27 Segmental analysis.

The Group provides a segmental analysis to enhance the understanding of the financial statements.

Under the requirements of IFRS 8, ‘Operating segments’, operating and reportable segments are presented in a manner consistent with the internal reporting provided to the chief operating decision maker, which has been identified as the Board of Legal & General Group Plc.

Reportable segments

During the year, the Group has changed the management lines of the international subsidiaries to reflect the development of our international strategy. This has had the consequence of changing the reportable segments of the Group as outlined below. In accordance with the requirements of IFRS 8, ‘Operating Segments’, the prior period segmental information has been restated to reflect these changes.

The Group has five reporting segments comprising Protection and Annuities, Savings, Investment management, US Protection, and Group capital and financing.

The Protection and Annuities segment comprises individual and group protection, individual and bulk purchase annuities, longevity and general insurance, together with estate agencies and the housing related business conducted through our regulated mortgage network. It also includes Legal & General France (LGF) and Legal & General Netherlands (LGN).

The Savings segment comprises non profit investment bonds, non profit pensions (including SIPPs), ISAs, retail unit trusts, retail platform businesses, all with-profits products, as well as our joint venture operation in India.

The Investment management segment comprises institutional fund management and LGIM America (LGIMA).

The US Protection segment comprises individual protection and universal life contracts written by Legal & General America (LGA).

Shareholders’ equity supporting the non profit Protection and Annuities 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. The Group capital and financing segment also includes our joint ventures in Egypt and the Gulf.

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 IFRS supplementary operating profit before tax. Segmental IFRS supplementary 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.

(i) Operating profit/(loss)

(XLS:) Segmental analysis – operating profit/(loss) 2012

For the year ended 31 December 2012

Protection and Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing1
£m

Total
£m

Operating profit/(loss)

640

133

243

99

(28)

1,087

Investment variances

(3)

(11)

(5)

(20)

(39)

Losses attributable to
non-controlling interests

(12)

(12)

Profit/(loss) from continuing operations before tax

637

122

238

99

(60)

1,036

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

(158)

(25)

(44)

(37)

29

(235)

Profit for the year after tax

479

97

194

62

(31)

801

(XLS:) Segmental analysis – operating profit/(loss) 2011

For the year ended 31 December 2011 (Restated)

Protection
and
Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing1
£m

Total
£m

1.

For segmental purposes, Investment projects of £50m (2011: £56m) have been included in Group capital and financing.

Operating profit/(loss)

601

126

234

97

(5)

1,053

Investment variances

151

(34)

(7)

(207)

(97)

Losses attributable to
non-controlling interests

(3)

(3)

Profit/(loss) from continuing operations before tax

752

92

227

97

(215)

953

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

(199)

(22)

(44)

(34)

67

(232)

Profit/(loss) for the year after tax

553

70

183

63

(148)

721

(ii) Revenue

(XLS:) Segmental analysis – revenue 2012

For the year ended 31 December 2012

Protection and Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing
£m

Total
£m

Internal revenue

69

149

(54)

(164)

External revenue

6,790

5,457

20,804

1,461

464

34,976

Total revenue

6,859

5,457

20,953

1,407

300

34,976

(XLS:) Segmental analysis – revenue 2011

For the year ended 31 December 2011

Protection
and
Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing
£m

Total
£m

1.

The presentation of the LGA Internal Reinsurance Arrangement has been amended to better reflect the actual cash flows between the divisions. This has impacted the Protection and Annuities and US Protection segments. The intra-segment revenue within the Savings division has been removed from previously reported numbers.

Internal revenue1

78

145

(50)

(173)

External revenue

5,967

1,569

9,447

1,079

255

18,317

Total revenue

6,045

1,569

9,592

1,029

82

18,317

Total revenue includes investment return of £28,834m (2011: £12,143m).

(iii) Consolidated balance sheet

(XLS:) Segmental analysis – consolidated balance sheet 2012

As at 31 December 2012

Protection and Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing2
£m

Total
£m

1.

Includes non recourse financing.

2.

