. Cash management movements include external holdings in money market funds and other cash mandates held for clients' liquidity management purposes.
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 76
5.02 LGIM total external assets under management and net flows
Assets under management Net flows(2) 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 2021 2020 2020 2021 2020 2020 GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn International(1) 344.8 289.5 303.5 15.0 (3.2) (1.0) UK Institutional - Defined contribution 125.5 96.7 112.7 4.4 5.5 5.6 - Defined benefit 689.6 706.7 699.4 4.6 2.5 7.7 UK Retail - Retail intermediary 39.2 33.3 36.0 1.5 1.2 0.6 - Personal investing(3) 6.3 5.2 5.6 (0.2) - - ETF(4) 8.2 3.5 5.4 2.1 0.2 1.3 Total external 1,213.6 1,134.9 1,162.6 27.4 6.2 14.2 -------- -------- ------ ------ 1. International assets are shown on the basis of client domicile. Total International AUM including assets managed internationally on behalf of UK clients amounted to GBP434bn as at 30 June 2021 (30 June 2020: GBP385bn; 31 December 2020: GBP388bn). 2. External net flows exclude movements in short-term solutions assets, with maturity as determined by client agreements and are subject to a higher degree of variability. 3. Personal investing includes GBP1.6bn as at 30 June 2021 (30 June 2020: GBP1.4bn; 31 December 2020: GBP1.4bn) of AUM relating to legacy Banks and Building Society customers which is driving net outflows.
4. ETF reflects external AUM and flows invested on the platform. Total AUM managed on the platform is $13.0bn in H1 21 (H1 20: $4.8bn) and flows of $3.4bn (H1 20: $0.4bn) which include internal investment from other LGIM asset classes. 5.03 Reconciliation of assets under management to Consolidated Balance Sheet financial investments, investment property and cash and cash equivalents 30 Jun 30 Jun 31 Dec 2021 2020 2020 GBPbn GBPbn GBPbn ----------------------------------------------------------------- ------- ------ ------ Assets under management 1,327 1,241 1,279 Derivative notionals (1) (351) (348) (340) Third party assets (2) (441) (399) (419) Other (3) 10 72 33 Total financial investments, investment property and cash and cash equivalents 545 566 553 Less: assets of operations classified as held for sale - (23) - ----------------------------------------------------------------- ------- ------ ------ Financial investments, investment property and cash and cash equivalents 545 543 553 ----------------------------------------------------------------- ------- ------ ------ 1. Derivative notionals are included in the assets under management measure but are not for IFRS reporting and are thus removed. 2. Third party assets are those that LGIM manage on behalf of others which are not included on the group's Consolidated Balance Sheet. 3. Other includes assets that are managed by third parties on behalf of the group, other assets and liabilities related to financial investments, derivative assets and pooled funds.
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 77
5.04 Assets under administration
Workplace(1) Annuities(2) Workplace Annuities Workplace Annuities 30 Jun 2021 30 Jun 2021 30 Jun 2020 30 Jun 2020 31 Dec 2020 31 Dec 2020 GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn As at 1 January 50.8 87.0 40.3 75.9 40.3 75.9 Gross inflows 7.5 3.7 3.3 3.8 10.0 10.1 Gross outflows (1.5) - (0.9) - (2.2) - Payments to pensioners - (2.2) - (2.1) - (4.3) Net flows 6.0 1.5 2.4 1.7 7.8 5.8 Market and other movements 3.4 (2.7) (1.2) 3.1 2.7 5.3 As at 30 June/31 December 60.2 85.8 41.5 80.7 50.8 87.0 1. Workplace assets under administration as at 30 June 2021 includes GBP60.1bn (30 June 2020: GBP41.5bn; 31 December 2020: GBP50.7bn) of assets under management included in Note 5.01. 2. Annuities assets under administration as at 30 June 2021 includes GBP77.3bn (30 June 2020: GBP73.8bn; 31 December 2020: GBP79.4bn) of assets under management included in Note 5.01.
Legal & General Group Plc
Half Year Results 2021 Part 3
Asset and premium flows Page 78
5.05 LGR new business
6 months 6 months 6 months Full year 30 Jun 30 Jun 31 Dec 31 Dec 2021 2020 2020 2020 GBPm GBPm GBPm GBPm Pension risk transfer - UK(1) 2,965 3,176 4,417 7,593 - US 107 248 1,002 1,250 Individual annuities 483 421 489 910 Lifetime & Retirement Interest Only mortgage advances 414 362 429 791 Total LGR new business 3,969 4,207 6,337 10,544 1. UK pension risk transfer includes a GBP925m (H1 20: GBPnil; H2 20: GBP397m) Assured Payment Policy (APP). 5.06 LGI new business 6 months 6 months 6 months Full year 30 Jun 30 Jun 31 Dec 31 Dec 2021 2020 2020 2020 GBPm GBPm GBPm GBPm UK Retail protection 105 83 92 175 UK Group protection 55 65 52 117 US protection(1) 43 44 36 80 Total LGI new business 203 192 180 372 1. In local currency, US protection reflects new business of $59m for H1 2021 (H1 20: $56m; H2 20: $47m). 5.07 Gross written premiums on insurance business 6 months 6 months 6 months Full year 30 Jun 30 Jun 31 Dec 31 Dec 2021 2020 2020 2020 GBPm GBPm GBPm GBPm UK Retail protection 714 680 694 1,374 UK Group protection 274 245 137 382 US protection(1) 512 550 543 1,093 Longevity insurance 152 159 168 327 Total gross written premiums on insurance business 1,652 1,634 1,542 3,176 1. In local currency, US protection reflects gross written premiums of $712m for H1 2021 (H1 20: $693m; H2 20: $710m).
Legal & General Group Plc
Half Year Results 2021 Part 3
Capital Page 79
6.01 Group regulatory capital - Solvency II
The group complies with the requirements established by the Solvency II Framework Directive, as adopted by the Prudential Regulation Authority (PRA) in the UK and measures and monitors its capital resources on this basis.
The Solvency II results are estimated and unaudited. Further explanation of the underlying methodology and assumptions are set out in the sections below.
The group calculates its Solvency II capital requirements using a Partial Internal Model. The vast majority of the risk to which the group is exposed is assessed on the Partial Internal Model basis approved by the PRA. Capital requirements for a few smaller entities are assessed using the Standard Formula basis on materiality grounds. The group's US insurance businesses are valued on a local statutory basis, following the PRA's approval to use the Deduction and Aggregation method of including these businesses in the group solvency calculation.
The table below shows the "shareholder view" of the group Own Funds, Solvency Capital Requirement (SCR) and Surplus Own Funds, based on the Partial Internal Model, Matching Adjustment and Transitional Measures on Technical Provisions (TMTP) (recalculated as at 30 June 2021). The TMTP incorporates estimated impacts of end June 2021 economic conditions and changes during 2021 to the Internal Model and Matching Adjustment. This is in line with group's management of the capital position on a dynamic TMTP basis.
(a) Capital position As at 30 June 2021, and on the above basis, the group had a surplus of GBP7.5bn (31 December 2020: GBP7.4bn) over its Solvency Capital Requirement, corresponding to a Solvency II capital coverage ratio on a "shareholder view" basis of 183% (31 December 2020: 177%). The shareholder view of the Solvency II capital position is as follows: 30 Jun 31 Dec 2021 2020 GBPbn GBPbn Unrestricted Tier 1 Own Funds 12.3 12.3 Restricted Tier 1 Own Funds(1) 0.5 0.5 Tier 2 Subordinated liabilities(2) 4.3 4.5 Eligibility restrictions(3) (0.5) (0.2) ================================================================================= ======= ====== Solvency II Own Funds(4,5) 16.6 17.1 Solvency Capital Requirement (9.1) (9.7) Solvency II surplus 7.5 7.4 -
--------------------------------------------------------------------------- --- ------- ------ SCR Coverage ratio(6) 183% 177% 1. Restricted Tier 1 Own Funds represent Perpetual restricted Tier 1 contingent convertible notes. 2. Tier 2 subordinated liabilities include GBP0.3bn of subordinated debt issued during 2009, callable in 2021. On 26 May 2021, notification was given that the group intends to redeem these notes in full on 23 July 2021. Effective from the notification date, the notes were no longer treated as Tier 2 own funds for Solvency II purposes. 3. Eligibility restrictions include GBP0.3bn of subordinated debt, following the notification to redeem the notes in full. 4. Solvency II Own Funds do not include an accrual for the interim dividend of GBP309m (31 December 2020: GBP754m) declared after the balance sheet date. 5. Solvency II Own Funds allow for a Risk Margin of GBP5.5bn (2020: GBP6.1bn) and TMTP of GBP4.8bn (2020: GBP5.6bn). 6. SCR Coverage ratio is based on unrounded inputs.
