14 Embedded value reconciliation

1.

The free surplus reduction of £661m to finance new business includes £101m of the short term default allowance, as well as £334m [IFRS] new business strain and £232m additional required capital. Other items have a net positive impact of £6m.

2.

Included in the loss for the period is a non profit inter-fund transfer from free surplus to [VIF] of £710m.

3.

Capital movements within the UK comprise the £252m cost of acquiring Nationwide Life and £8m (€10m) of capital injected from [Society] into France. The acquisition of Suffolk Life (£63m) was funded from the non-covered business element of Group capital and financing. The International capital movements comprise £52m ($96m) of capital injected into the USA and the £8m (€10m) of capital injected into France.

4.

The transfer to non-covered business represents the IFRS profits arising in the period from the provision of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.

1.

Included in the profit for the period is an inter-fund transfer from non profit (included in [VIF]) to SSC (included in free surplus) of £60m.

2.

Capital movements comprise the repayment of £602m of intra-group subordinated debt; offset by £57m ($114m) of capital injected into the USA and £39m injected into Legal & General International (Ireland) from Group, together with £27m (€40m) injected into France from Society.

3.

In previous periods, UK SNW represented the amounts in the Society long term fund and LGPL shareholder capital which were regarded as either required capital or free surplus held within the covered business. As a consequence of the 2007 Capital review all shareholder capital in Society and LGPL is included as SNW within the covered business. This notional transfer of the previously excluded Society Shareholder Capital (SSC) into UK SNW is included as Other capital movements.

4.

The transfer to non-covered business represents the IFRS profits arising in the period from the provision of investment management services by Legal & General Investment Management to the UK covered business, which have been included in the operating profit of the covered business on the look through basis.