WELL POSITIONED FOR GROWTH.

A PROMISING YEAR

In the 2009 report I outlined the difficult economic conditions experienced during the year and highlighted the encouraging position in which we entered 2010. I am pleased to say that we capitalised on this positive start and have delivered strong results across the Group.

We have continued to strengthen our balance sheet and have attracted more customers, distribution partners and high quality employees to the Group throughout the year.

Increasing demand for our products and a measured increase in market confidence have seen the Group exceed its financial targets in 2010, and we are well placed for continued success.

SHAREHOLDER RETURN AND DIVIDEND

The FTSE All-Share Index gained 11% over the year. Our [total shareholder return (TSR)] for 2010 was 25% (2009: 11%).

This year in recognition of the strong results achieved by the Group in 2010 and a positive outlook for our company, the Board is recommending an increase in the final dividend of 25% to 3.42p per share, payable on 1 June 2011. With the interim dividend of 1.33p this will bring total dividends for 2010 to 4.75p.

SHAREHOLDER COMMUNICATIONS AND ANNUAL GENERAL MEETING (AGM)

Over 90% of our shareholders no longer receive printed versions of our Annual Report, viewing the information online. This has allowed us to improve shareholder communications and our online report has been highly commended for a number of years.

This year’s AGM will be held at 2.30pm on Wednesday 25 May 2011 at The Honourable Artillery Company, City Road, London EC1Y 2BQ.

BOARD CHANGES

At the start of 2010 I took over from Sir Rob Margetts as Chairman of your Company. Two long-serving members of the Board, Frances Heaton and Ronaldo Schmitz also left during the year and I would like to thank them both for their contribution to the Company’s success.

I would also like to take this opportunity to thank our Vice Chairman, Sir David Walker, as he will be retiring from the Board after this year’s AGM, having served on the Board for nine years.

In November, Nick Prettejohn, formerly CEO of Lloyd’s of London and chief executive of Prudential UK and Europe, joined the Board as a non-executive director of the Group. I would like formally to welcome Nick to Legal & General.

Full details of all changes can be found in the Your Board section of the report.

MANAGEMENT OF RISK

Risk management is one of our core competencies and we ensure continuous improvement in this area by regularly reviewing our policies and practices. During 2010 we upgraded our risk management processes in two ways.

In July we appointed Andrea Blance as our first Group Chief Risk Officer. This appointment reflects our continued commitment to strong risk management. Andrea will support the Group Risk Committee in ensuring that our risk appetite is both clearly defined and communicated. She will also provide assurance that the most material risks have been identified and ensure that our risk management framework is upgraded where required, and prepared for the forthcoming [Solvency II] capital regime.

We also reviewed our Group Risk Committee and decided that membership should consist of non-executive directors.

OUR STAFF

Our employees drive Legal & General’s strong performance and are the owners of our customer service ethic.

This year I hosted the Making a Difference awards for employees and I was both touched and impressed at the level of dedication shown to charities and communities. There is much talk of the Big Society in the media at present and I am proud to say that this attitude appears to be thriving already across our offices.

OUTLOOK

Although we expect UK economic growth to remain subdued in 2011 we are seeing increasing opportunities in our markets.

We have carried strong business momentum into 2011 which, together with increasing consolidation in a number of our markets, underpins our confidence in the continued success of the Group going forward.