The "shareholder view" basis excludes the contribution that the final salary pension schemes would normally make to the group position. This is reflected by reducing the group's Own Funds and the group's SCR by the amount of the SCR for the final salary pension schemes.
On a proforma basis, which includes the contribution of the final salary pension schemes, the coverage ratio at 30 June 2021 is 182% (31 December 2020: 175%).
Legal & General Group Plc
Half Year Results 2021 Part 3
Capital Page 80
6.01 Group regulatory capital - Solvency II (continued)
(b) Methodology and assumptions
The methodology, assumptions and Partial Internal Model underlying the calculation of Solvency II Own Funds and associated capital requirements are broadly consistent with those set out in the group's 2020 Annual Report and Accounts and Full Year Results.
Non-market assumptions are consistent with those underlying the group's IFRS disclosures, but with the removal of any margins for prudence. Future investment returns and discount rates are those defined by the PRA, using risk free rates based on market, LIBOR swap rates net of credit risk adjustment of 10 basis points (31 December 2020: 11 basis points) for sterling denominated liabilities. For annuities that are eligible, the liability discount rate includes a Matching Adjustment. This Matching Adjustment varies between LGAS and LGRe and by the currency of the relevant liabilities.
At 30 June 2021 the Matching Adjustment for UK GBP denominated liabilities was 90 basis points (31 December 2020: 103 basis points) after deducting an allowance for the fundamental spread equivalent to 53 basis points (31 December 2020: 55 basis points).
(c) Analysis of change
The table below shows the movement (net of tax) during the six month period ended 30 June 2021 in the group's Solvency II surplus. 6 months Full year 30 Jun 31 Dec 2021 2020 GBPbn GBPbn Surplus arising from back-book (including release of SCR) 0.7 1.3 Release of Risk Margin(1) 0.3 0.6 Amortisation of TMTP(2) (0.2) (0.4) ----------------------------------------------------------- -------- ---------- Total operational surplus generation(3) 0.8 1.5 ----------------------------------------------------------- -------- ---------- New business strain (0.2) (0.3) ----------------------------------------------------------- -------- ---------- Net surplus generation 0.6 1.2 Operating variances(4) - 0.4 Mergers, acquisitions and disposals(5) - (0.1) Market movements(6) 0.6 (1.4) Restricted Tier 1 convertible notes(7) - 0.5 Subordinated liabilities(8) (0.3) 0.5 Dividends paid(9) (0.8) (1.0) Total surplus movement (after dividends paid in the period) 0.1 0.1 ----------------------------------------------------------- -------- ---------- 1. Based on the Risk Margin in force at 31 December 2020 and does not include the release of any Risk Margin added by new business written in 2021. 2. TMTP amortisation based on a linear run down of the 31 December 2020 TMTP. 3. Release of surplus generated by in-force business and includes management actions which at the start of the year could have been reasonably expected to take place. For 2021 these are primarily related to the planned reinsurance of back-book liabilities. 4. Operating variances include the impact of experience variances, changes to valuation and capital calibration assumptions, other management actions including changes in asset mix, hedging strategies, and Matching Adjustment optimisation. 5. 2020 primarily reflected the impacts of the sale of the Mature Savings business, which completed in H2 2020. 6. Market movements represent the impact of changes in investment market conditions over the year and changes to future economic assumptions. Market movements in 2021 include a decrease in the Risk Margin of GBP0.5bn net of tax (2020: increase of GBP0.7bn) and a decrease to TMTP of GBP0.5bn net of tax (2020: increase of GBP0.7bn). 7. Restricted Tier 1 Own Funds represent Perpetual restricted Tier 1 contingent convertible notes, issued in 2020. No additional issuance in 2021. 8. Subordinated liabilities reflect the restriction applied to the GBP0.3bn debt issued in 2009, which is no longer available as capital following the group's announcement in May 2021 to redeem these notes in full on 23 July 2021 (2020: Issuance of GBP0.5bn). 9. Dividends paid are the amounts from the 2020 final dividend paid in H1 2021 (2020: 2019 final dividend and 2020 interim dividend).
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Half Year Results 2021 Part 3
Capital Page 81
6.01 Group regulatory capital - Solvency II (continued)
Operational Surplus Generation is the expected surplus generated from the assets and liabilities in-force at the start of the year. It is based on assumed real world returns and best estimate non-market assumptions. It includes the impact of management actions to the extent that, at the start of the year, these were reasonably expected to be implemented over the year.
New Business Strain is the cost of acquiring, and setting up Technical Provisions and SCR (net of any premium income), on actual new business written over the year. It is based on economic conditions at the point of sale.
(d) Reconciliation of IFRS Net Release from Operations to Solvency II Net Surplus Generation (i) The table below provides a reconciliation of the group's IFRS Release from operations to Solvency II Operational surplus generation. 6 months Full year 2021 2020 GBPbn GBPbn IFRS Release from operations 0.8 1.3 Expected release of IFRS prudential margins (0.2) (0.5) Releases of IFRS specific reserves(1) (0.1) (0.2) Solvency II investment margin(2,3) - 0.3 Release of Solvency II Capital Requirement and Risk Margin less TMTP amortisation 0.3 0.6 Solvency II Operational surplus generation(4) 0.8 1.5 ------------------------------------------------------------ --------- --------- 1. Release of prudence from IFRS specific reserves which are not included in Solvency II (e.g. long term longevity and expense margins). 2. Release of prudence related to differences between the PRA defined Fundamental Spread and Legal & General's best estimate default assumption. 3. Expected market returns earned on LGR's free assets in excess of risk-free rates over 2021. 4. Solvency II Operational Surplus Generation includes management actions which at the start of 2021 were reasonably expected to be implemented over the year. (ii) The table below provides a reconciliation of the group's IFRS New business surplus to Solvency II New business strain. 6 months Full year 2021 2020 GBPbn GBPbn IFRS New business surplus 0.1 0.3 Removal of requirement to set up prudential margins above best estimate on new business 0.2 0.3 Set up of SCR on new business (0.4) (0.7) Set up of Risk Margin on new business (0.1) (0.2) Solvency II New business strain(1) (0.2) (0.3)
1. UK PRT new business volume during 2021 was GBP3.0bn, compared to GBP7.6bn over 2020.
(e) Reconciliation of IFRS equity to Solvency II Own Funds
A reconciliation of the group's IFRS equity to Solvency II Own Funds is given below: 30 Jun 31 Dec 2021 2020 GBPbn GBPbn ----------------------------------------------------------- ------- ------ IFRS equity(1) 10.3 10.0 Remove DAC, goodwill and other intangible assets and associated liabilities (0.4) (0.4) Add IFRS carrying value of subordinated borrowings(2) 4.0 4.0 Insurance contract valuation differences(3) 4.0 4.5 Difference in value of net deferred tax liabilities (0.7) (0.6) SCR for final salary pension schemes (0.1) (0.2) Eligibility restrictions(4) (0.5) (0.2) Solvency II Own Funds(5) 16.6 17.1 ------- ------ 1. IFRS equity represents equity attributable to owners of the parent and restricted Tier 1 convertible debt note as per the Consolidated Balance Sheet. 2. Treated as available capital on the Solvency II balance sheet as the liabilities are subordinate to policyholder claims. 3. Differences in the measurement of technical provisions between IFRS and Solvency II. 4. Eligibility restrictions include the impact of redemption of GBP0.3bn of subordinated debt as announced by the group on 26 May 2021, in addition to the Own Funds of non-insurance regulated entities that are subject to local regulatory rules. 5. Solvency II Own Funds do not include an accrual for the interim dividend of GBP309m (31 December 2020: GBP754m) declared after the balance sheet date.