Group capital and financing includes inter-segmental eliminations.

Assets

 

 

 

 

 

 

Deferred acquisition costs

128

947

829

1,904

Investment in associates

4

78

5

87

Investment property

660

2,075

1,265

1,143

5,143

Financial investments

37,110

41,971

235,234

2,012

421

316,748

Reinsurers’ share of contract liabilities

1,897

3,273

287

(2,958)

2,499

Other assets

1,912

671

1,386

1,164

(1,865)

3,268

Cash and cash equivalents

817

2,379

2,015

139

11,302

16,652

Total assets

42,528

51,394

239,900

4,431

8,048

346,301

 

 

 

 

 

 

 

Shareholders’ equity

550

190

360

919

3,422

5,441

Non-controlling interests

39

39

Total equity

550

190

360

919

3,461

5,480

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Subordinated borrowings

1,890

1,890

Participating contract liabilities

2,686

13,744

16,430

Non-participating contract liabilities

33,483

35,320

233,069

1,644

(830)

302,686

Senior borrowings1

3

250

2

272

948

1,475

Other liabilities

5,806

1,890

6,469

1,596

2,579

18,340

Total liabilities

41,978

51,204

239,540

3,512

4,587

340,821

Total equity and liabilities

42,528

51,394

239,900

4,431

8,048

346,301

(XLS:) Segmental analysis – consolidated balance sheet 2011

As at 31 December 2011 (Restated)

Protection
and
Annuities
£m

Savings
£m

Invest­ment manage­ment
£m

US Protection
£m

Group capital and financing2
£m

Total
£m

1.

Includes non recourse financing.

2.

Group capital and financing includes inter-segmental eliminations.

Assets

 

 

 

 

 

 

Deferred acquisition costs

117

908

808

1,833

Investment in associates

4

50

6

60

Investment property

491

2,146

1,077

1,180

4,894

Financial investments

33,921

41,059

223,135

2,131

358

300,604

Reinsurers’ share of contract liabilities

1,737

1,717

301

(1,466)

2,289

Other assets

1,786

639

1,115

1,084

(1,918)

2,706

Cash and cash equivalents

682

2,378

2,024

127

8,902

14,113

Total assets

38,738

48,897

227,351

4,451

7,062

326,499

 

 

 

 

 

 

 

Shareholders’ equity

468

184

351

910

3,143

5,056

Non-controlling interests

66

66

Total equity

468

184

351

910

3,209

5,122

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Subordinated borrowings

1,921

1,921

Participating contract liabilities

2,420

14,402

16,822

Non-participating contract liabilities

29,741

32,311

222,342

1,699

(742)

285,351

Senior borrowings1

240

286

803

1,329

Other liabilities

6,109

1,760

4,658

1,556

1,871

15,954

Total liabilities

38,270

48,713

227,000

3,541

3,853

321,377

Total equity and liabilities

38,738

48,897

227,351

4,451

7,062

326,499

(iv) Gross written premiums on insurance contracts

Gross written premium is the total written by the Group before deductions for reinsurance.

Long term insurance premiums are recognised as revenue when due for payment. General insurance premiums are accounted for in the period in which the risk commences. Estimates are included for premiums not notified by the year end and provision is made for the anticipated lapse of renewals not yet confirmed. Those proportions of premiums written in a year which relate to periods of risk extending beyond the end of the year are carried forward as unearned premiums.

Premiums received relating to investment contracts are not recognised as revenue, but are included in the balance sheet investment contract liability.

(XLS:) Segmental analysis – gross written premiums on insurance contracts

 

2012
£m

2011
£m

From continuing operations

 

 

Protection and Annuities

 

 

Non-participating UK business

3,782

3,778

Netherlands (LGN)

172

194

France (LGF)

406

393

General insurance

 

 

– Household

327

283

– Other business

22

21

Total Protection and Annuities

4,709

4,669

 

 

 

Savings

 

 

Non-participating Savings business

39

40

Participating business

336

488

Total Savings

375

528

 

 

 

US Protection

584

522

Total gross written premiums

5,668

5,719