Legal & General Group Plc comprises Risk, Savings and Investment management businesses. The Group’s principal operating subsidiaries are set out in the Financial Statements. The business is managed as five main segments: Risk, Savings, Investment management, International, and Group capital and financing.
Financial Reporting
Legal & General, like other European listed life assurers, reports financial information to shareholders under two complementary reporting bases.
The primary Financial Statements are prepared on an IFRS basis, as is required for all EU listed companies. We believe the IFRS basis provides insight into the Company’s ability to generate distributable income to support dividends. IFRS reporting is also the more appropriate basis for reporting for several of our businesses which are primarily cash-based or where contracts are of relatively short duration.
We also provide supplementary financial statements prepared on the EEV basis, which we believe provides shareholders with a good understanding of the value generated by certain longer term, insurance-based businesses, particularly Individual protection.
Operating profit, which is a key metric used both in IFRS and EEV reporting, reports changes in profit and embedded value in a financial year but excludes fluctuations from assumed longer term investment returns.
During the year, Legal & General remained closely involved with the work of the International Accounting Standards Board (IASB) as it develops a new valuation model for insurance contracts. This is currently expected to be published in exposure draft form in 2009. We are also active members of the CFO Forum, a pan-European insurance industry grouping which is working to develop embedded value methodology and which published its principles for Market Consistent Embedded Value (MCEV) methodology in 2008. Legal & General is supportive of these principles, while recognising that further technical work is required before MCEV could be meaningfully adopted in succession to the current EEV basis.
“As a long term business, we run a strong balance sheet, with a healthy capital surplus and strengthened reserves to deal with more uncertain market conditions. Management action on de-risking, and our strong operational cashflow, mean we remain confident in our capital base.”
Andrew Palmer
Group Director (Finance)