Legal & General Group Plc
Half Year Results 2021 Part 3
Capital Page 82
6.01 Group regulatory capital - Solvency II (continued)
(f) Sensitivity analysis The following sensitivities are provided to give an indication of how the group's Solvency II surplus as at 30 June 2021 would have changed in a variety of adverse events. These are all independent stresses to a single risk. In practice, the balance sheet is impacted by combinations of stresses and the combined impact can be larger than adding together the impacts of the same stresses in isolation. It is expected that, particularly for market risks, adverse stresses will happen together. Impact Impact Impact Impact on on on on net of net of net of net of tax tax tax tax Solvency Solvency Solvency Solvency II II II II capital coverage capital coverage surplus ratio surplus(1) ratio(1) 2021 2021 2020 2020 GBPbn % GBPbn % Credit spreads widen by 100bps assuming an escalating addition to ratings(1,2) 0.5 11 0.5 11 Credit spreads narrow by 100bps assuming an escalating addition to ratings(1,2) (0.7) (12) (0.7) (12) Credit spreads widen by 100bps assuming a level addition to ratings(1) 0.6 12 0.7 13 Credit spreads of sub investment grade assets widen by 100bps assuming a level addition to ratings(1,3) (0.3) (5) (0.4) (5) Credit migration(4) (0.8) (9) (1.2) (13) 25% fall in equity markets(5) (0.5) (4) (0.5) (4) 15% fall in property markets(6) (0.8) (7) (0.6) (6) 50bps increase in risk-free rates(7) 0.5 11 0.6 11 100bps increase in risk-free rates(7) 1.0 21 1.0 20 50bps decrease in risk-free rates(7,8) (0.7) (12) (0.7) (11) 50bps increase in future inflation expectations(7) (0.1) (3) - (2) Substantially reduced Risk Margin(9) 0.6 6 0.5 5 1. The spread sensitivity applies to the group's corporate bond (and similar) holdings, with no change in long-term default expectations. Restructured lifetime mortgages are excluded as the underlying exposure is mostly to property. 2. The stress for AA bonds is twice that for AAA bonds, for A bonds it is three times, for BBB four times and so on, such that the weighted average spread stress for the portfolio is 100 basis points. To give a 100bps increase on the total portfolio, the spread stress increases in steps of 32bps, i.e. 32bps for AAA, 64bps for AA etc. 3. No stress for bonds rated BBB and above. For bonds rated BB and below the stress is 100bps. The spread widening on the total portfolio is 2bps as the group holds less than 2% in bonds rated BB and below. The impact is primarily an increase in SCR arising from the modelled cost of trading downgraded bonds back to a higher rating in the stress scenarios in the SCR calculation. 4. Credit migration stress covers the cost of an immediate big letter downgrade on 20% of all assets where the capital treatment depends on a credit rating (including corporate bonds, and sale and leaseback rental strips; lifetime mortgage senior notes are excluded). Downgraded assets are assumed to be traded to their original credit rating, so the impact is primarily a reduction in Own Funds from the loss of value on downgrade. The impact of the sensitivity will depend upon the market levels of spreads at the balance sheet date. 5. This relates primarily to equity exposure in LGC but will also include equity-based mutual funds and other investments that receive an equity stress (for example, certain investments in subsidiaries). Some assets have factors that increase or decrease the stress relative to general equity levels via a beta factor. 6. Assets stressed include residual values from sale and leaseback, the full amount of lifetime mortgages and direct investments treated as property. 7. Assuming a recalculation of the Transitional Measure on Technical Provisions that partially offsets the impact on Risk Margin. 8. In the interest rate down stress negative rates are allowed, i.e. there is no floor at zero rates. 9. Assuming a 2/3 reduction in the Risk Margin, allowing for offset from an equivalent reduction in the Transitional Measure on Technical Provisions. The above sensitivity analysis does not reflect all management actions which could be taken to reduce the impacts. In practice, the group actively manages its asset and liability positions to respond to market movements. Other than in the interest rate and inflation stresses, we have not allowed for the recalculation of TMTP. The impacts of these stresses are not linear therefore these results should not be used to interpolate or extrapolate the impact of a smaller or larger stress. The results of these tests are indicative of the market conditions prevailing at the balance sheet date. The results would be different if performed at an alternative reporting date.
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Half Year Results 2021 Part 3
Capital Page 83
6.02 Estimated Solvency II new business contribution
(a) New business by product (1) Management estimates of the present value of new business premium (PVNBP) and the margin for selected lines of business are provided below: Contribution Contribution from new from new PVNBP(2) business(3) Margin(4) PVNBP(2) business(3) Margin(4) 6 months 6 months 6 months Full year Full Full year year 2021 2021 2021 2020 2020 2020 GBPm GBPm % GBPm GBPm % LGR - UK annuity business 3,269 274 8.4 8,503 901 10.6 UK Protection Total 1,089 83 7.6 1,887 160 8.5 - Retail Protection 828 65 7.8 1,359 123 9.1 - Group Protection 261 18 7.1 528 37 7.0 US Protection(5) 413 48 11.5 829 94 11.2 1. Selected lines of business only.
2. PVNBP excludes quota share reinsurance single premium of GBP0.2bn relating to LGR new business, where the treaty was finalised after the balance sheet date. 3. The contribution from new business is defined as the present value at the point of sale of expected future Solvency II surplus emerging from new business written in the year using the risk discount rate applicable at the end of the year. 4. Margin is based on unrounded inputs. 5. In local currency, US Protection reflects PVNBP of $574m (31 December 2020: $1,064m) and a contribution from new business of $66m (31 December 2020: $120m). The decrease in LGR margin was driven by the shorter average duration for the schemes written in the first six months of the year, compared to the schemes written in prior year. For UK Protection the contribution from new business is supported by strong volumes in Retail Protection where the reduction in margin is largely due to pricing action, movements in product mix and changes in market conditions in H1 2021. The US Protection margin improved compared to the prior full year. The increase is driven by business mix and modified reinsurance terms on digital products.
(b) Basis of preparation
Solvency II new business contribution reflects the portion of Solvency II value added by new business written in the period. It has been calculated in a manner consistent with principles and methodologies which were set out in the group's 2020 Annual Report and Accounts and Full Year Results.
Solvency II new business contribution has been calculated for the group's most material insurance-related businesses, namely, LGR, LGI and LGA.
Intra-group reinsurance arrangements are in place between US, UK and Bermudan businesses and it is expected that these arrangements will be periodically extended to cover recent new business. The LGA new business margin assumes that the new business will continue to be reinsured in 2021 and looks through the intra-group arrangements.
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Half Year Results 2021 Part 3
Capital Page 84
6.02 Estimated Solvency II new business contribution (continued)
(c) Assumptions
The key economic assumptions are as follows:
30 Jun 31 Dec 2021 2020 % % Margin for Risk 3.6 3.9 Risk-free rate - UK 1.1 0.5 - US 1.5 0.9 Risk discount rate (net of tax) - UK 4.7 4.4 - US 5.1 4.8 Long-term rate of return on non-profit annuities in LGR 2.4 2.1
The future earnings are discounted using duration-based discount rates, which is the sum of a duration-based risk free rate and a flat margin for risk. The risk free rates have been based on a swap curve net of the PRA-specified Credit Risk Adjustment. The risk free rate shown above is a weighted average based on the projected cash flows.
Other than updating for recent experience, all other economic and non-economic assumptions and methodologies that would have a material impact on the margin for these contracts are unchanged from those previously used by the group for its European Embedded Value reporting, other than the cost of currency hedging which has been updated to reflect current market conditions and hedging activity in light of Solvency II. In particular:
-- The assumed future pre-tax returns on fixed interest and RPI linked securities are set by reference to the portfolio yield on the relevant backing assets held at market value at the end of the reporting period. The calculated return takes account of derivatives and other credit instruments in the investment portfolio. The returns on fixed and index-linked assets are calculated net of an allowance for default risk which takes account of the credit rating and the outstanding term of the assets. The allowance for corporate and other unapproved credit asset defaults within the new business contribution is calculated explicitly for each bulk annuity scheme written, and the weighted average deduction for business written in 2021 equates to a level rate deduction from the expected returns for the overall annuities portfolio of 15 basis points.
-- Non-economic assumptions have been set at levels commensurate with recent operating experience, including those for mortality, morbidity, persistency and maintenance expenses (excluding development costs). An allowance is made for future mortality improvement. For new business, mortality assumptions may be modified to take certain scheme specific features into account.
The profits on the new business are presented gross of tax.
