BALANCE SHEET STRENGTH.


Changing balance sheet profile: Sovereigns (2008 12%; 2011 19%); ABS (2008 16%; 2011 16%); Banks (2008 23%; 2011 12%); Corporates (2008 32%; 2011 36%); Other (2008 17%; 2011 17%) (bar chart)

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  • Increase in quality sovereigns, in particular UK and US sovereigns;
  • Reduction in the Group’s exposure to banks; and
  • Increased diversity (>3000 instruments, >500 issuers, many sectors and geographies)

The Group’s balance sheet, aided by strong risk controls and capital management policies, remains robust with an [IGD surplus] of £3.8bn (2010: £3.7bn) and a coverage ratio of 220% (2010: 226%). The LGPL credit default provision of equivalent 61bps or £1.6bn (2010: £1.5bn) remains in place to fund against the risk of default, and in the year has experienced no defaults (2010: £nil).

Our Standard & Poor’s financial strength rating remained at AA- and all four rating agencies continue to have a stable outlook for the Group.

Worldwide assets under management at 31 December 2011 were £379bn of which shareholders have direct exposure to 10% or £39.4bn. The majority of this shareholder exposure relates to the £30bn of assets backing our UK annuity business which also represents the majority of the Group’s fixed interest exposure. The Group’s shareholder asset exposure to Portugal, Ireland, Italy, Greece and Spain (PIIGS) sovereigns and banks is low with £317m and £109m respectively.

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