OUTLOOK
Recovery in the UK economy in 2010 is likely to be slow and we expect the UK housing market to remain subdued. Nonetheless we expect our core UK Risk and Savings markets to recover in 2010 from depressed levels in 2009. We are optimistic about the Group’s medium term growth prospects. We aim to capitalise on our market leading positions in Risk, build the [LGIM] franchise in the UK and overseas, deliver further improvements in Savings and continue to develop our existing international portfolio whilst exploring opportunities to expand into other attractive markets.
SOLVENCY II
Solvency II is the new risk-based regulatory approach which the EU is introducing for all insurance organisations operating in the European Union. It covers both capital adequacy and risk management, with the key objective of improving protection for policyholders. Currently the planned implementation date is 31 October 2012.
Solvency II will impact Legal & General directly in its UK, French and Dutch businesses, as well as at Group level.
The outline requirements of Solvency II are reasonably clear, but many important specific requirements remain under discussion with the European Commission and its advisors. These specific requirements will determine the impact of Solvency II on the Group. We are engaging actively to ensure a satisfactory outcome to these negotiations, to ensure that capital requirements are sufficient but not excessive and will protect consumers without increasing the cost to them of our insurance products.
We also set up a major programme to implement the Solvency II requirements. This will be an expensive and resource intensive undertaking over a period of three years, involving all of the Group’s insurance subsidiaries.