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6.02 Estimated Solvency II new business contribution (continued)
(d) Reconciliation of PVNBP to gross written premium
A reconciliation of PVNBP and gross written premium is given below: 6 months Full year 2021 2020 Notes GBPbn GBPbn 6.02 PVNBP (a) 4.8 11.2 Effect of capitalisation factor (1.3) (2.3) New business premiums from selected lines 3.5 8.9 Other(1) 0.7 2.0 Total LGR and LGI new business 5.05,5.06 4.2 10.9 Annualisation impact of regular premium long-term business (0.2) (0.2) IFRS gross written premiums from existing long-term insurance business 1.6 3.0 Deposit accounting for investment products (1.3) (1.2) Total gross written premiums(2) 4.3 12.5 1. Other principally includes annuity sales in the US, lifetime and retirement interest only mortgage advances and the reversal of a quota share reinsurance single premium of GBP0.2bn relating to LGR new business, where the treaty was finalised after the balance sheet date. 2. Total gross written premiums include GBP55m of gross written premiums relating to a residual reinsurance treaty following the disposal of the General Insurance business.
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7.01 Investment portfolio
Market Market Market value value value 30 Jun 30 Jun 31 Dec 2021 2020 2020 GBPm GBPm GBPm Worldwide total assets under management(1,2) 1,333,203 1,247,960 1,285,489 Client and policyholder assets (1,218,560) (1,119,803) (1,161,631) Non-unit linked with-profits assets - (9,854) - Investments to which shareholders are directly exposed 114,643 118,303 123,858 1. Worldwide total assets under management include LGIM AUM and other group assets not managed by LGIM. 2. As part of a change in accounting policy in 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balance for Worldwide total assets under management has been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01. Analysed by investment class: Other non-profit Other LGR insurance LGC shareholder investments investments investments investments Total Total Total 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 2021 2021 2021 2021 2021 2020 2020 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm Equities 11 31 2,739 307 3,088 2,812 3,086
Bonds (3) 7.03 78,226 2,366 1,827 280 82,699 81,337 85,502 Derivative assets (4) 13,987 - 32 - 14,019 22,388 20,936 Property 7.04 4,639 - 464 - 5,103 4,250 4,672 Loans (3,5) 3,472 29 789 11 4,301 2,000 4,248 Financial investments 4.04 (a) 100,335 2,426 5,851 598 109,210 112,787 118,444 Cash and cash equivalents 1,866 242 1,222 410 3,740 3,777 3,616 Other assets (6) 100 - 1,593 - 1,693 1,739 1,798 Total investments 102,301 2,668 8,666 1,008 114,643 118,303 123,858 3. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Bonds and Loans have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01. 4. Derivative assets are shown gross of derivative liabilities of GBP17.7bn (30 June 2020: GBP24.9bn; 31 December 2020: GBP21.2bn). Exposures arise from use of derivatives for efficient portfolio management, especially the use of interest rate swaps, inflation swaps, credit default swaps and foreign exchange forward contracts for assets and liability management. 5. Loans include reverse repurchase agreements of GBP4,152m (30 June 2020: GBP1,868m; 31 December 2020: GBP4,117m). 6. Other assets include finance leases of GBP87m (30 June 2020: GBP89m; 31 December 2020: GBP88m), associates and joint ventures of GBP314m (30 June 2020: GBP328m; 31 December 2020: GBP288m) and the consolidated net asset value of the group's investments in CALA Homes and other housing businesses.
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7.02 Direct investments
(a) Analysed by asset class Direct(1) Traded(2) Direct(1) Traded(2) Direct(1) Traded(2) investments securities Total investments securities Total investments securities Total 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec 31 Dec 2021 2021 2021 2020 2020 2020 2020 2020 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm Equities 1,202 1,886 3,088 1,142 1,670 2,812 1,145 1,941 3,086 Bonds (3,5) 22,218 60,481 82,699 20,612 60,725 81,337 21,555 63,947 85,502 Derivative assets - 14,019 14,019 - 22,388 22,388 - 20,936 20,936 Property (4) 5,103 - 5,103 4,250 - 4,250 4,672 - 4,672 Loans and other receivables (5) 119 4,182 4,301 145 1,855 2,000 99 4,149 4,248 Financial investments 28,642 80,568 109,210 26,149 86,638 112,787 27,471 90,973 118,444 -------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- ------- Cash and cash equivalents 221 3,519 3,740 69 3,708 3,777 42 3,574 3,616 Other assets 1,693 - 1,693 1,739 - 1,739 1,798 - 1,798 Total investments 30,556 84,087 114,643 27,957 90,346 118,303 29,311 94,547 123,858 -------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- ------- 1. Direct investments, which generally constitute an agreement with another party, represent an exposure to untraded and often less volatile asset classes. Direct investments also include physical assets, bilateral loans and private equity, but excluded hedge funds. 2. Traded securities are defined by exclusion. If an instrument is not a direct investment, then it is classed as a traded security. 3. Bonds include lifetime mortgage loans of GBP6,325m (30 June 2020: GBP5,478m; 31 December 2020: GBP6,036m). 4. A further breakdown of property is provided in Note 7.04. 5. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Bonds and Loans and other receivables have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.
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7.02 Direct investments (continued)
(b) Analysed by segment LGR LGC (1) LGI Total 30 Jun 30 Jun 30 Jun 30 Jun 2021 2021 2021 2021 GBPm GBPm GBPm GBPm - --------------------------------------------- --- ------- -------- ------ ------ Equities 9 1,077 116 1,202 Bonds(2) 21,023 3 1,192 22,218 Property 4,639 464 - 5,103 Loans and other receivables - 119 - 119 ---------------------------------------------------- ------- -------- ------ ------ Financial investments 25,671 1,663 1,308 28,642 ----------------------------------------------------- ------- -------- ------ ------ Other assets, cash and cash equivalents 100 1,814 - 1,914 ---------------------------------------------------- ------- -------- ------ ------ Total direct investments 25,771 3,477 1,308 30,556 ----------------------------------------------------- ------- -------- ------ ------ 1. LGC includes GBP52m of equities that belong to other shareholder funds. 2. Bonds include lifetime mortgage loans of GBP6,325m. LGR LGC(1) LGI Total 30 Jun 30 Jun 30 Jun 30 Jun 2020 2020 2020 2020 GBPm GBPm GBPm GBPm Equities - 1,068 74 1,142 Bonds (2,3) 19,444 3 1,165 20,612 Property 4,016 234 - 4,250 Loans and other receivables (3) - 145 - 145 -------------------------------------------- --------- --------- --------- -------- Financial investments 23,460 1,450 1,239 26,149 ---------------------------------------------- --------- --------- --------- -------- Other assets, cash and cash equivalents 104 1,700 4 1,808 ------------------------------------------- --------- --------- --------- -------- Total direct investments 23,564 3,150 1,243 27,957 ---------------------------------------------- --------- --------- --------- -------- 1. LGC includes GBP48m of equities that belong to other shareholder funds. 2. Bonds include lifetime mortgage loans of GBP5,478m. 3. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were classified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Bonds and Loans and other receivables have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01. LGR LGC(1) LGI Total 31 Dec 31 Dec 31 Dec 31 Dec 2020 2020 2020 2020 GBPm GBPm GBPm GBPm Equities - 1,043 102 1,145 Bonds(2) 20,306 3 1,246 21,555 Property 4,319 353 - 4,672
Loans and other receivables - 99 - 99 ---------------------------------------------- ------- ------ ------ ------ Financial investments 24,625 1,498 1,348 27,471 ----------------------------------------------- ------- ------ ------ ------ Other assets, cash and cash equivalents 106 1,730 4 1,840 Total direct investments 24,731 3,228 1,352 29,311 ----------------------------------------------- ------- ------ ------ ------ 1. LGC included GBP47m of equities that belong to other shareholder funds. 2. Bonds include lifetime mortgage loans of GBP6,036m.
