3 Segmental analysis.


The Group has five reporting segments comprising Risk, Savings, Investment management, International, and Group capital and financing.

The composition of the Savings and Investment management segments changed in 2010, with institutional retail investment business now included in Savings investments. Previously this was reported in the Investment management segment. Comparative information has been amended to reflect the change.

The Risk segment comprises individual and group protection, individual and [bulk purchase annuities], and general insurance, together with estate agencies and the housing related business conducted through our regulated mortgage network.

The Savings segment comprises non profit investment bonds, non profit pensions (including SIPPs), ISAs, retail unit trusts, and all with-profits products.

The Investment management segment comprises institutional fund management business.

The International segment comprises businesses in the United States, France, the Netherlands and emerging markets.

Shareholders’ equity supporting the non profit Risk and Savings businesses is held within Legal & General Assurance [Society] Limited and Legal & General Pensions Limited and is managed on a groupwide basis within Group capital and financing. This also includes capital within the Group’s treasury function, and unit trust funds and property partnerships, which are managed on behalf of clients but are required to be consolidated under [IFRS], which do not constitute a separately reportable segment.

Transactions between reportable segments are on normal commercial terms, and are included within the reported segments.

The Group assesses performance and allocates resources on the basis of supplementary operating profit before tax (set out in Note 2). Segmental [IFRS operating profit] before tax is reconciled to the consolidated profit from continuing operations before tax attributable to equity holders and consolidated profit from ordinary activities after income tax.

The Group considers additional performance measures in assessing the performance of the segments. These include new business levels (Note 4) and [EEV] reporting (Supplementary Financial Statements).

(i) Operating profit/(loss)

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For the year ended 31 December 2010

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing1
£m

Total
£m

1.

For segmental purposes, the Investment projects have been included in Group capital and financing.

2.

Risk business 2010 investment variance reflects the positive experience of £180m, partly offset by changes to interest rates and changes to modelling of liability and asset data.

3.

Savings business investment variance includes the difference between IFRS deferred policyholder tax and the amount included within the unit linked life funds.

Operating profit

560

115

206

102

19

1,002

Variation from longer term investment return2,3

102

(54)

(8)

35

15

90

Property losses attributable to non-controlling interests

–

–

–

–

–

–

Profit from continuing operations before tax attributable to equity holders of the Company

662

61

198

137

34

1,092

Tax (expense)/credit attributable to equity holders of the Company

(184)

(18)

(41)

(37)

8

(272)

Profit for the year after tax

478

43

157

100

42

820

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For the year ended 31 December 2009

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing1
£m

Total
£m

1.

For segmental purposes, the Investment projects have been included in Group capital and financing.

2.

At half-year 2009, non profit Risk business reflected a small reduction in yield from action taken to sell some of the Group's holdings of tier 1 and upper tier 2 bank securities. These actions have contributed £75m to the negative investment variance. The cash and overlay strategy executed on the portfolio resulted in adverse effects on the assumed yields at the half-year which are reflected within IFRS profit. As expected these half-year yield impacts have been reversed by action taken in further diversifying the credit portfolio in the second half of the year. The impact of strengthening assumptions for reinvestment of cash flows, variability in currency hedging costs and inflation is also reflected here, in addition to the negative impact from default provisioning of £50m.

3.

Savings investment variances reflect management action taken in the second half of the year to optimise the tax position of unit linked business.

Operating profit

735

50

172

127

25

1,109

Variation from longer term investment return2,3

(218)

127

(4)

26

53

(16)

Property losses attributable to non-controlling interests

–

–

–

–

(19)

(19)

Profit from continuing operations before tax attributable to equity holders of the Company

517

177

168

153

59

1,074

Tax (expense)/credit attributable to equity holders of the Company

(142)

(48)

(46)

(49)

55

(230)

Profit for the year after tax

375

129

122

104

114

844

(ii) Revenue

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For the year ended 31 December 2010

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing
£m

Total
£m

Internal revenue

129

128

128

–

(385)

–

External revenue

5,547

6,403

24,922

1,236

332

38,440

Total revenue

5,676

6,531

25,050

1,236

(53)

38,440

 

 

 

 

 

 

 

For the year ended 31 December 2009

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing
£m

Total
£m

Internal revenue

117

135

104

–

(356)

–

External revenue

5,809

7,295

28,897

1,527

262

43,790

Total revenue

5,926

7,430

29,001

1,527

(94)

43,790

Total revenue includes investment gains of £32,671m (2009: £38,201m).