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7.03 Bond portfolio summary
(a) Sectors analysed by credit rating BB or AAA AA A BBB below Other Total(2) Total(2) As at 30 June 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm % Sovereigns, Supras and Sub-Sovereigns 1,925 10,091 1,249 335 10 - 13,610 17 Banks: - Tier 1 - - - - - - - - - Tier 2 and other subordinated - - 58 39 4 - 101 - - Senior - 1,024 3,490 790 2 - 5,306 6 - Covered 151 - - - - - 151 - Financial Services: - Tier 2 and other subordinated - 113 57 21 - - 191 - - Senior 55 443 406 393 9 - 1,306 2 Insurance: - Tier 2 and other subordinated 64 196 31 58 - - 349 - - Senior - 221 405 542 - - 1,168 1 Consumer Services and Goods: - Cyclical - 84 1,135 1,772 193 - 3,184 4 - Non-cyclical 338 1,052 2,658 3,936 344 - 8,328 10 - Health Care - 605 851 690 5 - 2,151 3 Infrastructure: - Social 208 746 4,669 916 77 - 6,616 8 - Economic 311 51 766 4,053 183 - 5,364 6 Technology and Telecoms 174 209 1,462 3,085 22 1 4,953 6 Industrials - 31 672 694 22 - 1,419 2 Utilities - 207 5,629 5,861 27 - 11,724 14 Energy - - 468 589 16 - 1,073 1 Commodities - - 365 910 8 - 1,283 2 Oil and Gas - 560 1,047 389 274 - 2,270 3 Real estate - 11 1,728 1,591 177 - 3,507 4 Structured finance ABS / RMBS / CMBS / Other 423 798 403 603 24 1 2,252 3 Lifetime mortgage loans(1) 3,852 1,509 524 427 - 13 6,325 8 CDOs - 55 - 13 - - 68 - Total GBPm 7,501 18,006 28,073 27,707 1,397 15 82,699 100 Total % 9 22 34 33 2 - 100 1. The credit ratings attributed to lifetime mortgage loans are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for GBP78,226m, representing 95% of the total group portfolio.
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7.03 Bond portfolio summary (continued)
(a) Sectors analysed by credit rating (continued) BB or AAA AA A BBB below Other Total(2) Total(2) As at 30 June 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm % Sovereigns, Supras and Sub-Sovereigns 2,521 11,299 738 449 26 - 15,033 19 Banks: - Tier 1 - - - 1 - 1 2 - - Tier 2 and other subordinated - - 69 42 5 - 116 - - Senior - 1,335 2,192 545 1 - 4,073 5 - Covered 187 - 4 - - - 191 - Financial Services: - Tier 2 and other subordinated - 120 70 11 - 4 205 - - Senior 2 447 176 267 9 - 901 1 Insurance: - Tier 2 and other subordinated 56 139 8 63 - - 266 - - Senior - 257 538 311 - - 1,106 1 Consumer Services and Goods: - - - - Cyclical - 354 1,089 1,961 333 2 3,739 5 - Non-cyclical 305 883 2,803 4,006 316 1 8,314 10 - Health Care - 376 856 636 7 - 1,875 2 Infrastructure: - Social 216 771 4,331 877 89 - 6,284 8 - Economic 332 58 920 3,626 337 - 5,273 7 Technology and Telecoms 206 204 1,612 2,844 41 - 4,907 6 Industrials - 12 847 681 27 - 1,567 2 Utilities - 221 5,540 5,733 6 - 11,500 15 Energy - - 424 859 12 - 1,295 2 Commodities - - 286 748 17 - 1,051 1 Oil and Gas - 649 1,037 539 274 - 2,499 3 Real estate - 7 1,685 1,608 101 - 3,401 4 Structured finance ABS / RMBS / CMBS / Other(3) 372 767 294 519 225 1 2,178 2 Lifetime mortgage loans(1) 3,427 1,384 304 350 - 13 5,478 7 CDOs - 57 11 15 - - 83 - Total GBPm 7,624 19,340 25,834 26,691 1,826 22 81,337 100 Total % 9 24 32 33 2 - 100 1. The credit ratings attributed to lifetime mortgage loans are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for GBP76,406m, representing 94% of the total group portfolio. 3. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Structured finance ABS / RMBS / CMBS / Other have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.
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7.03 Bond portfolio summary (continued)
(a) Sectors analysed by credit rating (continued) BB or AAA AA A BBB below Other Total(2) Total(2) As at 31 December 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm % Sovereigns, Supras and Sub-Sovereigns 2,747 12,187 903 398 9 - 16,244 19 Banks: - Tier 1 - - - - - - - - - Tier 2 and other subordinated - - 61 43 3 - 107 - - Senior - 1,182 3,314 678 1 - 5,175 6 - Covered 158 - - - - - 158 - Financial Services: - Tier 2 and other subordinated - 120 71 10 - 3 204 - - Senior 55 488 202 323 9 - 1,077 1 Insurance: - Tier 2 and other subordinated 65 161 8 59 - - 293 -
- Senior - 273 492 401 - - 1,166 1 Consumer Services and Goods: - Cyclical - 24 1,158 1,771 288 - 3,241 4 - Non-cyclical 366 1,153 2,849 4,057 324 - 8,749 10 - Health care - 437 886 669 5 - 1,997 2 Infrastructure: - Social 217 766 4,579 814 79 - 6,455 8 - Economic 328 61 784 4,006 290 - 5,469 7 Technology and Telecoms 193 229 1,633 3,080 31 1 5,167 6 Industrials - 16 709 759 26 - 1,510 2 Utilities - 207 6,034 5,526 27 - 11,794 14 Energy - - 429 784 19 - 1,232 1 Commodities - - 351 919 7 - 1,277 2 Oil and Gas - 773 958 467 276 - 2,474 3 Real estate - 8 1,622 1,675 93 - 3,398 4 Structured finance ABS / RMBS / CMBS / Other 429 772 400 578 27 1 2,207 3 Lifetime mortgage loans(1) 3,611 1,533 494 385 - 13 6,036 7 CDOs - 58 - 14 - - 72 - Total GBPm 8,169 20,448 27,937 27,416 1,514 18 85,502 100 Total % 9 24 33 32 2 - 100 1. The credit ratings attributed to lifetime mortgage loans are allocated in accordance with the internal Matching Adjustment structuring. 2. The group's bond portfolio is dominated by LGR investments. These account for GBP80,438m, representing 94% of the total group portfolio.
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7.03 Bond portfolio summary (continued)
(b) Sectors analysed by domicile EU excluding Rest of UK US UK the World Total As at 30 June 2021 GBPm GBPm GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 9,937 1,900 861 912 13,610 Banks 1,807 1,828 1,241 682 5,558 Financial Services 532 344 555 66 1,497 Insurance 103 1,239 60 115 1,517 Consumer Services and Goods: - Cyclical 446 2,088 503 147 3,184 - Non-cyclical 1,952 5,822 382 172 8,328 - Health care 285 1,785 80 1 2,151 Infrastructure: - Social 5,826 582 160 48 6,616 - Economic 3,941 847 226 350 5,364 Technology and Telecoms 407 2,981 707 858 4,953 Industrials 186 815 351 67 1,419 Utilities 6,834 2,230 2,075 585 11,724 Energy 229 622 96 126 1,073 Commodities 6 564 183 530 1,283 Oil and Gas 213 634 792 631 2,270 Real estate 2,089 562 620 236 3,507 Structured Finance ABS / RMBS / CMBS / Other 919 1,237 11 85 2,252 Lifetime mortgage loans 6,325 - - - 6,325 CDOs - - - 68 68 Total 42,037 26,080 8,903 5,679 82,699
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7.03 Bond portfolio summary (continued)
(b) Sectors analysed by domicile (continued) EU excluding Rest of UK US UK the World Total As at 30 June 2020 GBPm GBPm GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 11,035 2,603 859 536 15,033 Banks 998 1,696 1,181 507 4,382 Financial Services 415 189 490 12 1,106 Insurance 111 934 203 124 1,372 Consumer Services and Goods: - Cyclical 539 2,666 367 167 3,739 - Non-cyclical 1,715 6,037 424 138 8,314 - Health care 204 1,603 68 - 1,875 Infrastructure: - Social 5,670 452 111 51 6,284 - Economic 3,945 830 190 308 5,273 Technology and Telecoms 593 2,677 755 882 4,907 Industrials 78 1,075 348 66 1,567 Utilities 6,597 2,332 2,055 516 11,500 Energy 228 813 112 142 1,295 Commodities 4 346 167 534 1,051 Oil and Gas 253 644 796 806 2,499 Real estate 2,196 381 618 206 3,401 Structured Finance ABS / RMBS / CMBS / Other (1) 941 1,210 12 15 2,178 Lifetime mortgage loans 5,478 - - - 5,478 CDOs - - - 83 83 Total 41,000 26,488 8,756 5,093 81,337 1. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Structured finance ABS / RMBS / CMBS / Other have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.
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7.03 Bond portfolio summary (continued)
(b) Sectors analysed by domicile (continued) EU excluding Rest of UK US UK the World Total As at 31 December 2020 GBPm GBPm GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 11,797 2,425 1,176 846 16,244 Banks 1,687 1,907 1,463 383 5,440 Financial Services 391 298 525 67 1,281 Insurance 109 1,049 181 120 1,459 Consumer Services and Goods - Cyclical 543 2,201 360 137 3,241 - Non-cyclical 1,789 6,403 389 168 8,749 - Health care 209 1,694 94 - 1,997 Infrastructure - Social 5,809 487 112 47 6,455 - Economic 4,071 853 231 314 5,469 Technology and Telecoms 485 3,098 754 830 5,167 Industrials 191 927 330 62 1,510 Utilities 6,886 2,236 2,097 575 11,794 Energy 244 758 105 125 1,232 Commodities 3 596 165 513 1,277 Oil and Gas 232 642 832 768 2,474 Real estate 2,168 384 634 212 3,398 Structured finance ABS / RMBS / CMBS / Other 944 1,207 11 45 2,207 Lifetime mortgage loans 6,036 - - - 6,036 CDOs - - - 72 72 Total 43,594 27,165 9,459 5,284 85,502
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7.03 Bond portfolio summary (continued)
(c) Bond portfolio analysed by credit rating Externally Internally rated rated(1) Total As at 30 June 2021 GBPm GBPm GBPm AAA 3,254 4,247 7,501 AA 14,732 3,274 18,006 A 20,595 7,478 28,073 BBB 21,462 6,245 27,707 BB or below 970 427 1,397 Other 1 14 15 Total 61,014 21,685 82,699 Externally Internally rated rated(1,2) Total As at 30 June 2020 GBPm GBPm GBPm AAA 3,808 3,816 7,624 AA 15,720 3,620 19,340 A 19,457 6,377 25,834 BBB 20,835 5,856 26,691 BB or below 1,114 712 1,826 Other 8 14 22 Total 60,942 20,395 81,337 Externally Internally rated rated(1) Total As at 31 December 2020 GBPm GBPm GBPm AAA 4,101 4,068 8,169 AA 17,101 3,347 20,448 A 21,235 6,702 27,937 BBB 21,307 6,109 27,416 BB or below 1,049 465 1,514 Other 4 14 18 Total 64,797 20,705 85,502 1. Where external ratings are not available an internal rating has been used where practicable to do so. 2. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity reserves, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Structured finance ABS / RMBS / CMBS / Other have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.
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7.03 Bond portfolio summary (continued)
(d) Sectors analysed by Direct investments and Traded Direct investments Traded Total As at 30 June 2021 GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 991 12,619 13,610 Banks 628 4,930 5,558 Financial Services 396 1,101 1,497 Insurance 162 1,355 1,517 Consumer Services and Goods: - Cyclical 469 2,715 3,184 - Non-cyclical 386 7,942 8,328 - Health care 339 1,812 2,151 Infrastructure: - Social 3,507 3,109 6,616 - Economic 3,696 1,668 5,364 Technology and Telecoms 129 4,824 4,953 Industrials 58 1,361 1,419 Utilities 1,656 10,068 11,724 Energy 331 742 1,073 Commodities 57 1,226 1,283 Oil and Gas 57 2,213 2,270 Real estate 2,109 1,398 3,507 Structured Finance ABS / RMBS / CMBS / Other 925 1,327 2,252 Lifetime mortgage loans 6,325 - 6,325 CDOs - 68 68 Total 22,221 60,478 82,699
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7.03 Bond portfolio summary (continued)
(d) Sectors analysed by Direct investments and Traded (continued) Direct investments Traded Total As at 30 June 2020 GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 846 14,187 15,033 Banks 482 3,900 4,382 Financial Services 250 856 1,106 Insurance 318 1,054 1,372 Consumer Services and Goods: - Cyclical 230 3,509 3,739 - Non-cyclical 469 7,845 8,314 - Health care 325 1,550 1,875 Infrastructure: - Social 3,417 2,867 6,284 - Economic 3,521 1,752 5,273 Technology and Telecoms 191 4,716 4,907 Industrials 78 1,489 1,567 Utilities 1,346 10,154 11,500 Energy 347 948 1,295 Commodities 58 993 1,051 Oil and Gas 55 2,444 2,499 Real estate 2,272 1,129 3,401 Structured Finance ABS / RMBS / CMBS / Other (1) 929 1,249 2,178 Lifetime mortgage loans 5,478 - 5,478 CDOs - 83 83 Total 20,612 60,725 81,337 1. As part of a change in accounting policy in the second half of 2020 for LGIA universal life and annuity liabilities, certain financial investments were reclassified from designated as amortised cost to designated as fair value through profit or loss. Accordingly, the 30 June 2020 balances for Structured finance ABS / RMBS / CMBS / Other have been restated to reflect the fair value of those assets. Further details on the impact of the 2020 change in accounting policy are provided in Note 4.01.
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7.03 Bond portfolio summary (continued)
(d) Sectors analysed by Direct investments and Traded (continued) Direct investments Traded Total As at 31 December 2020 GBPm GBPm GBPm Sovereigns, Supras and Sub-Sovereigns 889 15,355 16,244 Banks 644 4,796 5,440 Financial Services 310 971 1,281 Insurance 282 1,177 1,459 Consumer Services and Goods: - Cyclical 351 2,890 3,241 - Non-cyclical 396 8,353 8,749 - Health care 363 1,634 1,997 Infrastructure: - Social 3,283 3,172 6,455 - Economic 3,726 1,743 5,469 Technology and Telecoms 93 5,074 5,167 Industrials 64 1,446 1,510 Utilities 1,475 10,319 11,794 Energy 355 877 1,232 Commodities 59 1,218 1,277 Oil and Gas 58 2,416 2,474
Real estate 2,301 1,097 3,398 Structured Finance ABS / RMBS / CMBS / Other 870 1,337 2,207 Lifetime mortgage loans 6,036 - 6,036 CDOs - 72 72 Total 21,555 63,947 85,502
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7.04 Property analysis
Property exposure within Direct investments by status LGR(1) LGC(2) Total As at 30 June 2021 GBPm GBPm GBPm % Fully let 4,035 - 4,035 79 Development 604 323 927 18 Land - 141 141 3 Total 4,639 464 5,103 100 LGR(1) LGC(2) Total As at 30 June 2020 GBPm GBPm GBPm % Fully let 3,663 - 3,663 86 Development 353 104 457 11 Land - 130 130 3 Total 4,016 234 4,250 100 LGR(1) LGC(2) Total As at 31 December 2020 GBPm GBPm GBPm % Fully let 3,974 - 3,974 85 Development 345 224 569 12 Land - 129 129 3 Total 4,319 353 4,672 100 1. The fully let LGR property includes GBP4.0bn (30 June 2020: GBP3.5bn; 31 December 2020: GBP3.8bn) let to investment grade tenants. 2. The above analysis does not include assets related to the group's investments in CALA Homes and other housing businesses, which are accounted for as inventory within Receivables and other assets on the group's Consolidated Balance Sheet and measured at the lower of cost and net realisable value. At 30 June 2021 the group held a total of GBP2,190m (30 June 2020: GBP2,261m; 31 December 2020: GBP2,179m) of such assets.
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Alternative Performance Measures Page 101
An alternative performance measure (APM) is a financial measure of historic or future financial performance, financial position, or cash flows, other than a financial measure defined under IFRS or the regulations of Solvency II. APMs offer investors and stakeholders additional information on the company's performance and the financial effect of 'one-off' events, and the group uses a range of these metrics to enhance understanding of the group's performance. However, APMs should be viewed as complementary to, rather than as a substitute for, the figures determined according to other regulations. The APMs used by the group are listed in this section, along with their definition/explanation, their closest IFRS measure and reference to reconciliations to those IFRS measures.