(iii) Consolidated balance sheet

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As at 31 December 2010

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing
£m

Total
£m

1.

Includes non recourse financing.

Assets

 

 

 

 

 

 

Deferred acquisition costs

51

1,004

–

1,036

(91)

2,000

Investment in associates

4

21

–

32

–

57

Investment property

130

2,246

832

6

1,357

4,571

Financial investments

25,194

43,216

223,657

6,733

770

299,570

Reinsurers' share of contract liabilities

1,733

1,178

–

299

(874)

2,336

Other assets

903

750

821

1,822

(1,993)

2,303

Cash and cash equivalents

259

2,450

2,599

477

7,251

13,036

Total assets

28,274

50,865

227,909

10,405

6,420

323,873

 

 

 

 

 

 

 

Shareholders' equity

123

142

324

1,664

2,574

4,827

Non-controlling interests

–

–

–

–

47

47

Total equity

123

142

324

1,664

2,621

4,874

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Subordinated borrowings

–

–

–

–

1,897

1,897

Participating contract liabilities

–

15,351

–

2,447

–

17,798

Non-participating contract liabilities

24,868

32,963

223,940

3,625

(645)

284,751

Senior borrowings1

–

248

1

344

842

1,435

Other liabilities

3,283

2,161

3,644

2,325

1,705

13,118

Total liabilities

28,151

50,723

227,585

8,741

3,799

318,999

Total equity and liabilities

28,274

50,865

227,909

10,405

6,420

323,873

 

 

 

 

 

 

 

As at 31 December 2009

Risk
£m

Savings
£m

Investment management
£m

International
£m

Group capital and financing
£m

Total
£m

Assets

 

 

 

 

 

 

Deferred acquisition costs

45

999

16

984

(87)

1,957

Investment in associates

–

14

–

31

–

45

Investment property

–

1,965

497

7

1,370

3,839

Financial investments

22,416

40,857

206,753

6,400

(410)

276,016

Reinsurers’ share of contract liabilities

1,558

687

–

272

(424)

2,093

Other assets

1,380

689

744

1,453

(1,822)

2,444

Cash and cash equivalents

568

2,619

3,314

516

3,633

10,650

Total assets

25,967

47,830

211,324

9,663

2,260

297,044

 

 

 

 

 

 

 

Shareholders’ equity

120

113

305

1,372

2,286

4,196

Non-controlling interest

–

–

–

–

2

2

Total equity

120

113

305

1,372

2,288

4,198

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Subordinated borrowings

–

–

–

–

1,870

1,870

Participating contract liabilities

–

15,084

–

2,376

–

17,460

Non-participating contract liabilities

22,102

30,078

207,963

3,523

(581)

263,085

Senior borrowings1

9

199

2

535

662

1,407

Other liabilities

3,736

2,356

3,054

1,857

(1,979)

9,024

Total liabilities

25,847

47,717

211,019

8,291

(28)

292,846

Total equity and liabilities

25,967

47,830

211,324

9,663

2,260

297,044

(iv) Gross written premiums on insurance contracts

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2010
£m

2009
£m

From continuing operations

 

 

Risk

 

 

Non-participating Risk business

3,309

3,057

General insurance

 

 

– Household

259

247

– Other business

22

26

Total Risk

3,590

3,330

 

 

 

Savings

 

 

Non-participating Savings business

41

45

Participating business

609

772

Total Savings

650

817

 

 

 

International

 

 

USA

502

487

Netherlands

227

270

France

379

371

Total International

1,108

1,128

Total gross written premiums

5,348

5,275

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