Group adjusted operating profit
Definition
Group adjusted operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes and exceptional items. It therefore reflects longer-term economic assumptions for the group's insurance businesses and shareholder funds, except for LGC's trading businesses (which reflects the IFRS profit before tax) and LGIA non-term business (which excludes unrealised investment returns to align with the liability measurement under US GAAP). Variances between actual and smoothed investment return assumptions are reported below group adjusted operating profit, as well as any differences between investment return on actual assets and the long-term asset mix. Exceptional income and expenses which arise outside the normal course of business in the period, such as merger and acquisition and start-up costs, are also excluded from group adjusted operating profit.
Group adjusted operating profit was previously described as 'operating profit'. In order to maintain a consistent understanding of the group's performance the term 'operating profit' will continue to be used throughout the Interim Management Report, the Annual Report and Accounts, and other external reporting, as a substitute for group adjusted operating profit.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Note 2.01 Operating profit.
Return on Equity (ROE)
Definition
ROE measures the return earned by shareholders on shareholder capital retained within the business. ROE is calculated as IFRS pro t after tax divided by average IFRS shareholders' funds (by reference to opening and closing shareholders' funds as provided in the IFRS consolidated statement of changes in equity for the period).
Closest IFRS measure
Calculated using:
- Profit attributable to equity holders
- Equity attributable to owners of the parent
Reconciliation
Calculated using annualised profit attributable to equity holders for the period of GBP2,130m (30 June 2020: GBP580m; 31 December 2020: GBP1,607m) and average equity attributable to the owners of the parent of GBP9,677m (30 June 2020: GBP9,140m; 31 December 2020: GBP9,270m).
Assets under Management
Definition
Funds which are managed by our fund managers on behalf of investors. It represents the total amount of money investors have trusted with our fund managers to invest across our investment products.
Closest IFRS measures
- Financial investments
- Investment property
- Cash and cash equivalents
Reconciliation
Note 5.03 Reconciliation of assets under management to Consolidated Balance Sheet financial investments, investment property and cash and cash equivalents.
Net release from operations
Definition
Release from operations plus new business surplus/(strain). Net release from operations was previously referred to as net cash, and includes the release of prudent margins from the back book, together with the premium received less the setup of prudent reserves and associated acquisition costs for new business.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Notes 2.01 Operating profit and 2.02 Reconciliation of release from operations to operating profit before tax .
Adjusted profit before tax attributable to equity holders
Definition
The APM measures profit before tax attributable to shareholders incorporating actual investment returns experienced during the year and the pre-tax results of discontinued operations.
Closest IFRS measure
Profit before tax attributable to equity holders.
Reconciliation
Note 2.01 Operating profit.
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Half Year Results 2021 Part 3
Glossary Page 102
* These items represent an alternative performance measure (APM)
Ad valorem fees
Ongoing management fees earned on assets under management, overlay assets and advisory assets as defined below.
Adjusted profit before tax attributable to equity holders*
Refer to the alternative performance measures section.
Advisory assets
These are assets on which Global Index Advisors (GIA) provide advisory services. Advisory assets are bene cially owned by GIA's clients and all investment decisions pertaining to these assets are also made by the clients. These are different from Assets under Management (AUM) de ned below.
Alternative performance measures (APMs)
An alternative performance measure is a financial measure of historic or future financial performance, financial position, or cash flows, other than a financial measure defined under IFRS or the regulations of Solvency II.
Annual premium
Premiums that are paid regularly over the duration of the contract such as protection policies.
Annual premium equivalent (APE)
A standardised measure of the volume of new life insurance business written. It is calculated as the sum of (annualised) new recurring premiums and 10% of the new single premiums written in an annual reporting period.
Annuity
Regular payments from an insurance company made for an agreed period of time (usually up to the death of the recipient) in return for either a cash lump sum or a series of premiums which the policyholder has paid to the insurance company during their working lifetime.
Assets under administration (AUA)
Assets administered by Legal & General which are bene cially owned by clients and are therefore not reported on the Consolidated Balance Sheet. Services provided in respect of assets under administration are of an administrative nature, including safekeeping, collecting investment income, settling purchase and sales transactions and record keeping.
Assets under management (AUM)*
Refer to the alternative performance measures section.
Back book acquisition
New business transacted with an insurance company which allows the business to continue to utilise Solvency II transitional measures associated with the business.
Bundled DC solution
Where investment and administration services are provided to a scheme by the same service provider. Typically, all investment and administration costs are passed onto the scheme members.
Bundled pension schemes
Where the fund manager bundles together the investment provider role and third-party administrator role, together with the role of selecting funds and providing investment education, into one proposition.
CAGR
Compound annual growth rate.
Credit rating
A measure of the ability of an individual, organisation or country to repay debt. The highest rating is usually AAA and the lowest Unrated. Ratings are usually issued by a credit rating agency (e.g. Moody's or Standard & Poor's) or a credit bureau.
Deduction and aggregation (D&A)
A method of calculating group solvency on a Solvency II basis, whereby the assets and liabilities of certain entities are excluded from the group consolidation. The net contribution from those entities to group Own Funds is included as an asset on the group's Solvency II balance sheet. Regulatory approval has been provided to recognise the (re)insurance subsidiaries of LGI US on this basis.
Defined benefit pension scheme (DB scheme)
A type of pension plan in which an employer/sponsor promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns.
Defined contribution pension scheme (DC scheme)
A type of pension plan where the pension benefits at retirement are determined by agreed levels of contributions paid into the fund by the member and employer. They provide benefits based upon the money held in each individual's plan specifically on behalf of each member. The amount in each plan at retirement will depend upon the investment returns achieved and on the member and employer contributions.
Derivatives
Derivatives are not a separate asset class but are contracts usually giving a commitment or right to buy or sell assets on specified conditions, for example on a set date in the future and at a set price. The value of a derivative contract can vary. Derivatives can generally be used with the aim of enhancing the overall investment returns of a fund by taking on an increased risk, or they can be used with the aim of reducing the amount of risk to which a fund is exposed.
Direct investments
Direct investments, which generally constitute an agreement with another party, represent an exposure to untraded and often less volatile asset classes. Direct investments also include physical assets, bilateral loans and private equity, but exclude hedge funds.
Dividend cover
Dividend cover measures how many times over the net release from operations in the year could have paid the full year dividend. For example, if the dividend cover is 3, this means that the net release from operations was three times the amount of dividend paid out.
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Half Year Results 2021 Part 3
Glossary Page 103
Earnings per share (EPS)
EPS is a common nancial metric which can be used to measure the pro tability and strength of a company over time. It is the total shareholder pro t after tax divided by the number of shares outstanding. EPS uses a weighted average number of shares outstanding during the year.
Eligible Own Funds
Eligible Own Funds represents the capital available to cover the group's Solvency II Capital Requirement. Eligible Own Funds comprise the excess of the value of assets over liabilities, as valued on a Solvency II basis, plus high quality hybrid capital instruments, which are freely available (fungible and transferable) to absorb losses wherever they occur across the group. Eligible Own Funds (shareholder view basis) excludes the contribution of the final salary pension schemes to the group's solvency capital requirement.
Employee engagement index
The Employee engagement index measures the extent to which employees are committed to the goals of Legal & General and are motivated to contribute to the overall success of the company, whilst working with their manager to enhance their own sense of development and well-being.
ETF
LGIM's European Exchange Traded Fund platform.
Euro Commercial paper
Short term borrowings with maturities of up to 1 year typically issued for working capital purposes.
FVTPL
Fair value through profit or loss. A financial asset or financial liability that is measured at fair value in the Consolidated Balance Sheet reports gains and losses arising from movements in fair value within the Consolidated Income Statement as part of the profit or loss for the year.
Full year dividend
Full year dividend is the total dividend per share declared for the year (including interim dividend but excluding, where appropriate, any special dividend).
Generally accepted accounting principles (GAAP)
These are a widely accepted collection of guidelines and principles, established by accounting standard setters and used
by the accounting community to report financial information.
Gross written premiums (GWP)
GWP is an industry measure of the life insurance premiums due and the general insurance premiums underwritten in the reporting period, before any deductions for reinsurance.
Group adjusted operating profit*
Refer to the alternative performance measures section.
ICAV - Irish Collective Asset-Management Vehicle
A legal structure investment fund, based in Ireland and aimed at European investment funds looking for a simple, tax-efficient investment vehicle.
Index tracker (passive fund)
Index tracker funds invest in most or all of the same shares, and in a similar proportion, as the index they are tracking, for example the FTSE 100 index. Index tracker funds aim to produce a return in line with a particular market or sector, for example, Europe or technology. They are also sometimes known as 'tracker funds'.
International financial reporting standards (IFRS)
These are accounting guidelines and rules that companies and organisations follow when completing financial statements.
They are designed to enable comparable reporting between companies, and they are the standards that all publicly listed
groups in the UK are required to use.
Key performance indicators (KPIs)
These are measures by which the development, performance or position of the business can be measured effectively. The group Board reviews the KPIs annually and updates them where appropriate.
LGA
Legal & General America.
LGAS
Legal and General Assurance Society Limited.
LGC
Legal & General Capital.
LGI
Legal & General Insurance.
LGI new business
New business arising from new policies written on retail protection products and new deals and incremental business on group protection products.
LGIA
Legal & General Insurance America.
LGIM
Legal & General Investment Management
LGR
Legal & General Retirement, which includes Legal & General Retirement Institutional (LGRI) and Legal & General Retirement Retail (LGRR).
LGR new business
Single premiums arising from annuity sales and back book acquisitions (including individual annuity and pension risk transfer), the volume of lifetime mortgage lending and the notional size of longevity insurance transactions, based on the present value of the fixed leg cash flows discounted at the LIBOR curve.
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Half Year Results 2021 Part 3
Glossary Page 104
Liability driven investment (LDI)
A form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both current and future. This form of investing is most prominent in final salary pension plans, whose liabilities can often reach into billions of pounds for the largest of plans.
Lifetime mortgages
An equity release product aimed at people aged 55 years and over. It is a mortgage loan secured against the customer's house. Customers do not make any monthly payments and continue to own and live in their house until they move into long term care or on death. A no negative equity guarantee exists such that if the house value on repayment is insufficient to cover the outstanding loan, any shortfall is borne by the lender.
Matching adjustment
An adjustment to the discount rate used for annuity liabilities in Solvency II balance sheets. This adjustment reflects the fact that the profile of assets held is sufficiently well-matched to the profile of the liabilities, that those assets can be held to maturity, and that any excess return over risk-free (that is not related to defaults) can be earned regardless of asset value fluctuations after purchase.
Mortality rate
Rate of death, influenced by age, gender and health, used in pricing and calculating liabilities for future policyholders of life and annuity products, which contain mortality risks.
Net release from operations*
Refer to the alternative performance measures section.
New business surplus/strain
The net impact of writing new business on the IFRS position, including the benefit/cost of acquiring new business and the setting up of reserves, for UK non profit annuities, workplace savings, protection and savings, net of tax. This metric provides an understanding of the impact of new contracts on the IFRS profit for the year.
Open architecture
Where a company offers investment products from a range of other companies in addition to its own products. This gives customers a wider choice of funds to invest in and access to a larger pool of money management professionals.
Overlay assets
Overlay assets are derivative assets that are managed alongside the physical assets held by LGIM. These instruments include interest rate swaps, in ation swaps, equity futures and options. These are typically used to hedge risks associated with pension scheme assets during the derisking stage of the pension life cycle.
Pension risk transfer (PRT)
PRT represents bulk annuities bought by entities that run nal salary pension schemes to reduce their responsibilities by closing the schemes to new members and passing the assets and obligations to insurance providers.
Persistency
Persistency is a measure of LGIM client asset retention, calculated as a function of net flows and closing AUM.
Platform
Online services used by intermediaries and consumers to view and administer their investment portfolios. Platforms usually provide facilities for buying and selling investments (including, in the UK products such as Individual Savings Accounts (ISAs), Self-Invested Personal Pensions (SIPPs) and life insurance) and for viewing an individual's entire portfolio to assess asset allocation and risk exposure.
Present value of future new business premiums (PVNBP)
PVNBP is equivalent to total single premiums plus the discounted value of annual premiums expected to be received over the term of the contracts using the same economic and operating assumptions used for the new business value at the end of the financial period. The discounted value of longevity insurance regular premiums and quota share reinsurance single premiums are calculated on a net of reinsurance basis to enable a more representative margin figure. PVNBP therefore provides an estimate of the present value of the premiums associated with new business written in the year.
Purchased interest in long term business (PILTB)
An estimate of the future profits that will emerge over the remaining term of life and pensions policies that have been
acquired via a business combination.
Real assets
Real assets encompass a wide variety of tangible debt and equity investments, primarily real estate, infrastructure and energy. They have the ability to serve as stable sources of long term income in weak markets, while also providing capital appreciation opportunities in strong markets.
Release from operations
The expected IFRS surplus generated in the period from the difference between IFRS prudent assumptions and our best estimate of future experience for in-force LGR and UK Insurance businesses, the post-tax operating profit on other UK businesses, including the medium term expected investment return on LGC invested assets, and dividends remitted from LGIA.
Return on Equity (ROE)*
Refer to the alternative performance measures section.
Risk appetite
The aggregate level and types of risk a company is willing to assume in its exposures and business activities in order to achieve its business objectives.
Single premiums
Single premiums arise on the sale of new contracts where the terms of the policy do not anticipate more than one premium being paid over its lifetime, such as in individual and bulk annuity deals.
Solvency II
The Solvency II regulatory regime is a harmonised prudential framework for insurance rms in the EEA. This single market approach is based on economic principles that measure assets and liabilities to appropriately align insurers' risk with the capital they hold to safeguard the policyholders' interest.
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Half Year Results 2021 Part 3
Glossary Page 105
Solvency II capital coverage ratio
The Eligible Own Funds on a regulatory basis divided by the group solvency capital requirement. This represents the number of times the SCR is covered by Eligible Own Funds.
Solvency II capital coverage ratio (proforma basis)
The proforma basis Solvency II SCR coverage ratio incorporates the impacts of a recalculation of the Transitional Measures for Technical Provisions and the contribution of our defined benefit pension schemes in both Own Funds and the SCR in the calculation of the SCR coverage ratio.
Solvency II capital coverage ratio (shareholder view basis)
In order to represent a shareholder view of group solvency position, the contribution of the defined benefit pension scheme are excluded from both, the group's Own Funds and the group's solvency capital requirement, by the amount of their respective solvency capital requirements, in the calculation of the SCR coverage ratio. This incorporates the impacts of a recalculation of the Transitional Measures for Technical Provisions based on end of period economic conditions. The shareholder view basis does not reflect the regulatory capital position as at 30 June 2021. This will be submitted to the PRA in August 2021.
Solvency II new business contribution
Reflects present value at the point of sale of expected future Solvency II surplus emerging from new business written in the period using the risk discount rate applicable at the end of the reporting period.
Solvency II risk margin
An additional liability required in the Solvency II balance sheet, to ensure the total value of technical provisions is equal to the current amount a (re)insurer would have to pay if it were to transfer its insurance and reinsurance obligations immediately to another (re)insurer. The value of the risk margin represents the cost of providing an amount of Eligible Own Funds equal to the Solvency Capital Requirement (relating to non-market risks) necessary to support the insurance and reinsurance obligations over the lifetime thereof.
Solvency II surplus
The excess of Eligible Own Funds on a regulatory basis over the SCR. This represents the amount of capital available to the company in excess of that required to sustain it in a 1-in-200 year risk event.
Solvency Capital Requirement (SCR)
The amount of Solvency II capital required to cover the losses occurring in a 1-in-200 year risk event.
Total shareholder return (TSR)
TSR is a measure used to compare the performance of different companies' stocks and shares over time. It combines the share price appreciation and dividends paid to show the total return to the shareholder.
Transitional Measures on Technical Provisions (TMTP)
This is an adjustment to Solvency II technical provisions to bring them into line with the pre-Solvency II equivalent as at 1 January 2016 when the regulatory basis switched over, to smooth the introduction of the new regime. This will decrease linearly over the 16 years following Solvency II implementation but may be recalculated to allow for changes impacting the relevant business, subject to agreement with the PRA.
Unbundled DC solution
When investment services and administration services are supplied by separate providers. Typically the sponsoring employer will cover administration costs and scheme members the investment costs.
With-profits funds
Individually identifiable portfolios where policyholders have a contractual right to receive additional benefits based on factors such as the performance of a pool of assets held within the fund, as a supplement to any guaranteed benefits. An insurer may either have discretion as to the timing of the allocation of those benefits to participating policyholders or
may have discretion as to the timing and the amount of the additional benefits.
Yield
A measure of the income received from an investment compared to the price paid for the investment. It is usually expressed as a percentage.
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